The business model canvas is a great tool for helping you to develop your competitive advantage. I’ve used it for several companies to help them become more competitive. The secret, and I’ll say this right up front, is to sketch your business out in the business model canvas and then think imaginatively how you can change it. As you see how you business can work differently you see lots of paths to becoming more competitive. Of course if you don’t do anything you’ll stay exactly where you are. I’ll take you through the steps to becoming more competitive one at a time.
Draft Your Business Model Canvas
I’ve drawn out hundreds of business model canvases. A first draft will normally take a few minutes. The process is described in detail in my free business model canvas course. For what we are trying to do here the aim is not detail. You are not trying to get the canvas accurate to the nth degree.
What you are trying to do is to see the business in it’s broad outline. For most companies that means 1 – 3 components in each of the 9 parts of the business model canvas (customers, value proposition, relationships, channels, activities, resources, partnerships,costs and revenue). Go with your gut about what is important and don’t over think it at this stage.
Play What If
The next step is a game of what if. For each of the 9 business model canvas segments ask yourself “What if this was different?”
- What if I had different customers? Who would they be?
- If I offered a different value proposition to my customers what do they need? What would they buy? Would it solve the same pain?
- Can I reduce the cost of my customer relationships? What would the impact of that be? If I doubled my spending on supporting my customers how would that change my business?
- If my three biggest channels stopped working (random act of God, legal change or whatever takes your fancy) how would I get new customers? Could I grow my business only through referrals? How would I do that?
- What do I need to do to double the average sale price?
- Are there any key resources can I do without? What additional key resource could I add that would transform the value that I provide to customers?
- Are my key activities all really necessary? Which activities can be outsourced? How would my business change if I really improved the people delivering several key activities so that they were the best in the world?
- What happens if my industry changes and one or more key partners stop existing? Who would I really love as a partner? What do I do now that a partner could do better?
- How could I reduce my costs by 30%? If I increased my costs by 50% how much additional value could I provide and would customers pay for it?
Asking these questions lets you see different versions of reality. Many will lead to failure. You don’t care about those. What you are looking for is the right question and answer that sets you on the path to become more competitive
Make or Buy?
When we start out in business we make lots of make or buy decisions. Do we custom code the whole website or do we use WordPress with an off the shelf theme?
A make decision is when we create a key resource through our own actions. A buy decision is when we rent or buy the key resource from someone else.
In the space industry Nasa buys in its space rockets and shuttles from third parties (or used to when it did spaceflight). Space X by contrast has decided to build, own and operate its own spacecraft.
In the early 2000’s many companies decided to rent their call centres from companies operating in India and the Philippines. That was a buy decision. Now many have moved back to building their own competency and skills in running them themselves.
Every company has it’s own approach on how to become more competitive. There is no perfect make and buy blend. What works is what delivers comparative advantage.
You may have a philosophical position here that outsourcing is always wrong (Uber outsources taxis and driving to its drivers to reduce the amount of capital it requires). That is not the point with this exercise. The point is to imagine it and to see what you could do differently. Seeing new possibilities is the first step to becoming more competitive.
The final approach is to get a list of your top five competitors. I’m sure you know how they work already but take a few minutes and go over their website, their sales collateral and and news reports about them. Then draw a business model canvas for each of them. Whilst you do it don’t think too much about your business – though I’m sure lots of things will start popping into your head as you do it.
Then lay out all six business model canvases side by side (yours included) and start looking for opportunities were you can break their business model. Do they rely on cheap resources? What does that mean for the rest of the business? Are they able to deliver as good a value proposition? Is their customer support of lower quality? Do they pay more to acquire customers as a result? Knowing this what can you do to disrupt this?
Competitors when you look at them like this cease to be monolithic and decompose into sets of linkages that you can attack and disrupt. One of of the weaknesses of Google’s business model is that it depends on free information from every website (including this one) giving it the raw data that it uses to return search results.
Become More Competitive
Step back now and look at what you have learnt.
You will have learnt that:
- There are lots of things that you could do differently
- You made choices early on about your cost base that you have never really revisited
- Your competitors have many weaknesses in their business models that you can exploit.
Now draw one of more new business model canvases that synthesise all this information and you’ll start to see new strategic approaches. It’s unlikely that you’ll be able to change overnight. Out of all this it will be a lot clearer how to chart the way forward. That becomes the basis for your new business strategy. You will be able to become more competitive as a result.
Will it work immediately?
Of course not! Everything else has remained the same. All that has changed is the way that you see the world. You now need to go out and test what you have discovered and see how it holds up in meetings with your key staff. You need to test it on customers and suppliers. Then you need to make the changes to actually implement it and deliver value. If you want to become more competitive the first step is reframing the world. Then you repurpose your business.
This also works for startups and larger businesses when they have to pivot.