Transforming

a Firm's
Business Model

Elijah Ezendu
Preface
This piece of work serves as introduction to key concepts in business model
development and the standard method for transforming a firm’s business model from
ineffectiveness & mediocrity to unparalleled cascades of peak performance.

A clear understanding of requirements provides impetus for clutching systemic solution.

That’s why the complete relationship network existing in a business system must be
captured and sorted out, with the intention that all arrays of dependencies occurring at
every activity stratum would be discovered, fathomed and appropriately exploited for
achievement of peak performance.

Business Model is a simplistic representation of the interlocking factors in business

operation, showing connectivity, dependencies, in addition to establishment of the right
mix of configuration for each factor that would facilitate peak performance.

Business Model exists in every organisation either in the form of unstructured or

structured scheme. When an organisation deliberately craft perceivably workable
business model: It serves as a structured one. If an organisation fails to deploy an
objectively tested business model for its operation, the incessant multi-polarization of
decisions and practices therein would continue to embed unstructured business model,
which may jeopardize the established business intent. A well structured business model
serves as fitting alignment between business intent and peak performance.

I believe this know-how will be beneficial for transformation.

Dr Elijah Ezendu
Award-Winning Business Expert
Introduction

Linder and Cantrell indicated Business Model is an organisation’s core logic for creating
value. Bill Vorley, Mark Lundy and James Macgregor identified Business Model as a
way of creating and capturing value within a market network of producers, suppliers and
consumers. Alexander Osterwalder postulated “Business Model is nothing else than a
representation of how an organisation makes or intend to make money”. While Mitch
Thrower affirmed, "in all enterprises, it's the business model that deserves detailed
attention and understanding".

Steps in Transforming a Business Model

• Business Model Analysis

• Development of Solution Options for Identified Problems
• Restructuring of Business Model to More Efficient Alternatives
• Identification of Most Efficient Alternative
• Deployment of New Business Model and Review

Elijah Ezendu, Business Model

Business Model Analysis

This is the critical identification and evaluation of a business model for purpose of
ascertaining its internal alignments to operational effectiveness and external alignments
to efficiency of the total business stream.

Business stream is a schema that shows the five layers in business development
framework, from business intent to business performance.

Layers of Business Stream

• Business Intent
• Business Strategy
• Business Model
• Business Process
• Business Performance

Elijah Ezendu, Business Model

Business Intent

Business intent is the description and accentuation of a structured focus, highlighting

vision, mission, goals and objectives, while symbolizing direction and destiny.

Business Strategy

Business strategy represents clearly identified feasible route for steering activities onto
attainment of goals and objectives. There are three levels of business strategy.

Three Levels of Business Strategy

• Corporate Level Strategy
• Business Unit Level Strategy
• Functional/Operational Level Strategy

Corporate Level Strategy

This comprises overall strategy elements for the firm. Resolving issues pertaining to mix
of businesses and means for coordination and integration of individual unit strategies.
It’s concerned with the following:

Managing Activities and Business Interrelationships

Corporate Responsibilities

Management Practices

Competitive Contact

Business Unit Level Strategy

This involves translation of the corporate level strategy into suitable strategies for
individual business divisions or portfolios, required to develop and sustain competitive
advantage for products or services of the firm. This is concerned with the following:

Influencing the layout of competition by means of action such as vertical integration.

Positioning the firm’s business against competitors.

Modifying action to cope with changes in demand, supply, regulations & technology.

Developing useful partnerships with customers and other business units.

Functional/ Operational Level Strategy

This involves development of strategies for functional catchments such as production,

finance, human resource, research, logistics, business development and materials
management. It’s concerned with implementation of the strategic plans established at
corporate and business unit levels in order to ensure functional silos partnership in
organisational leadership.

Characteristics of Business Model

Business Model is a blueprint pinpointing the flow of articulated value from a firm to
its customers, and the dimensions of returns to the firm.

Business model is a bridge providing appropriate linkage between business strategy
and business process.

Without a well-structured business model in place, there would be a disconnect
between business strategy and business process.

Business Model is the drawing board for designing Business Performance.

Business Model is the heart of Business Success.

Osterwalder & Pigneur Business Model Canvas

Alexander Osterwalder & Yves Pigneur, Business Model Generation

Ezendu Business Model Template

Elijah Ezendu, Business Model

The business model template consists of four parts namely infrastructure, offer,
customer and finance. The content of each part is as stated below.

Infrastructure

Alliance Networks

Key Activities

Coherence

Key Resources

Offer

Value Propositions
 Customer

Customer Relationships

Influence

Channels

Target Customers

Finance

Cost Structure

Revenue Stream

Alliance
Alliance is an agreement between firms for achievement of defined goals and building
mutual interdependence while remaining separate entities.
The two alliance structures are as follows:

i. Transient Alliance
ii. Strategic Alliance

Alliances can exist between a firm and its suppliers, distributors, competitors and non-
competitors. Some types of alliance are as follows:

I. Preferred Suppliers
II. Co-Marketing
III. Licensing
IV. Joint Production
V. Coopetition
VI. Minority Investments
VII. Multi-Partner Consortia
VIII. Joint Research and Development
IX. Outsourcing
X. Equity Joint Venture

Alliance provides opportunities for leveraging external capabilities so as to evolve value,

especially where outright acquisition may be unnecessary or premature.
Key Activities

This represents the major work concentration of a firm in order to produce well-defined
value proposition. Ascertainment of key activities gives room for mapping aggregate
work requirements and ancillary projections.

Coherence

Coherence is a cultural thrust that provides effective connectivity for all the components
of business model, fusing them together in characteristic intimacies, and facilitating
uniform drive onto specified goals and objectives.

Key Resources

These are the resources required for producing a set of value propositions.
The four types of resources are as follows:

Material Resources

Physical Resources

Financial Resources

Intellectual Resources

Value Propositions
 Value propositions represent the whole set of values which a firm lays out to its
customers, in order for them to find consummate worth therein.
 Value Propositions stand as the pivot of business intent.
 Value Propositions give room for development of interdependencies between a
firm and its customers.

Customer Relationships

This deals with identification and inventory of diversity of relationships which a firm
should nurture with its customers. Where the customers are segmented, relationships
may vary from one segment to another. If the customers are not segmented, then the
ensuing relationships would be undifferentiated. Customer Relationships should be
 deployed for expanding value synchronization capacity of the firm-customer bond
beyond primary transactional linkages that characterize customer touch points, with the
intention of gaining resolute foothold in the belief structure of customers.

Goals of Customer Relationships

i. Customer Information Services
ii. Customer Acquisition
iii. Customer Retention
iv. Cross-Selling
v. Up-Selling
vi. Price Optimization
vii. Continuous Value Propositions Realignment

Influence

This is the active strength that affects a person’s opinion, thereby inducing action in a
particular direction.
It provides productive link to customers.
Its operability depends on pedestals of acceptance and belief.

Types of Influence

i. Social Influence
ii. Brand Influence
iii. Customer Influence
iv. Religious Influence
v. Economic Influence
vi. Environmental Influence
vii. Influence Predicated on National Pride

Channels

Channels are paths through which a firm moves its value proposition to target
customers, by means of designated sales points, distributors, and effective
communication.
Target Customers

These are the particular set of customers that a firm intends to be offering the right
value proposition for their identified needs or wants. Customers can be segmented,
aggregated or selected with specificity in the form of a niche.

Cost Structure

The cost structure of a business model highlights profiles of incurrable costs and the
ratio of fixed costs to variable costs. It facilitates identification of cost-containment
method that would be deployed. It allows for application of cost management
techniques to mitigate effects of identified cost drivers.

Types of Cost Structures

1. Cost Leadership
2. Value Maximization
3. Integrated Cost Leadership & Value Maximization

Revenue Streams

These are applicable means of obtaining revenue from customers as a measurable and
deserved return for values delivered.

Testing a Business Model

The four criteria for testing a business model are as follows:

1. Conveys Business Intent

2. Positive Alignment with Strategy
3. Translates Strategy to Process
4. Practicable Design for Performance Optimization
 Elijah Ezendu, Business Model

References

Osterwalder A, Pigneur Y (2009), Business Model Generation

Bill Vorley, Mark Lundy & James Macgregor, Business Models that are inclusive of small farmers

http://www.businessmodelalchemist.com

Elijah Ezendu, Business Model

Linder J.C., Cantrell S (2001), Changing Business Models: Surveying Landscape, Institute of
Strategic Change, Chicago USA, Accenture

Mitch Thrower, The Attention Deficit Workplace: Winning Strategies for Success in Today’s
Fast-Paced Business Environment.
About The Author
Dr. Elijah Ezendu is an award-winning business expert. He is a Certified Management
Consultant, licensed by International Council of Management Consulting Institutes
which has a Special Consultative Status in United Nations Economic and Social
Council. He is concurrently Senior Partner, Shevach Consulting; Lead Assessor and
Member of Governing Council, Institute of Management Consultants; Member of
Strategic Planning & Implementation Committee, Chartered Institute of Personnel
Management of Nigeria; Member of Training Development and Delivery Committee,
International Association of Software Architects; Lead Resource, Center for
Competitive Intelligence Development; Honorary Global Advisor, International Project
Management Commission; as well as Visiting Lecturer & MBA Programme Coordinator
(Nigeria), Regent Business School, South Africa; in consonance with active service on
boards of some firms. He has been a key player fostering global certifications
development and manpower upping in Business Development and Competitive
Intelligence. He holds a doctoral degree in Management from St. Clements University,
British West Indies. He is a Chartered Manager certified by Canadian Institute of
Management, Canada and holds numerous professional qualifications including Master
Project Manager; Project Manager E-Business; Fellow, Institute of Management
Consultants; Fellow, Certified Institute of Cost Management; Fellow, Institute of
Business Development; Fellow, American Academy of Financial Management; Fellow,
Institute of Internal Auditors; Fellow, Society of Sales and Marketing; Member, Nigerian
Institute of Training and Development; Member, Institute of Analytics Professionals;
Associate, Chartered Institute of Personnel Management of Nigeria; Associate,
Chartered Institute of Arbitrators (Nigeria). He is a Certified Business Development
Analyst, Outsourcing Professional, Mergers and Acquisition Advisor, Intellectual
Property Professional and Competitive Intelligence Professional. Additionally, he is an
information technology management professional certified by Institute for the
Management of Information Systems, UK along with Microsoft Corporation, USA and
stands as a Member of International Association of Software Architects holding
assortment of certificates in computer programming and web systems. He is a world-
class consultant, who has functioned as Speaker/Facilitator at myriad programmes of
professional institutes, international development organisations, private and public firms
including extra-governmental agencies and institutions. He is a prolific writer and author
who had served as Editor-in-Chief, Cost Management Journal; Part-Time Lecturer &
External Examiner (MBA Programme), Ladoke Akintola University of Technology;
Director of MBA Programme (Nigerian Outreach), Management Institute of Canada;
Chief Operating Officer, Rohan Marine; Second Vice President and Member of
Governing Council, Certified Institute of Cost Management; Director of Programmes
and Member of Governing Council, The Institute of Business Development; Member of
Executive Council, Institute of Internal Auditors; Director, Refined Shipping; Lead
Consultant/ Country Manager in some consulting firms including JK Michaels
Consulting, D & E; and Examiner to various Professional Institutes.
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