The continuous quest to problem-solving in the real world
Entrepreneurship is about solving problems by leveraging on markets’ feedbacks to develop products with high potential which people want and desire.
Entrepreneurs then must understand some of the tools they can leverage to build valuable companies able to capture some of the value delivered through their products and services and build sustainable business models.
One of the conceptual tools that entrepreneurs can leverage is a business model or a framework that helps them identify the key building blocks that by time to time a company is built upon.
Business modeling is useful to build valuable companies but also to observe existing companies in several industries to understand what parts of those companies can be borrowed.
By assembling those parts, and mixing them together with tinkering and experimentation that is how entrepreneurs can build a sustainable advantage.
Business design rather than business planning
In the times in which capital is easily available companies put up hundreds of pages of business plans just to discover the next day how useless they were.
While in the past using business planning made more sense. In the current times also companies with substantial capital injections need fast validation from the market to build something sustainable.
Thus, where in the past massive capital injections would be used as moats, capital without a sustainable business model won’t last long (see the most recent and exemplary WeWork case, but also at the rise of the dot-com bubble the Webvan case). Therefore, a company that wants to build something valuable needs to master business model design.
Business model design is not about scatch on a piece of paper, but that is about experimentation.
Business experimentation rather than business theory
Business experimentation is the key ingredient also when a company has massive capital injections because that strikes a balance and feedback loop which keeps companies grounded.
In short, a company that just uses capital to grow, without testing whether its growth is sustainable in the marketplace will need a reality-check sooner or later.
For that matter, a company built on the ground-up with a continuous loop with the marketplace can grow organically and yet exponentially.
Continuous iteration and market feedback loop
Therefore, the key to build a sustainable business model is about having a continuous feedback loop between vision (where you want to be in a decade from now), key customers (representing your ideal market at any given time), and offered value proposition.
Customer is the key investor
When your key customers love so much your product to make it grow organically and exponentially, that is when you hit the home run! What venture capitalists like to call Product-Market Fit.
Mastering a core value proposition is a key step and the glue which keeps the whole business model together. Value can be seen from several perspectives, and it’s not just about functionality. In many cases, that is about psychology, what Rory Sutherland calls psycho-logic.
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