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Make everything as simple as possible, but not simpler.

–Albert Einstein.

Einstein’s observation is just as applicable to business models as it is to science. HBR has printed a wonderful article on the importance of simple value propositions. The authors argue successful companies build a simple and elegant solution to a painful customer need. The product,  go-to-market strategy and almost every decision is defined by the singular focus on a problem/value proposition pair. Finding such a combination means discovering a scalable, repeatable business model.

Often, large enterprises fall prey to having too many focuses. Too many distinct products, messages and features that don’t align with the original value prop. As startups evolve, pivot and iterate, they too can lose focus on the original strategy particularly as the organization grows. Startups have two advantages: speed and focus. Founders should focus on playing to these strengths.

Now it’s much harder done than said. And it’s easy to be an armchair historian lecturing on the success of Apple and others. But the article is a good read and the principle is fundamental to success. I should believe it: it’s what I look for in our investments.

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2 thoughts on “The Best Business Model

  1. Tom, I agree that it is a really good article that reinforces the need to be laser focused on a strong customer value proposition, being differentiation minded and keeping it simple (as opposed to creating unnecessary complexity that tends to dilute the CVP over time).

    I do think that a customer value proposition is the heart of strategy but I do not a business model in an of itself.

    According to Ed Barrows, “A customer value proposition is an offering that helps customers do an important job more effectively, conveniently, or more affordably than the alternatives.”

    However, in my view, in addition to being “the heart of strategy” a customer value proposition is one of the 4 key components of a business model which include:

    1) customer value proposition,
    2) revenue/profit formula,
    3) resources and
    4) processes such as manufacturing.

    The authors make this point (see the chart on Vanguard’s diferentiation map)

    In my opinion, a successful customer value propositions have certain common characteristics, are inextricably linked to the offer(s) and need to be supported by the people, processes and technology geared towards delivering on the CVP in a manner that conveys an intimate understanding of the customer’s requirements. These requirements change over time (according to evolving customer needs, competition, market dynamics, internal changes in the business, etc.) so the CVP needs to be revisited from time-to-time.

    I make this point in my Strategy-In-Action blog post entitled: “Making a Good Value Proposition Better”. See http://wp.me/pT79u-3S.

  2. Pingback: The Best Business Model | ex post facto | Puur Positie

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