If you look at Amazon today, you’ll see an organization that’s extremely complex, with its tentacles spread across numerous activity sectors.
What began as an online bookstore in the early 2000s has expanded to include the agro-food business, TV and movie production, cloud computing, distribution, logistics, supply, and much more. Amazon’s products are physical and digital, tangible and intangible.
It would be hard to even know where to start analyzing this company—to understand who their clients are, what their value propositions are, how they acquire revenue, and how they use their value chains—because Amazon has 21 different ways to answer these questions and 21 different business models.
What’s more, Amazon is recognized as an industry leader in 10 of these, including:
Affiliation, Cash Machine, Cross-Selling, E-commerce, From Push-to-Pull, Layer Player, Leverage Customer Data, Long Tail, Razor and Blade, Multi-Sided Market, Ingredient Branding, Integrator, Mass Customization, Reverse Innovation, Self-Service, Subscription, and Virtualization.
Imagine if 21 paintings were laid one on top of the other, and you were asked to name the era, style, and artist for each. It would be impossible.
Now imagine if you performed the same exercise with 4 paintings, representing the number of business models most mature SMEs work with. With a little luck, you could maybe decipher an element or two, but no more.
Without the right tools, that’s exactly what you’re doing with your current business model. That’s why you’re left with the impression that your organization is unique and complex, and difficult to change. In reality, it isn’t.
ST.GALLEN’S 59 BUSINESS MODELS
In 2014, following 10 years of research, professors at St. Gallen University in Switzerland classified and published their 59 business models, analyzing their mutations from the turn of the century until today. Their model looks like this:
It was a painstaking task. It’s also a huge breakthrough in managerial thinking, and astonishingly enough it barely made an appearance in the syllabus at the graduate level. Yet it’s a gold mine of information.
The Business Model Navigator—available on Amazon*—should be part of any good strategist or manager’s bookshelf.
BENEFITS FOR YOUR COMPANY
So just how does it benefit you to know your company’s business model? It helps facilitate a great number of strategic approaches!
- Facilitates strategic thinking. Instead of starting a discussion with a general question like “How can we improve our business model?”, you can instead think about one business model at a time. This will help you to fully understand the unique opportunities of each model. You may even decide to let one model go and replace it with another.
- Facilitates comparison and benchmarking. By deconstructing your business models to their simplest forms, you will be able to completely change the way you make comparisons. You will also quickly realize that the best players in any given business model are usually not even in your industry. For example, the business model for subscriptions, which began in the printing business, can now be found in industries from fashion to food. Which means Québec players like Frank And Oak, Oatbox, and Cook it can find inspiration in the magazine industry—like Harvard Business Review—to innovate in their own domains.
- Facilitates strategic planning. It will then become easier to plan tactics that affect your business model, harmonize these in an execution plan, and communicate these effectively to your teams. Everyone involved will have an easier time to understand how they’re helping to move the company forward, and how this impacts the dynamics of the organization.
- Facilitates transformation (digital). Transforming all business models at the same time is a difficult task that more often than not leads to failure. If you understand how to transform each of your models, the task will quickly become less complex, more accessible, and easier to measure.
If you don’t have time to read the book…
Realistically, you probably don’t have time to read the book. That’s why my team and I read it for you. By combining St. Gallen with the Business Model Canvas and Design Thinking, we offer a solution that’s unique to Montréal—one that will help get you thinking about and planning your strategy better. Feel free to write me any time to learn more!
If you wish to learn how to do this yourself, I also offer workshops together with the Université de Sherbrooke’s School of Management.
* I have unfortunately not been able to find the book for sale at any store in Québec or Canada. If you find a link, do let me know.
Photo credit : Andres Urena / Unsplash