Business model innovation is the development of new, unique concepts supporting

an organization's financial viability, including its mission, and the processes for
bringing those concepts to fruition. The primary goal of business model innovation
is to realize new revenue sources by improving product value and how products are
delivered to customers.
Implementing or modifying a business strategy usually requires changes to
operations and people performing the work. And by nature people resist change. So
the processes, rules and the personal involved in the old strategy can have a impact
on the new strategy.

Business Process Modeling facilitates this by :

By helping managers and executives maintain consistency across processes while
keeping an eye on the overall strategy of the organization
By ensuring that the operational tasks and activities performed by the team
members actually help the organization implement its strategy. If the processes and
the strategies are not aligned it usually leads to failure in execution. Because even if
the operational tasks are performed correctly, the overall organizational goals are
not achieved.
Implement Business Process Re-engineering (BPR) by understanding the existing
processes and changing them for improved performance Business process
analysis helps in identifying bottlenecks and inefficiencies in the processes and thus
improving them.
Enable Process Agility, an ability to change and communicate processes quickly to
take advantage of new business opportunities or address business challenges.

Advanced BPM diagram highlighting the importance of business process modeling

Business process models help to visualize the processes to make better decision

(2) Improve Process Communication

One area that distinguishes successful businesses and teams is that they have a
very clear idea of what they are supposed to do, how they are supposed to do it and
what is the exact role of every team member. Clear communication of the
operational processes is critical to facilitate a smooth functioning of a team.
Business Process Modeling enables the documenting and communicating of the
organizations business processes:
Process modeling offers a common unified language and methodology for
communicating processes and information about processes and decision rules.
It is ideal for training of new people and rapid knowledge transfer because with a
thoroughly documented process any new team member can be very quickly trained
on what they have to do in any situation that they may face.
Minimizes potential danger of loss of staff resulting in loss of business process
knowledge.
It helps business managers communicate their ideas quickly and clearly.
Jump-starts the organizational process documentation initiative.
Turns the teams experience into documented processes.

(3) Increase Control and Consistency

Organizations and companies that succeed are ones that ensure their business
processes and rules are well designed and that they are consistently applied the
same way every single time. This process control and consistency is key for success
in any organization.

Business Process Modeling makes this possible by helping:

Formalize existing processes which may not be well documented or which have
evolved over time into informal knowledge.
Execute process in consistent manner because instead of relying on people to
remember to do the right thing the documented process can be given to the
business users.
Make better decisions because guesswork is eliminated as business users can have
the documented business rules in front of them.
Handle exceptions faster and in a better way.
Complete regulatory compliance by ensuring that the documented processes
follow the company guidelines and legal regulations.
Put business people in charge.
Support compliance initiatives such as Six Sigma, ISO 9000

(4) Improve Operational Efficiency

In todays business environment, every business and every manager wants to
ensure that they are achieving the best possible results with the resources available
to them. There is no room for inefficiencies and wastage.
The Process simulation and analysis steps of Business Process Modeling are critical
tools for managers and analysts to ensure that their processes are optimized and
are running accurately.
Process Simulation allows analysis and understanding of the process flows and
helps managers know if there is room for further optimization and efficiencies.
It helps spot needed improvements and reduce process cycle time.
It increases productivity of existing resources and staff and so allows the team to
do more with less.
It facilitates risk free experimentation and encourages exchange of process
improvement ideas.
Process simulation allows modeling of process designs before actually
implementing them thus minimizing disruptions.
It encourages a mind-set of continually optimizing business critical processes to
incrementally improve operational efficiency.
Process analysis enables better resource utilization.

(5) Gain Competitive Advantage

All the benefits mentioned above lead to a significant competitive advantage for an
organization that has invested the time and effort to document, simulate and
improve its business processes.

Studies of many wildly successful companies has often shown that they succeeded
not only because of better ideas or better business models. But also because they
constantly refined and improve their processes through business process modeling.

A slight improvement in one activity here and another one there leads to an overall
better process. And those little refinements help organizations run efficiently and
give the edge over their competitors.

The above points highlight the importance of business process modeling to an

organization. And this marks the end of the series of articles we shared on business
process modeling.
We sincerely hope that it had helped improving your knowledge on BPM and that
you would put the knowledge gained, in to practice. And we have professionally
designed business process modeling templates for you get started fast as well.As
always if you have any questions feel free to ask them in the comments section.
2 questions The Business Model Canvas was initially proposed by Alexander
Osterwalder[4] based on his earlier work on Business Model Ontology.[5] Since the
release of Osterwalder's work in 2008, new canvases for specific niches have
appeared, such as the Lean Canvas. The Business Model Canvas[edit]
Formal descriptions of the business become the building blocks for its activities.
Many different business conceptualizations exist; Osterwalder's work and thesis
(2010,[3] 2004[5]) propose a single reference model based on the similarities of a
wide range of business model conceptualizations. With his business model design
template, an enterprise can easily describe their business model.

Infrastructure
Key Activities: The most important activities in executing a company's value
proposition. An example for Bic[clarification needed] would be creating an efficient
supply chain to drive down costs.
Key Resources: The resources that are necessary to create value for the customer.
They are considered an asset to a company, which are needed in order to sustain
and support the business. These resources could be human, financial, physical and
intellectual.
Partner Network: In order to optimize operations and reduce risks of a business
model, organization usually cultivate buyer-supplier relationships so they can focus
on their core activity. Complementary business alliances also can be considered
through joint ventures, strategic alliances between competitors or non-competitors.
Offering
Value Propositions: The collection of products and services a business offers to meet
the needs of its customers. According to Osterwalder, (2004), a company's value
proposition is what distinguishes itself from its competitors. The value proposition
provides value through various elements such as newness, performance,
customization, "getting the job done", design, brand/status, price, cost reduction,
risk reduction, accessibility, and convenience/usability.
The value propositions may be:
Quantitative- price and efficiency
Qualitative- overall customer experience and outcome
Customers
Customer Segments: To build an effective business model, a company must identify
which customers it tries to serve. Various sets of customers can be segmented
based on the different needs and attributes to ensure appropriate implementation
of corporate strategy meets the characteristics of selected group of clients. The
different types of customer segments include:
Mass Market: There is no specific segmentation for a company that follows the Mass
Market element as the organization displays a wide view of potential clients. e.g.
Car
Niche Market: Customer segmentation based on specialized needs and
characteristics of its clients. e.g. Rolex
Segmented: A company applies additional segmentation within existing customer
segment. In the segmented situation, the business may further distinguish its
clients based on gender, age, and/or income.
Diversify: A business serves multiple customer segments with different needs and
characteristics.
Multi-Sided Platform / Market: For a smooth day-to-day business operation, some
companies will serve mutually dependent customer segment. A credit card
company will provide services to credit card holders while simultaneously assisting
merchants who accept those credit cards.
Channels: A company can deliver its value proposition to its targeted customers
through different channels. Effective channels will distribute a companys value
proposition in ways that are fast, efficient and cost effective. An organization can
reach its clients either through its own channels (store front), partner channels
(major distributors), or a combination of both.
Customer Relationships: To ensure the survival and success of any businesses,
companies must identify the type of relationship they want to create with their
customer segments. Various forms of customer relationships include:
Personal Assistance: Assistance in a form of employee-customer interaction. Such
assistance is performed either during sales, after sales, and/or both.
Dedicated Personal Assistance: The most intimate and hands on personal assistance
where a sales representative is assigned to handle all the needs and questions of a
special set of clients.
Self Service: The type of relationship that translates from the indirect interaction
between the company and the clients. Here, an organization provides the tools
needed for the customers to serve themselves easily and effectively.
Automated Services: A system similar to self-service but more personalized as it has
the ability to identify individual customers and his/her preferences. An example of
this would be Amazon.com making book suggestion based on the characteristics of
the previous book purchased.
Communities: Creating a community allows for a direct interaction among different
clients and the company. The community platform produces a scenario where
knowledge can be shared and problems are solved between different clients.
Co-creation: A personal relationship is created through the customers direct input
in the final outcome of the companys products/services.
Finances
Cost Structure: This describes the most important monetary consequences while
operating under different business models. A company's DOC.
Classes of Business Structures:
Cost-Driven - This business model focuses on minimizing all costs and having no
frills. e.g. SouthWest
Value-Driven - Less concerned with cost, this business model focuses on creating
value for their products and services. e.g. Louis Vuitton, Rolex
Characteristics of Cost Structures:
Fixed Costs - Costs are unchanged across different applications. e.g. salary, rent
Variable Costs - These costs vary depending on the amount of production of goods
or services. e.g. music festivals
Economies of Scale - Costs go down as the amount of good are ordered or
produced.
Economies of Scope - Costs go down due to incorporating other businesses which
have a direct relation to the original product.
Revenue Streams: The way a company makes income from each customer segment.
Several ways to generate a revenue stream:
Asset Sale - (the most common type) Selling ownership rights to a physical good.
e.g. Wal-Mart
Usage Fee - Money generated from the use of a particular service e.g. UPS
Subscription Fees - Revenue generated by selling a continuous service. e.g. Netflix
Lending/Leasing/Renting - Giving exclusive right to an asset for a particular period
of time. e.g. Leasing a Car
Licensing - Revenue generated from charging for the use of a protected intellectual
property.
Brokerage Fees - Revenue generated from an intermediate service between 2
parties. e.g. Broker selling a house for commission
Advertising - Revenue generated from charging fees for product advertising.
Resources: the main inputs that your company uses to create its value proposition,
service its customer segment and deliver the product to the customer.

3 qesstion
A revenue model is a framework for generating revenues. It identifies which
revenue source to pursue, what value to offer, how to price the value, and who pays
for the value.[1] It is a key component of a company's business model.[2] It
primarily identifies what product or service will be created in order to generate
revenues and the ways in which the product or service will be sold.

Without a well defined revenue model, that is, a clear plan of how to generate
revenues, new businesses will more likely struggle due to costs which they will not
be able to sustain. By having a clear revenue model, a business can focus on a
target audience, fund development plans for a product or service, establish
marketing plans, begin a line of credit and raise capital.[3]
Revenue model versus business model[edit]
People often confuse "revenue model" and "business model" as being synonymous,
or as being two completely different kind of models. A revenue model is part of a
business model. A business model shows the framework for an entire business and
allows investors and bankers as well as the entrepreneurs themselves to have a
quick way of evaluating that business. Business models can be viewed in many
different ways, however they are generally composed of the following six elements:
[12]

Acquire high value customers

Offer significant value to customers
Deliver products or services with high margins
Provide for customer satisfaction
Maintain market position
Fund the business
The revenue model is a key component of the business model[9] as it is an essential
factor for delivering products or services with high margins and funding the
business. Less than 50% of the investment required to set up a business will be
used in revenue-producing areas.[12] It can not resultantly be viewed as being
identical to the business model as it does not influence all the six elements but
more should be viewed as an inner component of it.
Having a well-structured business model is necessary for the success of any
business adding value to a product or service for customers. This will consequently
include having a clear and tailored revenue model which will ensure its financial
health. It provides the owners of the business with a necessary understanding of
cash flows as well as how it will generate revenue and maximize profitability.[13] In
addition to the business model, financial targets have to be forecasted when
creating an initial business plan whereby expected revenues and profits will have to
be presented[14] and thus calculated through the use of revenue models applied by
the business.
Revenue modeul sTypes of revenue models[edit]
The type of revenue model that is available to a firm depends, in large part, on the
activities the firm performs, and how it charges for those. Various models by which
to generate revenue include:

Advertising model[edit]
See also: Advertising
The advertising model is often used by Media businesses which use their platforms
where content is provided to the customer as an advertising space. Possible
examples are newspapers and magazines which generate revenue through the
various adverts encountered in their issues. Internet businesses which often provide
services will also have advertising spaces on their platforms. Examples include
Google and Taobao.[4] Mobile applications also use this specific revenue model to
generate revenues. By incorporating some ad space, many popular apps such as
Twitter and Instagram have strengthened their mobile revenue potential after
previously having no real revenue stream.[5]

Commission model[edit]
See also: Commission (remuneration)
The commission model is similar to the markup model as it is used when a business
charges a fee for a transaction that it mediates between two parties. Brokerage
companies or auction companies often use it as they provide a service as
intermediaries and generate revenue through commissions on the sales of either
stock or products.[1]

E-commerce model[edit]
Main article: E-commerce
This revenue model is the implementation of any of the other revenue models
online.
Fee-for-service model[edit]
Main article: Fee-for-service
In the fee-for-service model, unlike in the subscription model, the business only
charges customers for the amount of service or product they use. Many phone
companies provide pay as you go services whereby the customer only pays for the
amount of minutes he actually uses.

Licensing model[edit]
See also: License
With the licensing model, the business that owns a particular content retains
copyright while selling licenses to third parties. Software publishers sell licenses to
use their programs rather than straight-out sell copies of the program. Media
companies also obtain their revenues in this manner, as do patent holders of
particular technologies.[6]

Shareware model[edit]
Main article: Shareware
In the shareware model, users are encouraged to make and share copies of a
software product, which helps distribute it. Payment may be left entirely up to the
goodwill of the customer (donationware), or be optional with an occasional reminder
(nagware), or the software may be designed to stop working after a trial period
unless the user pays a license fee (trialware or demoware), or be crippled so that
key features don't work. Or it may be a free feature-limited "lite" version
(freemium), with a more advanced version available for a fee.
Question 4
When you first start a business, it can be intimidating. Youll have to face a lot of
struggles and challenges that bigger, more established businesses never have to
worry about. Youll deal with limited resources, a nonexistent reputation, concerns
over cash flow and only speculative information about your target demographics.
When you look at it this way, it seems impossible that a startup could ever out-
compete a bigger firm for a given client. Unless you have an in-demand solution
that literally nobody else on the planet can offer, your limitations at a startup will
put you at a disadvantage against the bigger, badder companies in your space.

But thats only one side of the story. The fuller truth is that startups actually hold a
number of great advantages over bigger companies, even though it may not seem
that way when youre in the middle of a crisis.
Startups will always have these five strengths against big businesses:

1. Agility.
Startups are young and formless for the first couple of years. You may have a solid
business plan and an operations strategy in place, but theres nothing confining you
to those structures. Big corporations are forced to keep their models the same to
keep the board of directors, the investors and their customer base happy. As a
startup, you can do whatever you want.

This agility comes in handy when something disrupts the industry, such as a new
technological development or an even newer competitor. Big businesses must
absorb the blow and respond slowly as their massive gears begin to turn. As a
startup, you can turn on a dime and rebuild everything from the ground up, if
necessary.

Related: The Key to Every Successful Business is Agility

2. Team chemistry.
Some major corporations have casual atmospheres, but for the most part, any big
business you walk into will be filled with walls, offices and cubicles. The people from
accounting dont know the people from marketing, and the CEO probably doesnt
know anyone below him/her.

In a startup, you have no choice but to bond with the other members of your team.
You may have three people or three dozen, but youll be working so closely together
on work that matters to all of you that youll have a natural chemistry in your
working relationships.

That chemistry matters more than you might think. It means your workers will be
more productive and more satisfied with their jobs, giving you more reliable work
and a lower turnaround.

3. Less bureaucracy.
In large corporations, everything must be formalized. Every minute process is well-
documented, and there are rules surrounding everything. Usually, when a decision
is to be made, it must undergo rigorous evaluation by multiple people in multiple
department. In essence, the gears of bureaucracy slow everything to a crawl and
formalize processes that never needed formalizing in the first place.

While you might have some solid rules and formal processes in place, your startup
doesnt have a fraction of the bureaucratic nonsense that your large competitors do.
You can make decisions faster and work more efficiently because of it.

Related: 5 Ways Your Startup Can Continue to Innovate in a Fast-Paced World

4. Competitive pricing.
Pricing is a difficult issue to speak about broadly. Each industry must consider
different factors when it comes to pricing. For example, in food product
development, larger companies have a pricing advantage because they have
access to more equipment, they can do larger runs and save money on items per
piece. However, for most industries, startups have the advantage when it comes to
pricing.

Startups have less overhead. Because fewer people are using fewer resources to
develop products and services, they can be priced more aggressively than those
same products and services churned out by a multi-level, massive corporation.
Youll also have more flexibility in pricing, open to negotiation, so youll be able to
secure more clients.

5. Personality.
Finally, and perhaps most importantly, because startups have fewer people within
an organization, they tend to have a much better, more accessible brand
personality. The CEO is just another member of the team and makes appearances at
most meetings, giving a face to the company. The employees, taking a smaller
salary and having more freedom, all actively want to be a part of the company, so
theyre happier and more fun to work with. Some customers will naturally gravitate
toward you because you are a startup. Youre novel and youre an underdog. People
love that.

Use these strengths to your advantage during your first few years of operation. Your
larger competitors may have the drop on you when it comes to resources and
influence, but your agility and underdog status will balance out the odds. If you can
utilize strategies that emphasize these natural startup advantages, youll be in a far
better position to succeed in the long term.
Questions 5

The laws covering business opportunity ventures usually exclude the sale of an
independent business by its owner. Rather, they are meant to cover the multiple
sales of distributorships or businesses that do not meet the requirements of a
franchise under the Federal Trade Commission (FTC) rule passed in 1979. This act
defines business offerings in three formats: package franchises, product franchises
and business opportunity ventures.

In order to be a business opportunity venture under the FTC rule, four elements
must be present:

1. The individual who buys a business opportunity, often referred to as a licensee or

franchisee, must distribute or sell goods or services supplied by the licenser or
franchisor.
2. The licensor or franchisor must help secure a retail outlet or accounts for the
goods and services the licensee is distributing or selling.

3. There must be a cash transaction between the two parties of at least $500 prior
to or within six months after the licensee or franchisee starts the business venture.

4. All terms and conditions of the relationship between the licensor and the licensee
must be stated in writing.

You can readily see that the sale of business opportunities as defined by the FTC
rule is quite different from the sale of an independent business. When you're
dealing with the sale of an independent business, the buyer has no obligations to
the seller. Once the sales transaction is completed, the buyer can subscribe to any
business operations system he or she prefers. There is no continued relationship
required by the seller. Business opportunity ventures, like franchises, are businesses
in which the seller makes a commitment of continuing involvement with the buyer.

Types of Business Opportunities

The FTC describes the most common types of business opportunity ventures as
follows:

Distributorship. Refers to an independent agent that has entered into an agreement

to offer and sell the product of another but is not entitled to use the manufacturer's
trade name as part of its trade name. Depending on the agreement, the distributor
may be limited to selling only that company's goods or it may have the freedom to
market several different product lines or services from various firms.
Rack jobber. Involves the selling of another company's products through a
distribution system of racks in a variety of stores that are serviced by the rack
jobber. Typically, the agent or buyer enters into an agreement with the parent
company to market their goods to various stores by means of strategically located
store racks. The parent company obtains a number of locations in which the racks
are placed on a consignment basis. It's up to the agent to maintain the inventory,
move the merchandise around to attract the customer, and do the bookkeeping.
The agent presents the store manager with a copy of the inventory control sheet
which indicates how much merchandise was sold, and then the distributor is paid by
the store or location which has the rack-less the store's commission.
Vending machine routes. Very similar to rack jobbing. The investment is usually
greater for this type of business opportunity venture since the businessperson must
buy the machines as well as the merchandise being vended, but here the situation
is reversed in terms of the pay procedure. The vending machine operator must pay
the location owner a percentage based on sales. The big secret to any route deal is
to get locations in high-foot-traffic areas, and of course, as close to one another as
possible. If your locations are spread far apart, you waste time and traveling
expenses servicing them.
In addition to the three types of business opportunities listed above, there are four
other categories you should be aware of:

Dealer. Similar to a distributor but while a distributor may sell to a number of

dealers, a dealer will usually sell only to a retailer or the consumer.
Trademark/product licenses. Under this type of arrangement, the licensee obtains
the right to use the seller's trade name as well as specific methods, equipment,
technology or products. Use of the trade name is purely optional.
Network marketing. This is a generic term that covers the realm of direct sales and
multilevel marketing. As a network marketing agent, you would sell products
through your own network of friends, neighbors, co-workers and so on. In some
instances, you may gain additional commissions by recruiting other agents.
Cooperatives. This business is similar to a licensee arrangement in which an existing
business, such as a hotel or hardware store, can affiliate with a larger network of
similar businesses, often for the sole purpose of advertising and promoting through
a common identity.
The Advantages of a Business Opportunity
Requires a lower initial fee than a franchise. Although the number of low-investment
franchises has increased, the fee to get into a business opportunity is still
considerably lower. The FTC requires a $500 minimum investment for an
opportunity to be considered a business opportunity, but there are many that fall
under this set fee, although most average around $2,000 to $3,000.

A proven system of operation or product. Existing systems serve to maximize

efficiency and returns and minimize problems. It's simply a matter of passing on
experience, still the best teacher. Whether they admit it or not, most people like
having their hands held once in a while. During crises, the parent company is there
to help the licensee over the bumps. Many people like this idea of safety in
numbers.

Intensive training programs. In any new business, a lot of time and money are
consumed during the learning period. A good business opportunity venture can
eliminate the majority of ineffective moves through an intensive training program.

Better financing options. Because of its financial size, credit line and contractual
agreements, the parent company offering the business opportunity can often
arrange better financing than an individual could obtain. Financial leverage is an
important consideration in any investment situation.

Professional advertising and promotion. Most small businesspeople don't spend

sufficient money on advertising. When they do, their efforts are often poorly
conceived and inconsistent. Many business opportunity ventures supply the buyer
with print advertising slicks, radio ads, TV storyboards, etc., in order to provide a
better marketing effort. Some business opportunity ventures will even have a
cooperative advertising agreement under which they will split the cost of print,
radio or TV ads. This type of marketing help is especially beneficial in large
metropolitan areas where the cost of media is prohibitive to the one-shop owner.

Ongoing counseling. Most business opportunity ventures offer support not only
through training but also through counseling from a staff of experts who offer
assistance that no independent could afford. Legal advice is available to a certain
degree. The most efficient accounting systems-perfect for that particular business-
have been designed by experts in the field. Some licensors offer free computer
analysis of records, and through comparison with other units can pinpoint areas of
inefficiency or loss as well as profitable aspects of the business that are being
neglected.

Site selection assistance. Experts in site selection and marketing choose locations
using all the scientific tools available. Professional negotiators arrange leases and
contracts to the best advantage, using the power of a large organization to
influence landlords and other important figures.

Purchasing power. Many times, the parent company's tremendous buying power and
special buying techniques can bring products, equipment and outside services to
the licensee at a much lower cost than an independent could ever get.

No ongoing royalties. In a business opportunity, unlike in a franchise, there are no

ongoing royalties to pay to the seller. The profits are all yours.

The Disadvantages of a Business Opportunity

Under ideal conditions, business opportunities are a good, low-investment way to
get into business with minimum risk and a good chance for success. But nothing in
this world is perfect, so here are some problems that can be expected:

Poor site selection. The majority of business opportunities are consumer-oriented

retail operations which rely on good location, visibility and easy access to the
establishment. Most buyers of business opportunities casually accept the locations
chosen for them. DON'T! Look it over thoroughly yourself. You might even hire an
outside marketing consultant to evaluate and possibly argue with the parent
company's choice. Having a better locations could literally mean millions of dollars
in profit over the course of 20 years.
Lack of ongoing support. There is usually no requirement for the business
opportunity seller to offer ongoing support of any kind. If the seller decides not to
supply information or guidelines that could help you once you're in operation, you
may not have much recourse available to you.
Exclusivity clauses. Are you restricted to selling only the manufacturer's
merchandise? If this is the case and you deviate for any reason whatsoever, you run
the risk of the licensor canceling the agreement. If you do buy from other sources, it
will be very hard to hide-most parent companies will require you to open your books
for examination at predesignated periods of time. Any irregularities will be spotted
at these times. Most smart buyers of business opportunities will negotiate the point
in the agreement stipulating sources of supply in case product quality is
inconsistent.
Parent-company bankruptcy. Another pitfall is the possibility of the parent company
overextending itself and going bankrupt. While this is not as serious in a business
opportunity as it would be in a franchise, you still run the risk of losing the business
because your property contracts may have been financed through the parent
company.
You should carefully investigate any business opportunity you're considering. Get a
list of operators from the parent company and call them. Have a lawyer look over
any agreement drafted by the parent company. Make sure you receive a disclosure
statement. Then carefully evaluate the licensor. Don't let anyone hurry you. Make
sure a responsible company backs the business opportunity.