Why is the Business Model Fucking Important ? Don’t entrepreneurs know how to make money anymore ? Have entrepreneurs forgotten how to be salesmen?
Having a business doesn’t only mean creating a product !
We are naturally heading towards another tech bubble if entrepreneurs are not able to make money without VCs. A great product might, with luck, be sold to a big corporation such as Google, Facebook or Microsoft. But it would only mean that these big corporations would continue disrupting markets by turning entrepreneurs into passive pawns that merely fuel the engine of their monopolies of wealth.
A Business Model is the key to independence and making a difference
I get it, our entrepreneur’s guts pushes us to constantly look for THE greatest product or service. The one that would have a competitive long-lasting edge. A product that will solve pertinent problems that haven’t been addressed yet.
But what is a product if you don’t have a Business Model?
A lack of Business Model is the same as having no strategy, in which case, what is the entrepreneur’s role really?
Traditionally, an entrepreneur has been defined as « a person who organizes and manages any enterprise, especially a business, usually with considerable initiative and risk. »
It might sound obvious, but the role of an entrepreneur is to create value by setting clear and robust strategies to monetise product or services.
Raising money from VCs to pay for the product or service and then raising more money from other VCs to pay back the other VCs, doesn’t seem to do justice to the entrepreneur’s drive, the entrepreneur’s strategy.
Customer Acquisition and Customer Value are the 2 main pillars of a Business Model.
To make it simple: focus on the customer. Don’t borrow money, instead raise it from your online community !
Back in 2009, Markus Persson created his own innovative game called Minecraft. But instead of raising money from corporations or VCs, he turned to his community whilst started to code the game at the same time he turned to his community and started to sell it (pre-ordered with discount). Two years later he launched the first official version, solely supported by his community.
Reaching directly to your online community and including your customers in the value chain will be key to increasing your efficiency and monetisation. I recently heard that startups and big corporations are starting to hire the so-called “Growth hackers”, specialists in finding hidden competitive advantages in the value chain.
And I thought, isn’t that exactly the basic role of the entrepreneurs?
It does sound like entrepreneurs have forgotten how to make money.
The value chain is the key factor for a successful entrepreneurship
The value chain is the first step to ensure that you build the best business model possible, as to begin with, you need to fully understand the value chain of your sector by identifying what is important for the customer and what is not.
In brief, the value chain refers to all the necessary steps required in order to satisfy customer’s need, including customer acquisition.
Michael Dell perfectly understood the importance of a well-founded Business Model.
He is one of the true business-model pioneers.
Dell started selling directly to end customers instead of selling through resellers like other PC makers.With this decision he not only managed to save on distribution costs, he also acquired the information needed to manage inventory better than anyone else in the industry.
He directly satisfied customer need whilst nurturing customer acquisition by creating a robust strategy, a strong Business Model.
He not only maintained independence and crushed the competition, he also generated enough cash to buy EMC for $67 billion in the biggest deal in the history of the tech industry.
If you keep in mind the value chain and focus your efforts in developing a vigorous Business Model, you will be able to identify what can be optimised.
If you optimise, you create more value and you generate better margins.
Let’s not forget what the entrepreneur’s primary role is! The success of my companies relies on my obsession with customer acquisition and customer value. I spent 80% of my working time acquiring as many customers as possible within the best margin.
The rest, I just delegate. I am an entrepreneur.
If I would just focus on the product without even thinking about the Business Model, then I would be a “product manager”.
So again, what kind of entrepreneur do you want to be?
This was part of a speech I gave at a the startup workshops by TheFamily, the past 24th of November in Paris.
Original post from Medium.