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What's Your Competitive Advantage (WYCA)

Author: Srinath Venkat

Start-up and established conglomerates ponder about creating or pivoting their business models and have serious questions like what business model to choose, which will give a competitive advantage, which will be the right fit for us.  Creating an innovative business model which is disruptive is as important as creating a product with unique value proposition. As Harvard Professor Michael J Skok states, the perfect storm happens when Disruptive Business Model, Discontinuous innovation and Uunderserved Market overlap. It should create innovator’s dilemma by changing the game, threatening the incumbents, rewriting the rules and creating a new playing field. (Eg. Google’s model of leveraging data gathered from its free services for ad revenue as opposed to Microsoft’s licensing model for software).

Business Model Canvas (BMC)

Key Partnerships

Key Activities

Value Proposition

Customer Relationship

Customer Segments

Key Resources

Channels

Cost Structures

Revenue Streams

The figure titled Business Model Canvas (BMC) shown was developed by Alexander Osterwalder is a strategic management tool which helps entrepreneurs design a customized business model by picturing out the unique value proposition of their product or service which is the core of the model, the value creation process and the value delivery process.

In figure titled Segments in BMC, I have created an abridged simplistic canvas, where the center of segments depicts the value (core of the business). Adjacent to the core (value proposition / value segment), on one end there is operational or business part of the model (value creation process) which includes, key resources required for running the business, key operational activities in the business, key partnerships for value delivery and the costs incurred. On the other end there is customer part of the model (value delivery process) which includes, channels for customer acquisitions / developing customer relationships, channels of distribution / delivery to customers, Revenue from sales.

Segments in BMC

 

 

 

Value Creation

 

(Business)

 

 

 

 

Value

 

(Product/Service)

 

 

Value Delivery

 

(Customer)

 

A new business venture need to do concept testing, where the venture takes several ideas and determines their viability, and develops prototype of the products which are likely to yield the best results. Most of the ventures overlook this step and are blinded by their preconceived notions.  Products testing is a strategy which gives feedback on marketing and sales activities, achieve competitive advantage through product superiority, determine the willingness to pay, predict consumer acceptance and monitor product quality.

Top 5 Reasons for Start-up Failure

Weak barrier to entry (clones and me-too product / service)

Failure in finding the must-have product rather than nice to have products (Product-Market Fit)

Challenges in acquiring customers or Customer Acquisition Cost is greater than the Life Time Value (CAC > LTV)

Poor Execution of the Team

High cash burn rate and weak unit economics

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