For most technophiles, the name Tesla rings with admiration. I’m not talking about the company that makes cars, I’m talking about Nikola Tesla, the genius inventor of the early 20th century. This guy thought of and invented crazy stuff, stuff that was decades ahead of its time, stuff that we rely on today. For fans of sci-fi, this was the guy that co-invented the death ray! While Nikola Tesla was a great inventor, ahead of his time, he died alone and nearly bankrupt. He was a great inventor, a genius, but he didn’t have a good grasp on business and how to sustain his inventions.
Come Tesla Motors, now Tesla Inc., named after a great inventor but with a sustainable business model. Their concept of sustainability goes beyond sustaining the business through monetary means, their concept of sustainability shows that corporations can create monetary value but also help with social issues, creating a win-win for everyone. Just like a seed needing basic things like water, soil and sunlight to bloom, innovations need support and funding to stay alive.
Monetary
We can distinguish an innovation from an invention by looking at value. Value is the stuff that we, as human beings, need from something. Is it going to make our lives better, is it going to help us in a way that was previously unachievable or is it just making something “new” again? Using the Tesla Inc. example, they took an existing product, a car, and created an innovation that has value to those that no longer wanted to rely on fossil fuels while also helping to reduce environmental impact from driving. Segway is an example of a company that created an invention. There was little to no value in what they created other than making a cooler, yet impractical, way of moving around.
When we identify potential value in something, we can rest a little bit easier, knowing the hardest part is behind us, now it’s just a matter of putting together business models, marketing and various analytics. However, we need to be careful not to get tunnel vision on innovations. Value is subjective and creating value for one group probably doesn’t mean anything to another. Our business model should be very aware of this and always keep the customers, stakeholders or end users in mind.
Canvasing
Looking at a business and trying to figure out what makes it work or not work can be daunting. That is why, by breaking it down into segments, we can get a better understanding of what we’re trying to revise or make better. A business model canvas looks at 9 different segments of a business:
Value Proposition: This is the capstone that hold the canvas together, separating the left side (internal) with the right side (external). Here is where we list out the value, the needs or problems that we satisfy in a customer. We have to put ourselves in their shoes and ask ourselves, what is this business doing for us? Are we better off with them and by how much?
Key Partners: We identify partnerships we have that make this business work. We’re also finding out what motivates us in working with them, the things that they do and what benefits we’re getting out of these partnerships.
Key Activities: This looks at the activities we perform to run this business and drive value.
Key Resources: What are some of the absolute human, financial, intellectual resources we need to have for this business to thrive?
Customer Relationships: Is there a relationship with the customer? If there is, what kind of relationship is it and how do we maintain or enhance it?
Channels: This looks into the various ways we deliver our value to the customers.
Customer Segments: Who are our customers, who are we creating value for? What are the different types of customers we have out there?
Cost Structure: In our current business model, where are we spending money and how much are we spending?
Revenue Streams: Where are we making money and how much money are we making from each revenue stream?
Regardless if a business is just starting up or has been thriving for a long time, business models are a reflection of the society it serves and since society is constantly changing, so should business models. By taking a snapshot of where a business is at with the canvas, we can start looking at where improvements can be made. Each of the canvas segments relate to other segments so by focusing on epicenters, we can begin to see the relationships and making improvements.
SWOT Analysis
There are many tools out there that can help a business better strategize and snapshot their current situation, but these tools are only as effective as the people using them. For a SWOT analysis to be effective, the people using this tool has to scrutinize the business and be very candid with its situation, sometimes the people up top might not agree or don’t like to hear these things but some wounds can’t be healed by a band-aid and they will continue coming back worse and worse without the proper triage.
In a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis, we’re looking at the business’ internal strengths and weaknesses, finding where the company has the most leverage and value while also identifying flaws, leakage and things that don’t work that well. External opportunities and threats are factors that are outside the business’s control but the business can take steps to capitalize on and/or mitigate. The point of the SWOT analysis is to lay out this information so that we can strategize on how to turn strengths and weaknesses into potential opportunities. Once, at a high level, these opportunities are analyzed, we can begin strategizing on how to execute on these findings. Identifying the external threats also calls for planning and strategy, if transforming strengths and weaknesses into opportunity is offense, identifying external threats so that they don’t become future weaknesses is defense.
SWOT analysis looks at things from a high level. Once the situation has been identified and analyzed, we can begin strategizing on the reinforcing the strengths, resolving the weaknesses, turning what we have into new opportunities and mitigating as much threat as possible.
Environmental
Businesses going “green” has become more and more popular. It’s a great card the PR department loves to play, showing that the business cares and is progressive. What does it take for a company to go green? Is it going from paper to email, putting in natural décor, recycling? Sure, all these things help, and something is better than nothing, but just to put this in context, most oil & gas and utilities companies are considered “green” companies.
Businesses thrive on fulfilling the needs of people. While “people” have been steadily increasing, the natural resources we depend on to live have been drastically decreasing. It’s gotten to a tipping point where demand is beginning to exceed what our resources can provide and businesses are scrambling to implement sustainable business models, not just going green. For example, if I’m a farmer and I can’t grow crops anymore because there’s no more water or the soil has tapped out, I’m probably going to try and go the sustainable route, out of self preservation. So while we’d want to think that businesses are being sustainable to help the planet, it’s more probable that they’re doing it out of wanting to stay in business, in the end, it’s a win-win for everyone.
Ideally, businesses should strive to achieve a zero or negative footprint, this is very challenging but where there is a challenge, there is business opportunity. Businesses need to adapt to the times and the services and products that are created need to reflect that. The need to adapt is critical, look at what Netflix did to Blockbuster, what Amazon did to the brick and mortar retail industry, the businesses that adapt (or are able to adapt) survive and the ones that don’t fail.