“In all enterprises, it’s the business model that deserves detailed attention and understanding.”
– Mitch Thrower

A successful, sustainable enterprise requires a good business model. That means they will have developed competency to create,  deliver and capture value from all inputs and supply chain linking profitably to end markets – business to customer.

Modern businesses operate in an ever moving environments, with changes influenced by economics,  geo-political factors, technology, risk movements,  process innovations, alterations to  the supply chain and variations to consumer buying behaviour, to name a few.  This requires the business to be adept at continually questioning, innovating, experimenting and constantly adapting.   The greater the volatility the greater the need for this approach, if smooth change is to be self-directed and self-motivated.. Achieving this requires leadership where a culture of perpetual innovation, questioning and experimentation  is encouraged. And there is also a need for clarity in communication so all stakeholders  are aligned in understanding all aspects of the business, where the organisation is now, and where it wants to go and what actions are required to deliver the outcomes sought.

The contributions within this edition explore the skills, thinking, challenges, necessary environments and available resources or tools for developing and maintaining a successful business model.  The contributors show that planning, questioning, and thinking ahead, enables  the business to  anticipate issues or potential problems that can then be fodder for further innovation.

“It’s easy to come up with new ideas; the hard part is letting go of what worked for you two years ago, but will soon be out of date.”
– Roger von Oech

Business Model Development – Dr Delyth Samuel, Manager, Business Development and Strategy, University of Melbourne

Dr Delyth Samuel believes a key imperative for organisations is that employees are aligned in their understanding of where the organisation is now, where it is headed, and what an individual’s contribution in getting there is. Once the end destination is understood and shared, a business model can help describe how and what is be to  achieved.

Outlining your business model is an opportunity to innovate across business processes, associated service delivery and distribution channels. Each business has a business plan, but as these documentas are often not updated as often as they should be and the speed of change of events, means that it is worth considering how you can quickly   generate or update a business model, relevant to current operating conditions.

Delyth discusses a book, “Business Model Generation – A Handbook  for Visionaries, Game Changers and Challengers”, that describes a useful approach to thinking about the overall value proposition of your business. Utilising a ‘business m odel canvas’ the key elements of an organisation can be captured visually..

Truly understanding your organisations strategic competitive advantage requires honed insights into your customers and  markets.  As well as locating product and service delivery solutions, there is the focus on  innovative combinations of key partnerships, customer relations and channels and taking advantage of technology. Delyth concludes with references to a few resources and frameworks that are easy to develop and communicate.

When It’s Time to Restructure – A. G. Sherlock B.Ec FCA MAICD, Principal, Hill Sherlock Willis & Partners

Tony Sherlock examines the business management tool of forecasting future cash needs. Cashflow has the biggest impact  on a business as adequate working capital, is vital to make sure the business is ustainable in the context of current as well as future operations.

Prevailing economic conditions are producing a tightened debt and capital market, sosecuring additional facilities from traditional lenders is a difficult and time consuming task.  Part of that task  is to demonstrate your understanding of the needs of the business as well as acting well before capital needs become strained.

Tony outlines what is required in making cash forecasts. Forecasts require well thought out assumptions that underpin sales, gross margins, expenses, capital works relating to capacity, the impact of competition, and understanding the inherent risks, are important aspects of planning to know your future requirements. A catalyst for preparation is involving key staff and management in the process to ensure the best forward plan.

The Business Model for a Model Business – Creating the Right Structure for Corporate Longevity – Suelen McCallum, CEO, dVT Consulting

Suelen McCallum demonstrates the value of having a good business structure that is complimentary and appropriate to your business model.  The structure should  minimise risk and that is easily adaptable to changes in the market.

Suelen achieves this by presenting two case studies. Company A, who had one company for all its operations – imports, sales and distribution, employment, and administration. There were a number of risk areas in the business model and as a few problems arose they found themselves unable to manage them, and liquidation ensued. This put all of the assets of the business, that had been built over time, at risk, and they were eventually lost to the business. If the business model had had a structure including different corporate entities then all may not have been lost. Company B operated in a competitive retail field. They developed a wide range of products – varying in quality and price – and sold them wholesale to retail outlets and also online to the public. To maintain margins and sale volume and avoid revealing their discounts and intangible assets in negotiations with retailers, they chose a business structure that split sales amongst separate companies.

Business models will face change. If the structure behind it is flexible and conducive to adaptation then it will at least have the ability to respond to demands and therefore live to fight another day.

Deeply Understand Your Customer and Value Chain Partnerships so Your Organisational Value Goes Beyond Their Expectations and Delivers Exceptional Results! – Dr Lewis Atkinson, Principal, Haines Centre for Strategic Management

Dr Lewis Atkinson poses the question, ‘How deeply do you really understand your customer or value chain partnerships?’ Many organisations answer this based on their own organisational assumptions, rather than what are the customers and partners wants, needs and solutions.

Lewis examines what may result if these wants and needs are not understood and what benefits accrue when you do. A 5 step solution ’Customer Epathy Mapping’ is presented.

Structural Cracks – Are We Seeing a Structural Shift in the Business of Innovation? – Paul McCarney, Consultant, Digital Technology Space

Paul McCarney examines the rate of business model innovation and how the dynamics and mechanics are shifting.

Large enterprises face an innovation dilemma due to practical reasons. They often have no real context or framework for disruptive innovation. Newer markets where innovation occurs are often small and they don’t satisfy enterprise growth needs or ROI standards. Also, their processes and culture aren’t nimble or flexible enough. And yet, each generation, there is fast change and innovation in business models.

Paul concludes with what is changing and why it is important for enterprises to consider scaling up their investment in innovation. The increased speed of technology to market and the decreased cost of innovating in this space are making it easier to test products and to become cash positive. Utility computing, content democratisation, lower costs and the transfer of proven models from overseas will only dramatically increase the rate of innovation. It is time large enterprises found a way to solve their innovation dilemmas and participate in change before someone else does.

Changing Trends – Combining Heart and Mind in Business – Lynn Copithorne, General Manager, Global Experience

Lynn Copithorne presents a snapshot of the Australian Education market over the last 2 years and depicts the global and national events that are shaping this previously expansive industry segment.

What had seemed a well established business is now operating in unpredictable, unimaginable times. Lynn manages a Homestay company for international students, and from this perspective outlines the factors driving the decline in this niche, largely unregulated industry. There are many challenges delivering Homestay, considering the different backgrounds and expectations of host families and students. And yet considering this, overall, the industry tends to be the ‘soft’ landing allowing students to settle into the new environment.

Lynn outlines key details of the change in this industry and concludes with a summary of key learning’s for any businesses undergoing change.

Change, Adaptation and Business Models – Lindley Edwards, CEO, AFG Venture Group

Lindley Edwards examines the ability of management to be capable of holding two opposing but true views or thoughts whilst still being able to function, called the antinomian by philosophers. All the changes can be viewed as providing opportunities and the skill is to capture them. What growth businesses have in common preparedness to embrace new business models and innovate to match demands of the market. They adapt, succeeding best when they embed the ability to hold the antinomial concept within the company’s strategy and deployment.

Lindley outlines the number of skills required to ‘perpetually innovate’ to ensure your business model always creates, delivers and captures value. Innovation is a two-sided process, discovery and delivery.

“Observe what is with undivided attention.”
– Bruce Lee

“Discovery consists of seeing what everybody has seen and thinking what nobody has thought.”
– Albert von Szent-Gyorgy

“If you’re not prepared to be wrong, you’ll never come up with anything original.”
– Sir Ken Robinson

If you have any comments or would like to submit an article, please email the editor@afgventuregroup.com – your comments and feedback are always welcome. We seek articles for the next issue that will focus on ‘Investing and Joint Venturing Offshore’. The due date for contributions will be late September 2011.

A Final Word

“We all operate in two contrasting modes, which might be called open and closed. The open mode is more relaxed, more receptive, more exploratory, more democratic, more playful and more humorous. The closed mode is the tighter, more rigid, more hierarchical, more tunnel-visioned. Most people, unfortunately spend most of their time in the closed mode. Not that the closed mode cannot be helpful. If you are leaping a ravine, the moment of takeoff is a bad time for considering alternative strategies. When you charge the enemy machine-gun post, don’t waste energy trying to see the funny side of it. Do it in the “closed” mode. But the moment the action is over, try to return to the “open” mode—to open your mind again to all the feedback from our action that enables us to tell whether the action has been successful, or whether further action is needed to improve on what we have done. In other words, we must return to the open mode, because in that mode we are the most aware, most receptive, most creative, and therefore at our most intelligent.”

–      John Cleese