1We describe the model in plain language
Segments, offer, channels, how you get paid, cost structure.
Business Model Review
Economics starts with how the model is built. We examine four elements: who you sell to, what, how you get paid and how you produce. And we find which one has stopped working.
Sound familiar?Revenue grows, but profit and cash can't keep up with it, The value for the customer is defined so broadly that anyone could repeat it, Parts of the model get in each other's way: sales promise what production can't deliver profitably
Strategy and Consulting
How we work
1
2We check the economics
Margin and cost to serve by segment and product.
3We compare with the market
Where competitors have different economics and what that means for you.
4We form options
Which changes to the design are possible and what each would give in numbers.
Sound familiar?
- Revenue grows, but profit and cash can't keep up with it.
- The value for the customer is defined so broadly that anyone could repeat it.
- Parts of the model get in each other's way: sales promise what production can't deliver profitably.
What usually lies behind it
A model rarely breaks as a whole. Usually one element runs out: a segment stops paying for your value, the way you get paid can't cover the costs, production hits the limits of the cost structure. Until it's named, improvements in the other parts don't add up to results.
What you get
A one-page description of the model that the whole team understands.
A map of the economics: where margin is created and where it's lost.
The element that is exhausted or close to it, named.
Options for change, with calculations.
The cost of waiting
If nothing changes
- 01
Growth will amplify weak economics.
- 02
The team will optimize parts instead of the system.
- 03
New products will appear without a clear logic of how they earn money.
When you don't need this service
- The numbers can't be trusted. Records come first; otherwise a model review turns into a battle of opinions.
- The model is clear and works, and the question is execution. Then you need sales, management or process work.
How to tell it worked
A clear model
whether every manager can explain it in a minute.
A margin map
whether you know the margin for each segment.
A named mechanism
whether the element that stopped working has been named.
Questions
Are a model review and a transformation the same thing?
No. A review shows what's happening with the model. A transformation is the move to a new model, if the review shows it's needed.
What data is needed?
Revenue and direct costs by product and segment, the cost structure, and customer data for the last year or two.
How long does it take?
Usually a few weeks. Longer if the data has to be restored first.
Related
Services: Business Model Transformation · Profitability Analysis · Strategic Consulting Materials: When the model stops working · Strategy as a list of refusals
Related to this service
Public company case analysis
Hershey
In 1999 Hershey launched new systems before Halloween and could not fill $100 million in orders, even though the goods were in the warehouse. A case analysis.
