Entrepreneurship Essentials 2: Transforming Your Idea into a Thriving Business
Giving practicality to your business ideas.
Objective
Now that you've got three brilliant business ideas from the last activity, it's time to start building something amazing. This module is all about choosing one of the three ideas and shaping it into a real, tangible business!
Topic(s):
Understanding Business Models
Activities:
Complete Your Business Model Canvas
Complete Your SWOT Analysis
Understanding Business Models
A business model is a blueprint that outlines how a company creates, delivers, and captures value. It describes how a business operates, generates revenue, and sustains itself in the market.
Types of Business Models
Product: Creating and selling physical goods to customers. Example: Shoprite.
Service: Providing intangible services to customers in exchange for payment. Example: Electric power utility companies.
Shared Assets: Leveraging shared resources or assets to provide value to customers. Example: Treepz.
Rent: Similar to the shared asset model, except that in a shared assets business model, multiple customers access and utilize the same assets or resources, while in a rent business model, customers pay to temporarily use or occupy assets that are owned by another party. Example: Residential or commercial real estate companies.
Insurance: Absorbing some form of risk and providing financial protection to customers in exchange for regular premium payments. Example: Sanlam.
Agency: Acting as an intermediary between buyers and sellers, earning a commission or fee for facilitating transactions. Example: Travel agencies.
Reseller: Purchasing products or services and then reselling them to customers at a higher price, earning a profit margin on each sale. Example: Come on, this one is straightforward.
Pay as you go: Customers pay for products or services on a usage basis, rather than through upfront purchases or subscriptions. Example: our standard mobile phone plans.
Advertising: Offers free content or services to users and generates revenue through advertising. Example: Nairaland.
Subscription: Customers pay a recurring fee for access to a product or service. Example: Showmax.
Freemium: Offers basic services for free while charging for premium features or upgrades. Example: Spotify.
Marketplace: Connects buyers and sellers on a platform, earning revenue through transaction fees or commissions. Examples: Takealot.com and Yango.
Franchise: Grants individuals or groups the right to operate a business under the parent company's brand, intellectual property and business model. Examples: Nando’s and Debonairs.
Although only up to two examples are shared per model, there are thousands of companies within each category. An interesting phenomenon is that as companies grow into their value chain, and new business units are added, they start operating with multiple business models simultaneously.
Video: The Big Lie of Small Business
Exercise 1: Complete Your Business Model Canvas
For this exercise, you will need the Business Model Canvas with you - print it or fill it in online.
The Business Model Canvas, developed by Alexander Osterwalder and Yves Pigneur, is a strategic management tool that will allow you to map out the key components of your business model on a single page. It is like a simplified business plan, consisting of nine building blocks representing a different aspect of the business, from value proposition to revenue streams.
The Nine Building Blocks of the Business Model Canvas:
Customer Segments: Identify your target customers and their specific needs, preferences, and characteristics. Consider segmentation based on demographics, psychographics, or behaviour, and conduct market research to validate your assumptions.
Value Proposition: Articulate the unique value your product or service offers to your target customers. What problem are you solving, and what benefits are you providing?
Channels: Determine how you will reach and engage with your customers. Explore various distribution channels, including online platforms, physical stores, and direct sales.
Customer Relationships: Define the type of relationship you want to establish with your customers. Will it be personal or automated? Transactional or long-term? Consider how you will acquire, retain, and grow your customer base.
Revenue Streams: Outline the different ways your business will generate revenue. This could include one-time sales, subscription fees, licensing agreements, or advertising revenue.
Key Resources: Identify the essential resources your business needs to operate effectively. This may include physical assets, intellectual property, human capital, or financial resources.
Key Activities: Define the key activities your business must perform to deliver your value proposition and generate revenue. This could include product development, marketing, sales, and customer support. Outsource non-core activities and leverage external partners to optimize your operations.
Key Partnerships: Identify strategic partnerships and alliances that can help your business succeed. Consider suppliers, distributors, manufacturers, and other stakeholders who can contribute to your value chain.
Cost Structure: Evaluate the costs associated with operating your business. This includes both fixed costs (e.g., rent, salaries) and variable costs (e.g., raw materials, marketing expenses). Look for opportunities to optimize costs without compromising on quality or value delivery.
LEGO Business Model Canvas Example
Exercise 2: Conducting a SWOT Analysis for Your Business
A SWOT analysis is a valuable tool for evaluating the Strengths, Weaknesses, Opportunities, and Threats your business might face.
Step 1: Identify Strengths
Strengths are internal factors that could give your business a competitive advantage. Consider what your business will do well and what will set it apart from competitors.
Guiding questions:
What will be your unique selling points?
What resources, skills, or expertise will your team possess?
Step 2: Identify Weaknesses
Weaknesses are internal factors that could hinder your business's performance or growth.
Guiding questions:
What challenges do you expect to face internally?
What areas would require immediate improvements or developments after launch?
Step 3: Identify Opportunities
Opportunities are external factors that your business can leverage to its advantage. Things such as emerging trends, market developments, or untapped niches that could benefit your business.
Guiding questions:
What trends or changes in the industry could be of benefit?
Are there new markets or customer segments that you could target?
Are there partnerships or collaborations worth pursuing?
Step 4: Identify Threats
Threats are external factors that could negatively impact your business's success or viability. They could be competitive pressures, market risks, or external challenges that pose risks to your business.
Guiding questions:
Outline who your main competitors would be, and what threats they pose.
Are there economic, regulatory, or environmental factors that could affect your business?
Are there emerging technologies or disruptions that could threaten your business model?
Step 5: Analyze and Develop Strategies
Lastly, develop actionable strategies and initiatives to maximize your business's strengths and opportunities while minimizing its weaknesses and potential threats.
IBM SWOT Analysis Example
Additional Resources:
Case Study: Should You Adjust Your Business Model for a Major Customer?
Case Study: The Power of Business Model Innovation
Book: Business Model Generation, by Alexander Osterwalder and Yves Pigneur
Activities
Don't forget to complete the mandatory activities outlined in this module before moving forward:
Complete Your Business Model Canvas
Complete Your SWOT Analysis
If you have any doubts, certain parts are unclear or any other feedback you might have, do not hesitate to share in the comments section below, or DM our Editor on LinkedIn.