manage you business model across the business lifecycle

© Starcher Group LLC For the sole use of client

Manage your business model across

the business lifecycle

Bruce Starcher

Starcher Group LLC


Business Models and the Business Lifecycle


Summary

There has been an explosion of posts on Business Models in the past several years.

Many of those posts relate to start ups / new ventures yet business models need to be

actively managed throughout the entire business lifecycle. The half life of a business

model has shrink from 20 – 100 years (Railroads, steel) to 7-10 years; this means that

the business model can no longer be assumed, it needs to be actively managed.

There are multiple business model schools of thought (Slideshare); they have their

strengths and weaknesses so pick an approach that best suits your business and

situation.

http://www.slideshare.net/bkmkstarcher/business-models-schools-of-thought


Start up Phase

• Need: A “good enough” business model design that can evolve as the start up

launches and learns. The leadership team needs to focus on the critical assumptions

underlying the business model and document those. If you are working with an

advisor, it will be important to transfer business model knowledge so that the

business knows how to evolve its business model over time and can get to a solid

definition before the growth phase.

• In Practice: With the advent of Lean Start Up and the focus on launching a Minimum

Viable Product, there has been less attention devoted to the business model. Having

worked with a number of start-ups, I have found a lot of chatter around business

models but very little real effort and focus on the part of the founders. There is a

Ready – Fire – Aim approach to launching the business and issues start when the

business reaches the growth phase without a solid business model in place.

• Recommendation: The easiest way to get to a good enough business model is to

use the Business Model Canvas. It provides the structure and the process to get to a

good enough business model. Document the underlying assumptions so that those

can be validated as the business learns.

• Examples: Countless

http://www.businessmodelgeneration.com/canvas/bmc


Growth Phase

• Need: A solid, validated business model design. After launching your start up with a good

enough business model, get to a defined business model before ramping. Assumptions

need to be validated, Customer Value Gaps need to be researched, the economic model

needs to be established, the scalability of the model needs to be established.

• In practice: As the growth phase starts, mind share is focused on the requirements of

delivering growing demand for the product/service and putting in place all the structures

and processes required to support a growing business. The business model design is

often considered important but not urgent and does not get the required attention. Growing

the business without a solid business model only makes it more difficult to change down

the road and a flawed business model scaled up can be catastrophic.

• Recommendation: Early in the growth phase, monitor the business model to ensure that

is remains relevant and that new information and knowledge is used to continue validating

the business model. When the first signs of maturity appear in the growth phase (business

deceleration), start the business model evolution and innovation process. This activity is

what will lead to the next growth phase and help you avoid reaching the decline phase.

• Examples: HP Inkjet where in 1995 the systems model (Razor / Razor blades) was

implemented and fueled a new growth phase.


Maturity Phase

• Need: How do I evolve the business model to get back onto a growth phase or add a line

of business that is in a growth phase? Can I evolve the business model based on

changing assumptions and/or do I need to transform the business model? Early in the

maturity phase when profitability and cash flow are there to support this new exploration is

when it is the easiest to tackle thinking about evolving your business model.

• In practice: The business has grown to the point where senior executive attention has

shifted to internal management of the business and a focus on delivering consistent

quarterly results. Customer knowledge is often obtained through many market research

studies and executive customer visits. No one is actively managing the business model

and often the original design has evolved due to strategies, acquisitions and operational

changes that were not always aligned with the business model. The strategic context will

have shifted and likely the business model is no longer aligned with the Strategic Context.

• Recommendation: Without significant effort to re-establish a business model that delivers

a new growth phase, the business is likely headed for the decline phase. The longer you

wait the more difficult it will be to overcome inertia. This is when an external perspective is

most needed, whether bringing in an expert to work with the management team or bringing

in an outside team to design an evolved or new business model.

• Examples: Outerwall (Redbox, Coinstar), HP Printing


Decline Phase

• Need: Your market value is declining and your revenues and profit are relatively flat. The

business model is in need of transformation at a time when the business is doubling down

on wringing efficiencies out of the current operations. At this point the business model

cannot just be evolved, it requires significant research and analysis to understand whether

the business model can be evolved or if it will need transformation.

• In practice: Senior executives are loath to make significant changes and want to continue

their current practices – after all that is what made them successful. Changing the

business model represents not only business but also personal / professional risk. Change

often does not happen until a new management team is brought in to turn the business

around.

• Recommendation: The easiest solution is to avoid getting into this situation in the first

place. The best time to put energy into evolving your business model is while still in the

growth and early maturity phase. It does not appear to be urgent and important at that time

while the reality is that it is a critical activity. Successfully transforming a business model is

one of the hardest things to do and the recommendation would be to bring in the best

business model experts that you can afford. This is not a capability that is internal within

companies.

• Examples: Kodak, Radio Shack, IBM, HP


About the Starcher Group LLC

We have been working Business Model projects since 2002, working with $1M to $25B

businesses across 18 industries and counting. To date we have identified and designed

$2.5B in value for our clients.