CHARACTERISTICS OF A GOOD IDEA

• Identified market need or gap – the idea must meet a clearly identified
market need to be commercially viable.
No or few existing competitors – the more innovative the product/service
and markets, the fewer competitors, and the higher the price you are
normally able to charge. However, remember it is always possible that
there are no competitors because there is no viable market for the
product/service.
Growing market – it is always easier to launch a business into a new or
growing rather than declining market. Of course it may be that you are
launching a business that will create a completely new market.
Clearly identified customers and a viable business model – if a business
does not know who it is selling to it won’t know how to sell to them, which
means it probably will not succeed. And remember it may be selling to
more than one market segment. The business model should be built up
systematically to appeal to these target customers
 CHARACTERISTICS OF A GOOD IDEA

• Low funding requirements – the lower the funding requirement, the easier it is to
start-up and the less you have to lose if the idea does not work.
Sustainable – the business must be built on solid foundations so that it has
longevity.
High profit margins – the more innovative the product/service and its target
market, the higher the margin is likely to be.
Effective communications strategy – once you know who you are selling to, and
why they should buy from you, you need to be able to communicate a persuasive
message to them and build a loyal customer base.
Not easily copied – if it can be, protect intellectual property. However, often
getting to the market quickly and developing a brand reputation is the best
safeguard.
Identifiable risks that can be monitored and mitigated – the future of a start-up is,
by definition uncertain. Identifying risks is the first step to understanding how they
can be monitored and then mitigated. The more strategic options you have
identified the greater your chance of success.
 BUSINESS MODEL
• a business model describes the logic of value
creation and value capturing of a firm (Teece,
2010; Zott et al., 2011)
• Afuah (2004) the set of activities which a firm
performs, how it performs them, and when it
performs them so as to offer its customers
benefits they want and to earn a profit
 What is a Business Model?
• A model is a plan or diagram that is used to make
or describe something.
• Business Model
• A firm’s business model is its plan or diagram for
how it competes, uses its resources, structures its
relationships, interfaces with customers, and
creates value to sustain itself on the basis of the
profits it generates.
• The term “business model” is used to include all
the activities that define how a firm competes in
the marketplace.
 BUSINESS MODEL
• A business model as a simplified description of how a company does business and makes
money.
• Extensive literature research and real-world experience define a business model as consisting
of 9 building blocks that constitute the business model canvas:
• The value proposition of what is offered to the market; * seven of the best value proposition
• A value proposition tells prospects why they should do business with you rather than your
competitors, and makes the benefits of your products or services crystal clear from the
outset.
• The segment(s) of clients that are addressed by the value proposition;
• The communication and distribution channels to reach clients and offer them the value
proposition;
• The relationships established with clients;
• The key resources needed to make the business model possible;
• The key activities necessary to implement the business model;
• The key partners and their motivations to participate in the business model;
• The revenue streams generated by the business model (constituting the revenue model);
• The cost structure resulting from the business model.
• *https://www.wordstream.com/blog/ws/2016/04/27/value-proposition-examples
 What is a Business Model?
• A model is a plan or diagram that is used to make
or describe something.
• Business Model
• A firm’s business model is its plan or diagram for
how it competes, uses its resources, structures its
relationships, interfaces with customers, and
creates value to sustain itself on the basis of the
profits it generates.
• The term “business model” is used to include all
the activities that define how a firm competes in
the marketplace.
 What is a Business Model?
• A model is a plan or diagram that is used to make
or describe something.
• Business Model
• A firm’s business model is its plan or diagram for
how it competes, uses its resources, structures its
relationships, interfaces with customers, and
creates value to sustain itself on the basis of the
profits it generates.
• The term “business model” is used to include all
the activities that define how a firm competes in
the marketplace.
 Business Models
• Timing of Business Model Development
• The development of a firm’s business model
follows the feasibility analysis stage of launching
a new venture but comes before writing a
business plan.
• If a firm has conducted a successful feasibility
analysis and knows that it has a product or
service with potential, the business model stage
addresses an approach to creating value that
represents a viable business.
 Importance of a Business Model
• Having a clearly defined business model is important
because it does the following:
• Serves as an ongoing extension of feasibility analysis. A
business model continually asks the question, “Does
this business make sense?”
• Focuses attention on how all the elements of a
business fit together and constitute a working whole.
• Describes why the network of participants needed to
make a business idea viable are willing to work
together.
• Articulates a company’s core logic to all stakeholders
Four Components of a Business Model
• Core Strategy
• The first component of a business model is the
core strategy, which describes how a firm
competes relative to its competitors.
• Primary Elements of Core Strategy
– Mission statement.
– Product/market scope.
– Basis for differentiation.
 Mission statement
• A firm’s mission, or mission statement, describes why it
exists and what its business model is supposed to
accomplish.
– For example, Southwest Airlines’ Mission Statement is as
follows: “The mission of Southwest Airlines is dedication to the
highest level of customer service delivered with a sense of
warmth, friendliness, individual pride, and company spirit.”
– http://www.alessiobresciani.com/foresight-strategy/51-mission-
statement-examples-from-the-worlds-best-companies/
• A company’s product/market scope defines the products
and markets on which it will concentrate. The choice of
products has an important impact on a firm’s business
model.
Product/market scope.

• The offering – this is what the business produces and

sells
• Value proposition: The value proposition is a
description of the products and services the business
offers and why customers will be compelled to buy
them.
• The value proposition describes the problem the
customers are experiencing and how the products and
services being offered will help solve that problem.
• It describes how the features and characteristics of the
products and services will contribute to the solution of
the customers’ problem.
 Primary Elements of Core Strategy
Basis of Differentiation
• It is important that a new venture
differentiate itself from its competitors in
some way that is important to its customers. If
a new firm’s products or services aren’t
different from those of its competitors, why
should anyone try them? Firms often
differentiate themselves on the basis of a cost
leadership strategy or a differentiation
strategy.
 Strategic Resources
• Strategic Resources
• A firm is not able to implement a strategy without
resources, so the resources affects its business model
substantially.
• For a new venture, its strategic resources may initially
be limited to the opportunity they have identified, and
the unique way they plan to serve their market.
• The two most important strategic resources are:
• A firm’s core competencies.
• Strategic assets.
 CORE COMPETENCY
• A core competency is a resource or capability
that serves as a source of a firm’s competitive
advantage over its rivals. Examples are Sony’s
competence in miniaturization, Dell’s
competence in supply chain management, and
3M’s competence in managing innovation.
 STRATEGIC ASSETS
• Strategic assets are anything rare and valuable
that a firm owns. They include plant and
equipment, location, brands, patents,
customer data, a highly qualified staff, and
distinctive partnerships.
 Partnership Network
• Partnership Network
• A firm’s partnership network is the third component of
a business model. New ventures, in particular, typically
do not have the resources to perform key roles.
• In most cases, a business does not want to do
everything itself because the majority of tasks needed
to build a product or deliver a service are not core to a
company’s competitive advantage.
• A firm’s partnership network includes:
– Suppliers.
– Other partners.
 Partnership Network
• Primary Elements of Partnership Network
• Suppliers
• Other Key Relationships
• A supplier is a company that provides parts or services to
another company. Intel is Dell’s primary supplier for
computer chips, for example. Firms are developing more
collaborative relationships with their suppliers, and finding
ways to motivate them to perform at higher levels.
• Along with suppliers, firms partner with other companies to
make their business models work. An entrepreneur’s ability
to launch a firm that achieves a sustainable competitive
advantage may hinge as much on the skills of the partners
that are involved as the skills within the firm itself.
 The Most Common Types of Business
Partnerships
• Customer Interface
• The way a firm interacts with its customers hinges on how
it chooses to compete. For example, Amazon.com sells
books over the Internet while Barnes & Noble sells through
its traditional bookstores and online.
• Dell sells strictly online while HP sells through retail stores.
• The three elements of a company’s customer interface are:
– Target customer.
– Fulfillment and support.
– Pricing model.
 Customer Interface
• Primary Elements of Customer Interface
– Target Market
– Fulfillment and Support
 Target Market

– A firm’s target market is the limited group of

individuals or businesses that it goes after or tries
to appeal to. The target market a firm selects
affects everything it does, from the strategic
assets it acquires to the partnerships it forges to
its promotional campaigns.
Fulfillment and Support

• Fulfillment and support describes the way a firm’s

product or service “goes to market” or how it
reaches its customers. It also refers to the channels a
company uses and what level of customer support it
provides. All these issues impact the shape and
nature of a company’s business model.
 Pricing Structure
• The third element of a company’s customer
interface is its pricing structure.
• Pricing models vary, depending on a firm’s
target market and its pricing philosophy.
 Strategic Resources
• Primary Elements of Strategic Resources Core
Competencies Strategic Assets 10 A core
competency is a resource or capability that serves
as a source of a firm’s competitive advantage
over its rivals. Examples are Sony’s competence in
miniaturization, Dell’s competence in supply
chain management, and 3M’s competence in
managing innovation. Strategic assets are
anything rare and valuable that a firm owns. They
include plant and equipment, location, brands,
patents, customer data, a highly qualified staff,
and distinctive partnerships.