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Contributed on March 9, 2012

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Drop Your Training Wheels: Competing on Business Models

Blog: Business Model Alchimist

The Business Model Canvas is continuing to spread across the business world. However, some people and organizations use it in more sophisticated ways than others. So I came up with four levels of strategic mastery as to competing on business models.

At the lowest level of mastery, level 0 strategies, people focus on products, technologies, and value propositions mainly. They aren’t even aware that it is often the business model that makes the difference between success and failure. At the highest level of mastery, level 3 strategies, companies disrupt themselves with new and innovative business models, while their existing business models are still successful and make money.
I played around with a new video tool, educrations, to outline my thoughts. Check out why focusing on products and technology alone is like competing with training wheels, while you could be riding a Ducati Monster:

In the video I describe four levels of mastery:

• Level 0 Strategy – The Oblivious: Focus on products/value propositions alone rather than the value proposition AND the business model.
• Level 1 Strategy – The Beginners: Use the Business Model Canvas as a checklist.
• Level 2 Strategy – The Masters: Outcompete others with a superior business model where every one of the business model building blocks reinforce each other (e.g. Nintendo Wii, Nespresso, Dell).
• Level 3 Strategy – The Invincible: Continuously disrupt themselves while their business models are still successful (e.g. Apple, Amazon.com).

Business models that outperform others do so in various ways, for example by…

• disrupting the existing market (e.g. Dell).
• creating a hard-to-copy competitive advantage (e.g. Apple appstore ecosystem).
• establishing game-changing cost and/or profitability structures (e.g. Nintendo Wii)
• creating entirely new markets (e.g. Nespresso).

As a complement to this post you might also want to have a look at my post on the characteristics of a good business model, 7 Questions to Assess Your Business Model Design
.

If you carefully watched the video you probably noticed that I messed up the Gary Kasparov quote, which should have been: “Success is the enemy of future success”. Good that I can blame the jet lag from my trip to New Orleans 😉