In our Street Smarts for a Scalable Business Model four part series, we go through a basic process for creating a scalable business model. The series is meant to encourage people to think big and to provide a basic outline for how to go about creating something scalable – it should not be taken as expert advice, but rather as a way to stimulate some fresh thinking.
An interesting article caught my eye a month or two ago. The article, titled “Toronto Startup’s Need a Paul Graham or Steve Blank” (Startup Article) discusses how the real problem for (Toronto) startups is not raising capital, but rather creating companies that have a scalable business model. After months of seeing presentations, talking to entrepreneurs, and working with companies, I can’t help but wonder if this problem applies to not only Toronto, and to not only startups.
The problem, according to the author of the Startup Article, is that many companies don’t know how to build scalable business models. He contends that a company needs to validate their business concept by monetizing customers and showing some likelihood that there is a scalable business model. The problem is that not many companies are doing this and not many of them know how to do it, not due to a lack of information, but due to a lack of knowledge. The solution, the author contends, is to have the guys with the street smarts and experience lead startups to victory by mentoring them through the whole process.
In principle, I think the author makes a great point. Everyone wants the five-star general leading him or her to victory. But in reality, there are not enough of these types of individuals to go around, meaning the majority of entrepreneurs need to strap on their boots and build a scalable business using their own resources.
So how can an entrepreneur build a business model that is scalable?
The core idea behind a scalable business model is that there are multiple groups of potential customers around the world who can be reached as the business scales up operations. If an entrepreneur understands the experience that their product or service gives one group of users, then they can start to find other groups who will find similar value. To start out, a little imagination and creativity are required.
Seeing a business as scalable requires vision and imagination. The solution that the entrepreneur envisions needs to fill a very prevalent gap in the market. If the gap is big enough, and the problem affects enough people, then the business model has immediate potential to be scalable. Most businesses are simply not meant to be scalable, as they instead tend to focus on meeting a specific need for a niche market. But for the game-changing entrepreneurs who want to reshape the playing field, thinking big is the only option.
Building a strategic model that allows a company to reach and monetize the masses requires a little creativity. Starting to think about strategies right from the beginning helps an entrepreneur ensure that there is a business model, rather than just a business. The difference is that a business model not only focuses on ways to create value, but to also deliver and capture it in new ways. This means finding innovative ways of getting the product or service to the customer and creating new revenue streams.
With some fresh thinking and a little imagination, the seeds of a scalable business model can be planted. If you want to get creative over a cup of coffee, you know where to find us.
Join us in Part 2 of this series as we talk about how to take the initial idea to the next level and conduct a feasibility study.
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