Business Model Innovation and Value Creation

This article was written by Dr Surja Datta, Senior Lecturer-Strategy and Innovation, Oxford Brookes Business School, and Co-Editor of International Journal of Technology Management and Sustainable Development.

Business model canvas is the core framework of the Help to Grow: Management Course. Small business leaders participating in the course develop a business model canvas throughout the Help to Grow: Management Course, applying the framework to their own business realities.  

A business model canvas articulates the logic of the business, it shows how the key elements of the enterprise hang together. The key elements in a business model canvas (there are nine of them) can be broadly classified into four categories: the value proposition, creating and delivering the value proposition, cost of creating value, revenue streams. 

The Value Proposition 

This is the value promise of the business. It specifies the customer need(s) that the business is aiming to satisfy. The value proposition is what attracts the customer to your doorstep instead of your rival’s, so it’s important to make it as distinctive as possible. 

Creating and Delivering the Value Proposition 

Companies deliver the value proposition through organisational resources and activities. SME resources are limited, and external partners are often needed to grow and scale up. 

The selection of appropriate distribution channels and market segmentation is as important as finding the right partners as it facilitates a frictionless delivery of value to customers. This strategy determines the way a business competes in the market. It helps leaders assess whether they will offer differentiated or ‘value for money’ products/services? Whichever option a leader decides upon, a value proposition is taking shape.  

Cost of Creating Value 

The development of organisational resources and the execution of key processes cost money. It is important to estimate costs in your strategy.

This helps leaders understand how much it costs the organisation to create and deliver the value promise.  

A solid grasp of strategic costs is a prerequisite of a sustainable business and involves answering the question- how much does it cost the firm to develop and execute activities that are crucial for value creation? It’s also essential to understand the value of goods in the market. This business vantage point enables tough decisions to be made with clarity as they are backed by figures and facts. 

Revenue Streams 

Companies usually monetise the value they’ve created for their customers through revenue streams. Monetisation of the created value can be achieved in several ways- pay and go, subscriptions, licensing, franchise fees etc.  

Finding the right approach to generating revenue can be the difference between success and failure. 

For example, a car washing service with a successful subscription system (that ensures repeat business and stable cash flows) will be valued higher compared to its rival whose revenue model is based on pay and go even though the volume of business both generate is similar. 

It is vital that business leaders identify which monetisation mechanism works best for their organisations so that they can maximise the viability of their business. 

The benefits of a business model canvas analysis are multifold. For instance, business model canvas analysis can pinpoint areas that need tweaking or improvement. An as-is analysis may show that the business lacks strategic partners, crucial for growth and scaling up.  

A business model canvas also provides a bird’s eye view of the enterprise, allowing the owner or manager to tell a coherent story about how the business makes money. Business model innovation, covered in detail in modules 1 and 2 of the Help to Grow: Management Course, is about changing the existing configuration in important ways to create more value for customers and the business itself. 

Understanding how to use a business model canvas to identify opportunities for increased revenue, profit and growth helps can provide vital insight. For example, for business leaders unsure of how to take their business to the next level, or those trying to make significant decisions regarding new products, or markets. 

The Help to Grow Management Course shows how this can be achieved in practice with the help of real SME case studies, and the support of a 1-2-1 mentor to help small business leaders apply their learnings directly to their business. 

Find out more about the Help to Grow: Management Course here.