It is fascinating that many entrepreneurs fail to formulate business models, while some don’t even know what a business model is.
A simple definition of a business model is a plan for the successful operation of a business, identifying revenue sources, a customer base, products, and details of financing.
A unique business model can be the distinguishing factor that will set you apart from your competition.
If your competitors have a bigger market share, are more capitalized and better capacitated, how can a different business model push your business ahead?
Malcolm Gladwell’s book David and Goliath looks at how David avoided fighting Goliath on his own terms, with swords and spears; he rather used what he knew best, because he could not have won if he tried to play Goliath’s game.
History has shown how the mighty often end up falling – and you can be the one to take them down.
Today, Naspers is the largest company in Africa and seventh largest internet company in the world by market capitalization. More than 60% of their value comes from their 34% shareholding in Tencent Holdings in China, but they still want to dominate in media and technolgy.
If you decide to go head-to-head with this enormous company, do not try to beat them at their own game; rather compete with them using a different approach. If you look at Apple, Google, Facebook and Amazon in Silicon Valley, they started by being disruptors.
I highly recommend that you learn the art and science of coming up with business models. Corporate companies, on average have at least four business models to make money.
The Founder and Group Chief Executive of Discovery Limited, Adrian Gore, is reported to have all his personal investments in the company. Some might think it’s risky to have all his eggs in one basket, but Discovery has diverse business models, such as medical aid, short-term insurance, and investments.
There are various types of business models. Telecom and electronics companies often use a model of prepaid or pay as you go.
Others, like MultiChoice and Netflix, use subscription, where you pay a continuous fee to access services or content.
Product to service is one of the most powerful models and is often used by tech companies. Uber, the world’s largest taxi company, owns no vehicles. Airbnb, the world’s largest accommodation provider, owns no real estate. Facebook, the world’s most popular media provider, creates no content. Instagram, the most valuable photo company, sells no cameras.
Low-touch is another model used by many retail companies, such as Shoprite and Walmart. They lower their prices by decreasing services. A similar model is Freemium, which offers basic services for free, but charges for the premium version, as LinkedIn does.
An interesting one is a reverse auction, where businesses bid for the amount they are willing to be paid for their service. The seller with the lowest amount wins.. One usually used with cars, is Leasing, where you rent than sell.
The crowdsourcing model is currently popular. This is where you get a group of people to contribute content for free, while you make money from advertising revenue; YouTube has mastered this.
Africa is excluded from these pioneering models. Eighty percent of the world’s mobile money transactions take place in East Africa, while $148 million a day is transacted every day using Mpesa and 40% of Kenya’s GDP is transacted through mobile money. Africa is powerfully positioned in this area and needs to make the most out of it.
We are living in an age with unlimited access to information. As Africans we have no excuse not to be competitive on a global scale. But, there needs to be an economic revolution in our consciousness that allows us to stand tall on the world’s stage.