Model Thinking

Business Models for the Reality at Hand: The Model at the Heart of the Business

At the heart of any business is not the plan but the model. Without a functioning model adaptable and actually adapted to human, technological and economic change, there can be no healthy business. A business model describes what product a company is selling to whom and how. The model starts with the problem it solves, the significance of that problem, and the size of the need, essentially the market for the product. You have to think it through because the heart of the model drives the makeup of your opportunities, costs, competition, and your functional risks. Time and technology can overtake your definition and while it seems you are selling one product, you may in actuality have migrated to sell another, or should. I partner with you to ask those “impertinent questions” and derive the pertinent solutions.

Whether you are in growth, balance, or turnaround phase, I bring clarity to your thinking and strategies. Has your model turned upside down? Has your commercial world turned upside down? Have your strategic marketers obscured your model amidst rather overly creative brand extensions? Whether you are overwhelmed by opportunity, risk, or someone else’s muddled thinking, I help you think through to the other side.

Does your model have hidden, or not so hidden, dysfunctions? I will team with you to think through the inside workings of your model. I am independent intellectually, emotionally and financially: I have not bought into the market’s perception, your team’s perception, or even your own perception of your model.

In the end, it’s not the revenues, not the cash flow, not the costs: it’s the model. Your model drives the numbers. Hone your model. Stay ahead of the times. Be looking for the trends that will bring the next opportunity. Don’t wait for time or tides to drive the model; don’t wait for the market to drive your model. Get ahead of the curve. And certainly don’t fuzzy assumptions drive the big decisions; don’t let mere hopeful guesswork drive your model. By the time the weak acquisition, the faulty strategy, or the sticky operation affects your numbers, your business will already be entrenched in modern warfare and an avalanche of future costs–and probably lawyers otherwise to be avoided like the plague.

© Copyright 2007-2015. S. Caroline Schroder. All Rights Reserved.

Inner Ring, Outer Ring:  Does Your Model Get It Right?

Do you recall the inner ring and outer ring strategies of supply, quality, and pricing?  Are mismatches giving your company migraines?   Does your model push its inner ring product way out into the outer ring?
The American Giant  clothing startup  joined the Cult of the Waiting List, seemingly the newest new thing, in 2012, thanks to crowd funding, but reportedly not by choice.   American Giant seems to have done so unplanned, through ‘catastrophic success’  when Slate  touted its new product online as the ‘greatest sweatshirt ever,’ , just as the Christmas rush got into full swing.  Unfortunately,  American Giant’s inventory was immediately wiped out and it missed the revenue wave that could have come with the hype. href=”http://bbc.co.uk/news/business-21680884″ target=”_blank”>As the BBC reported, American Giant was left hoping that its disappointed wave of customers would wait not only for product to be cut and sewed but for “US cotton…fabric being specially woven and dyed for it.”   That sounds like a long wait….

This  is why hopeful emergent growth companies are smart to operate in ‘submarine’ or ‘stealth’ mode and diligently keep a lid on public promotion and rejigger pricing until they have rampability as well as scalability sussed out: American Giant has a real problem model: manufacture and sale of limited supply goods with a luxury objective, ” to make…better crafted, more luxurious clothing..”    It would be interesting to know whether Winthrop, the founder, actually exacerbated all of his risks by soliciting the Slate article before he had figured out the rampability of his production.  It seems unusual for “word of mouth” marketing to morph into a Slate article without a bit more story behind the event.  Additionally, American Giant’s pricing seems way off.  If one online article, even in Slate, could create such demand, even at Christmas, the price must be significantly too low for “luxurious” limited supply goods.

Of course, every startup has fundamental problems with getting demand, pricing, and inventory right, but American Giant has created for itself a dangerous fundamental risk:  American Giant’s  problem with supply is not just getting the finished product; American Giant’s problem is even getting the raw materials.   Unless this basic supply problem can be resolved, American Giant’s current model is untenable.  If demand will be that high while supply is that limited, this Great American sweatshirt is better understood as an ‘inner ring’ luxury product and priced accordingly than as an ‘outer ring’ mass market product. Mass market your luxury goods by all means, but unless you understand that you have designed a luxury good of limited supply, your model is doomed to failure.

© 2013. S. Caroline Schroder. All Rights Reserved.

Debug, Develop, Originate Your Model

There is not a model which does not need debugging, for now or the future. The model not debugged will eventually crash unless later turned around. Don’t wait to get to the brink or the decline.

Turnaround is crisis driven: When the model is broken, impaired, ill-conceived or outmoded, problems from cash flow to personnel devolve from this. It stresses company, customer and the future. Solutions are harder, but we asked the right questions, sometimes the unthinkable questions, such as whether the economics have disappeared and the time to move on has come. All too often, the latest wave of technology, business strategy or politics has obsoleted the model, or threatens to do so. Partner with us to look at the stories behind the numbers, the model behind the stories and the path ahead.

Whether you have high currency invested in your business model through time, capital, production and personnel or you are just founding your company, the model at the heart of your business planning needs constant review.

Has the world changed? Has our information about the world changed? Is your model refractory to those changes and misperceptions? You have planned for the risks but have you thought of all the critical contingencies? Do you know what you sell? Are you selling cheap volume or luxury solutions; do you add an intangible benefit to the lives, business or happiness of your customers? Is there some business somewhere easily accessible, affordable and attractive to your customers dumping an equivalent model on the market and destroying your profit margins and your long-term repeat business? Do you need to change what you sell?

If you have never done exactly this before, have you asked the right questions? How much time have you got before your model has to pay or has to pay more? How do you define your success? Does your business model collect the low hanging fruit first? Is it scalable, rampable, digestible?

Is it simple? Have you built-in obstructive complexity, in love with a challenge? Do people function as your model needs them to function? Is your model cheaply replicable? Is there someone somewhere easily accessible and attractive to the people you want as your customers dumping an equivalent model on the market and destroying your chances of profit margins and any long-term repeat business? Do you need to change to a new model?

© Copyright 2007. S. Caroline Schroder. All Rights Reserved.