The impact-driven business model. That’s the theme we are kickin’ off 2013 with, as the time of the purely profit-driven business model is fading into the sunset like a John Wayne Western. In this blog post we will analyze the incubation of the impact-driven business model and throw a few ideas out there about how to make it work.

As the rise of the social enterprise continues, so to does the need for the impact entrepreneurs who create a business model that can deliver profitability over the long term without watering down their impact. The whole concept of a social enterprise is that the entity is created to solve a social problem for a significant sector of society; unlike non-profits, which don’t seek to generate returns, social enterprises can be built using the same entrepreneurial principles and guidelines as a traditional enterprise. And they need to be …

In the most recent cohort for The Unreasonable Institute (Summer 2012), for example, they only accepted social businesses who were implementing a business model and generating at least some form of revenue. Why?

Because those social enterprises who had a business model and were able to forecast future returns were much more likely to receive venture investment than those without a business model. The reason for that is simple; despite the fact that most investors want to support a business that is trying to change the world, no investor wants to be receiving a phone call every year asking for another cheque to be signed.

+ The Road to Reason – Be Unreasonable

After the 2012 edition of the Institute, 12 out of 21 ventures had been funded for a total of $3.6 million, while another 8 of the remaining 9 had funders interested in them. While it was too early to compare the data to previous years (financings can occur a year or two after the event), the feedback the Unreasonable team received from its mentors and capital partners was great.

It would be fantastic to incubate many more of these types of ventures and scale that impact. The question is, how do we incubate the impact-driven business model?

Last week on the blog, we talked about ASTA Networks, a social enterprise that built the first door-to-door network of inclusive products in Brazil. Using beautifully-designed products from artisan women in low-income communities in Brazil, ASTA has developed a reseller’s network so that the products get sold, as women in this demographic were previously having a very difficult time selling their products to make enough money to survive. The beautiful thing is that the business is self-sustainable and has a scalable business model.

+ Business Model Breakdown – ASTA Networks

Another social enterprise that we talked about a while back was Solidarium, which was built on similar principles to ASTA, but with a different end customer. While ASTA sells its artisanal products in Brazil, Solidarium has been developing the pipeline to sell them globally. 2012 was a big year for the company, as they began scaling their business model into foreign markets such as China and India.

What do these two enterprises have in common?

They were both incubated in entrepreneurial organizations that specialize in the development of social entrepreneurs in one form or another.

The first organization to nurture ASTA in its early stages was called AVINA, which is focused on developing leaders of sustainable development in Latin America. Solidarium, on the other hand was incubated in Aliança Empreendedora, a non-profit organization developed to support entrepreneurs in low-income communities in Brazil, where founder Tiago Dalvi worked prior to spinning out the idea for his enterprise. While inside these organizations, the entrepreneurs had the resources and support to develop their concepts and start testing them in their respective markets.

So how can we incubate more ideas like Solidarium, ASTA and the numerous other impact-driven enterprises that are starting to emerge, so that they can build out a sustainable business model?

It’s not a question that we can answer unequivocally, and we would love to hear what you have to think, but there are some clear precedents that can be taken from the above examples.

Entrepreneurs who are building impact-driven enterprises need time to experiment and test new concepts in these markets. Because the characteristics of the markets are different and cannot be optimized for growth in the same way as a traditional market, patience is needed, which means they need capital and support.

A good start would be working/incubating in an organization that:

a) specializes in incubating social enterprises or early-stage entrepreneurs;
b) is a traditional enterprise that wants to develop new social business ventures related to their specific market;
c) is a consultancy that can leverage their market expertise during the incubation phase to generate revenues while they test out ideas.

These are three setups that we could see working to allow entrepreneurs to earn money and have access to the resources that they need, while experimenting with an idea. Because the timelines are stretched for a social enterprise to start delivering returns, the alignment of perspective needs to be there.

An additional way to help these entrepreneurs get the capital they need to get started is to create a branded crowdfunding platform as Aliança has done with its Impulso platform:

+ Impulso : crowdfunding for microentrepreneurs in Brazil

These are just a few of the ideas we had to throw out there to bring more social businesses to the market. As we mentioned in our last blog, the lines between the social and traditional enterprises are starting to blur; however, the requirements to build a social enterprise are much different than those of the traditional enterprise and need to be dealt with accordingly.

So because 2013 is the Year to Shake It Up, it would be great to hear about any stories out there of businesses or organizations who are stepping forth to try and incubate the type of companies that the world is waiting to see. We’ve heard of one or two big projects of this nature in Europe, but let us know if you see anything worth mentioning in your local market.

What do you think can be done do incubate more enterprises with the Impact-Driven Business Model?


+ Business Model Breakdown – ASTA
+ ReImagine. ReDesign. ReConnect.


Building Blocks – PLAN – the Business Model

This is our 100th blog post : ) Check out what we were saying on day one (The Love of Lumos).

A new era of business is coming, one that is driven by collaboration, crowdfunding and the desire to kickstart the creative economy. Two weeks ago, we wrote a post about the Building Blocks for the New-Era Business, so today we are going to take a look at the first component in the PLAN process, the business model.

The business model is one of the key elements in the planning process. Without a rock-solid business model, no business (or social enterprise) can sustain itself over the long term. When you break down the PLAN into its basic components, the business model is the what and the strategy is the how. Business models have multiple components that combine to shape what the business will look like in the market – we will discuss these individual components further into the blog.

Why is it so important to PLAN your business model?

Business model innovation is the essential activity for any company that wants to succeed in the new era of business. With change occurring at such a rapid rate in markets globally, consumers around the world are beginning to rapidly redefine the value curve. Spending five hours trying to reinvent your value proposition today using the business model canvas could save you from five years of frustration by going down the wrong road.

The goal is to develop a business model that can withstand and adapt to the rapid changes that are happening in the market, as the rate of change will only accelerate more going forward.

The first key to understanding how to do this is to understand what the business model is. According to the definition from Business Model Generation, a business model is defined as:

the rationale of how an organization creates, delivers and captures value in the market

Once you understand what a business model is, you need to have the tools to experiment with your own business model. We are big fans (!) of the Business Model Generation concept and the corresponding business model canvas – we have written extensively about these tools (see post The Key Components of a Business Model) since the first book came out in 2010. Of all the tools in the market to help plan a business, the canvas has proven to be the most valuable. Additionally, there is a very strong global community (check out the Business Model HUB), so the concepts are constantly being updated and knowledge is being shared.

(click here) to see a larger version of the image or (click here) to download the canvas as a PDF.

The business model canvas developed by Osterwalder has nine key components –

You can read more about each specific component here in our previous blog post (see post The Key Components of a Business Model), or you can download a preview of the Business Model Generation book (click here) that covers each component on the canvas.

Essentially the canvas has two sides. The revenue side – which focuses on your customers and the ways you interact with them – and the costs side, which focuses on leveraging partnerships and key resources to keep costs low. At the heart of the canvas is the value proposition, which describes what the business does to justify its existence.

While we recommend getting a giant piece of paper, some markers and Post-IT notes for your canvas, you can also just scribble notes on a basic canvas. If you would like a pretty PDF version, Powerpoint version, or Google Docs version of the canvas contact us.

Once you start working on your canvas, keep in mind the goal is to open your mind and experiment. You want to explore new possibilities, consider absurd ideas and brainstorm quirky concepts. Business model planning is not about thinking outside the box, it’s about redefining what the box is. Be collaborative in your processes, solicit feedback and write outside the lines.

To make this all work, you need the following tools:

  • a sprinkle of imagination;

* a core understanding of the business model concepts:

  • a copy of the business model canvas; (click here)
  • pens or markers and Post-IT notes.

Additionally, there is an app available on the iPad for the tech-savvy crew (link here).

And that is how you can PLAN the business model. In terms of how you actually innovate the business model, that would require a whole other blog series. The key is to understand the core components and start experimenting to see what you can come up with. From there, you can start soliciting feedback and collaborating with the people who can help you make it happen.

+ Business Modelling 2.0

Keep in mind, that the business model is one of three components in the PLAN process. Additionally, we will be taking a look at the strategy you employ to make your business model work, and walk through a financial model template to evaluate the numbers behind the model. Stay tuned, as the Building Blocks for the New-Era Business roles out over the coming months.

If you are interested in preparing to raise venture capital, there are several additional considerations that you should keep in mind with the development of your business model. Check out the RoadToFunding guide by Martin Luenendork:

+ Investment Readiness Level


+ BMi: FINANCE
+ Time For BMi

To say that social media is disrupting industries worldwide would be an understatement. But just how deep does the social vein run and what impact will that have on future business models? In this blog post, we will explore that question in order to determine the power that social media has to alter verticals worldwide and what it means for businesses everywhere.

In the video footage above, taken from the 2010 Web 2.0 conference in San Francisco, Facebook CEO Mark Zuckerberg shares his vision for the next generation of businesses, which he thinks will be built around people. According to Zuckerberg (17:58 of video):

“I think that over 5 years most industries are going to get rethought to be social and designed around people.”

According to his thesis, social media will be the catalyst that drives a major shift in the way business is done globally. He uses the example of Facebook Photos, which was built in a couple months by a few Facebook Engineers and was able to overtake Flickr because of one simple feature set – social integration. Zuckerberg states that “a social version of anything will outperform any other version,”; and he may have a point.

Pushing aside the fact that the Facebook CEO would have an obvious bias on this topic, there is a strong case to be made that the difference between now and any other other time in the history of business is the disruptive potential of social media. The almost instantaneous proliferation of information and data from person to person, network to network, has the potential to transform verticals around the world almost overnight.

The question is not so much if socially-based business models will transform industries worldwide, but when, where and how. The seismic social shift is already beginning in areas like fashion and design, but it will be interesting to see social business models that have a much larger societal impact. Given that we may be at only the beginning of the social media wave, it may take some time, but you can bet that the impact will be profound and that anyone who doesn’t get on board soon will be left in the dust.

+ Download a copy of the business model canvas (click here)


+ Building Blocks – PLAN – the Business Model
+ Finance 2.0 – Wall Street Meets the Web

Crowdfunding Strategy – Summary


Trends and Research – Summary


Read about our collaborative Process

+ Twitter : @LumosBusiness

+ Pinterest : Visualize Trends

+ Discuss : OPEN forum

+ Google + : Hangout

+ RSS : Subscribe

Apps – they are at the centre of the rising mobile ecosystem. But to build an app that gets noticed is becoming increasingly more difficult with each passing day. That’s why a little business planning can make the difference between a flop and a best seller.

At Lumos, we believe there are three key pieces that need to come together in order to create a successful app business strategy: business model, messages and media.

Business Model: how will your app make money?

There are many different business models to think about when you begin strategizing ways to monetize your app, including: freemium, advertising, paid and subscriber. Choosing the right one can make the difference between a big hit and a failure.

Message: how will you target your message to your market?

For people to find your app, it has to be targeted correctly. Choosing the right name, keywords and description is essential to put your app on the radar of your target market.

Media: what channels will you use to reach your market?

The Internet has a sea of social media sites, forums and blogs that could be used as channels to bring visibility to your app. Finding the right channels is the key to creating a focused, cohesive marketing strategy that will draw attention to your app.

The sea of new apps flooding the market on a daily basis has created a whole new set of challenges if you are an app developer. To set yourself apart and drive revenues with your app requires a bit of strategy and business planning. At Lumos, we can work with you on a flexible basis to help create a business model and marketing strategy for your app.

Contact us to learn more …


+ Building Blocks for the New-Era Business
+ Finance 2.0 – Wall Street Meets the Web

Crowdfunding Strategy – Summary


Trends and Research – Summary


Read about our collaborative Process

+ Twitter : @LumosBusiness

+ Pinterest : Visualize Trends

+ Discuss : OPEN forum

+ Google + : Hangout

+ RSS : Subscribe

The online world is abuzz with discussion about business models thanks to the continued proliferation of Alex Osterwalder’s book, Business Model Generation, so much so that the very necessity of a business plan has come into question. In previous blogs, we have discussed the basics of business models and business plans, but today we want to directly parallel and compare the two, and discuss the key differences, where they integrate, and why we believe it is important to have both.

There is a lot of attention being devoted to the creation of startup companies, as many determined individuals endeavor to create a system that will increase the odds of success associated with building new ventures. Currently, the two leading theories, at least in the online world, relate to customer development and business model generation, and represent a shift away from a lot of the traditional ways of thinking about building a business.

In the traditional way, an entrepreneur would take an idea, write a business plan and try to get funding from investors. Clearly this method of doing things is still very common, but it has come under fire from many different people, especially in the startup technology sector. A couple of individuals who are against the traditional notion of a business plan are Steve Blank and Alex Osterwalder, the men behind the customer development and business model generation theories respectively. Since the debate is getting interesting, let’s put the two into context.

At its core, a business model is essentially an outline for the business, a rough sketch of how the pieces will come together to form the whole. The definition of a business model, according to Business Model Generation, is:

“a business model describes the rationale of a how a company plans to create, deliver and capture value.”

Sketching out a business model is a great way to create a broad-strokes overview of the business. While a business model is the outline, the business plan is the fine details. It delves into the finer points of the business to describe in specific detail what the company’s strategy is and how it will execute that strategy (among other things).

The major difference between a business plan and business model is that a business model is essentially a concept, something that can be sketched out on a piece of paper and articulated in a few minutes. A business plan, on the other hand, is typically a lengthy document that contains multiple sections and goes into the fine print to discuss the business. No business can exist without a solid business model, but it is usually the business plan that articulates how the model will be implemented.

The reason some are starting to question the very existence of the business plan is because of the perception that the whole plan relies on assumptions that are not yet proven in the marketplace. Steve Blank argues that since a business plan is typically built around a set of knowns, they should not be used for startups who rely on unknowns. Mr. Osterwalder, believes that “no business plan survives the first customer contact.” Instead of a business plan, the two recommend starting with a business model and then using the customer development theories to work with customers, iterate and repeat until a successful model is found.

While it is true that theoretically utilizing a combination of a business model and customer development framework will lead to customers, validated assumptions and a proven business model, we believe that to discount the importance of a business plan completely is unwise.

A business plan has a lot more importance than detailing the strategy of the company. It also contains core company information (mission, vision, milestones, unique risks), the financials and other important elements that are crucial to communicate internally. If used correctly, a business plan can be cohesive document that binds the company together and puts everyone on the same page. It does not need to be a huge document with 100 pages detailing every small aspect of the business. In its final form, it can be a concise 3 to 5 page summary of the key points that gets updated every month.

Also, there is no reason to stick to a specific plan if things are not working out. Staying agile is an essential quality for any business, even if you spend months writing a business plan that becomes obsolete a week after launch. Assumptions can be updated without discarding the whole plan; you certainly don’t want to readjust the direction of the entire business with each change or anomaly that you encounter.

Additionally, writing a business plan helps to build foresight and intuition. It is a useful exercise to make assumptions and pull them together to build a long-term outlook for the business, especially for strategic, financial and human resources planning. It’s true that startups are in a race against the clock to prove viability and that it’s virtually impossible to know how things will play out, but it is important to have a strong vision and believe in the company’s long-term success from the outset.

Overall, we believe that it is ideal to have both a business plan and business model for your business, as the two integrate perfectly. Create the business model at the outset to ensure that the idea has merit and that there really is a business there. Then, start writing a business plan to outline what the company will look like and how it will attack the opportunity. Make the plan your own by defining objectives and key outcomes from the beginning, and remember to stay out of the ivory tower and get out there.

Keep in mind, that to attract investors and high-quality business partners, you are likely to need a business plan regardless of how good the business model is. We have seen many entrepreneurs come to us with good business models, yet no business plan; while things look good initially, it is impossible to assess the direction that the business is going without seeing some details. Few people are going to jump into and commit to something without seeing the long-term planning and in-depth analysis that is usually found in a business plan.

In the end, it all depends on your style as an entrepreneur and what type of business you plan on building. For some startups, like a small tech company building a new software product, a business plan may not be as important, but for bigger projects, like a renewable energy company, business plans are essential. There are no silver bullets in the startup world, so use your own intuition and choose the strategy that works best for you. Whether you build a business model, write a business plan or decide to skip these steps and just get in there, it’s all a learning process that leads to very worthwhile experiences.


+ Business Model Breakdown: Crowdfunding
+ Strategy Sessions

Crowdfunding Strategy – Summary


Trends and Research – Summary


What we can offer

+ Twitter : @LumosBusiness

+ Pinterest : Visualize Trends

+ Discuss : OPEN forum

+ Google + : Hangout

+ RSS : Subscribe

In the first three parts of our ‘Street Smart for a Scalable Business Model’ series, we talked about how to identify a big opportunity, develop a vision for that opportunity and then validate that vision in two steps. In the final part of this series, we will talk about putting all the pieces together and getting the business market-ready.

Let’s assume that you have gone through the process of identifying an opportunity, doing some sort of feasibility study and validating the idea with customers. Now it’s time to ensure that the resources are in place to properly execute the idea.

One commonality between most scalable business ideas is that they require a substantial amount of resources to execute properly. This is simply because to make it big you have to spend money. The first step to obtaining the necessary resources is to identify them and create a business plan.

Writing a business plan will help consolidate all of the ideas related to the business in one place, even if the plan is basic. It will also help build momentum for the entire idea, as most major investors and potential business partners will want to see a business plan before getting interested in the idea. In its most basic form, a business plan would contain:

  • Mission, Vision and Opportunity Analysis
  • Marketplace Analysis (Customers and Competition)
  • Marketing Strategy
  • Operational Strategy
  • Information about the team
  • Financial Projections (3-5 years)

Once the business plan is created, it will become apparent how much capital is required to get the business through phase one and what key employees and business partners need to be added to help execute the strategy.

Many times, people think that a business plan is something that gets written once and thrown into the bottom desk drawer. In reality, a business plan should be living and breathing with the business, and be constantly updated as circumstances change. The business plan provides the framework for decision-making as operations move forward, and instills a certain discipline into the business right from the beginning.

With a basic plan on the table, the next step is to develop objectives for the business in the first eighteen months of operations and align those with strategies. The initial business plan, which may be anywhere from a few pages to hundreds of pages, needs to become actionable, something that everyone can get involved in. Within the opportunity and marketplace analysis, objectives can be identified and encapsulated in one sentence. Then those objectives can be linked to strategies that are also one sentence.

For example:

Objective: Convert 25% of trial users to paid customers in the first year of operations

Strategy: Create an experienced business development team and a dedicated customer support team to ensure all trial users are able to maximize use of the software in the trial period.

With a business plan in place, a great team ready to go, the bank account full of money and a set of objectives ready to be realized, everything is aligned to fully realize the opportunity.

And that’s the end of our Street Smarts for a Scalable Business Model series. For more information or to get started on your own business model planning, check out the links below.

Part 4: Imagination and Creativity

+ Download a copy of the business model canvas (click here)


+ Building Blocks – PLAN – the Business Model
+ Strategy Sessions

Crowdfunding Strategy – Summary


Trends and Research – Summary


Read about our collaborative Process

+ Twitter : @LumosBusiness

+ Pinterest : Visualize Trends

+ Discuss : OPEN forum

+ Google + : Hangout

+ RSS : Subscribe

In part 1 of “The Street Smarts for a Scalable Business Model” we talked about thinking big and getting creative as preliminary steps for building scalable business models, while in part 2 we looked at what can be done initially to validate that an idea has big potential. Now, we are going to talk about how to ensure a scalable business model is realistic by validating the idea through real customers.

In the original Startup Article, referenced in part 1 of the series, the author talks about the need for startups to monetize customers and prove that an idea has real traction in the early stages. The best way to accomplish this is to develop a small group of customers and test an initial version of the product or service on them.

Nowadays, the Lean Startup Methodology is becoming immensely popular with technology startups because of its belief that validating a vision through customers is the key to building an effective business. This methodology outlines a process called Customer Development, whereby a startup takes their minimum viable product (MVP) and begins testing it on customers. Once the MVP is out there, the company can begin iterating the original version into something that customers love, thereby validating that the product being created will be valuable enough to the end user that they will pay for it.

Whether or not you subscribe to the Lean Startup Methodology is not important. What is important however, is the idea of basing the original vision in reality by learning from real customers who are using the actual product. Customers will not know whether or not they want something until you put it right in front of them; therefore, a company with a scalable business model needs to be able to test the idea out with customers before building the whole structure of the business and raising big amounts of capital. Clearly there will be a need to deploy some capital to fulfill this step, but it will be a modest amount compared to the amount needed to fund the entire idea.

Now, the essential part of going through a customer validation process is to ensure that you know what to look for when testing the product on customers. If you were to skip the second step of our process, and not go about conducting a feasibility study of some kind, then it will be very difficult to understand which customer responses are meaningful and which ones are not. You need to know what behaviors to look for and what questions to ask when talking with the first group of customers. With no baseline understanding of the customers and the competition, this would be very difficult.

Once you know the questions to ask and the behaviors to look for, it is critical to identify the right type of customer to test the product on. The right customer is the one who you will want to buy your product and who is similar enough to other customers in the other markets you have identified. It is important to test the idea on quality customers rather than a vast quantity of customers who you know nothing about. The key to this entire step is learning. When you know the exact reasons that your product is making customers happy, then you can prove that your entire business model is scalable.

After identifying the right customers, the next step is to create a strategy to connect with them and ensure they are compelled to be involved in the testing process. Customers won’t become involved in the process unless there are good reasons to do so. It is important to ensure that the initial pitch to them is intriguing and well-organized, reassuring them that it won’t require tremendous amounts of work on their part to be involved. In many cases it’s necessary to create basic sales material or a website, as it adds legitimacy to the entire operation.

Once the strategy is in place, it is time to reach out to these customers and start talking to them. For many startups, it may be difficult to find customers willing to participate if you have no previous experience or connections in a given industry. In this case, a little creativity and gumption is required to reach out and convince them to help you through the initial phase.

Overall, customers can help ground the vision behind a new product or service in reality, thus ensuring it has traction and that people will pay for it. This can be a very challenging process, which is why we can help in certain areas. Join us in the final part of this blog series as we talk about putting all the pieces together.

Part 4: Putting the Pieces Together

+ Download a copy of the business model canvas (click here)


+ Building Blocks – PLAN – the Business Model
+ Strategy Sessions

Crowdfunding Strategy – Summary


Trends and Research – Summary


Read about our collaborative Process

+ Twitter : @LumosBusiness

+ Pinterest : Visualize Trends

+ Discuss : OPEN forum

+ Google + : Hangout

+ RSS : Subscribe

In Part 1 of “The Street Smarts for a Scalable Business Model” we talked about thinking big and getting creative as preliminary steps for building scalable business models. Today we will get more in-depth and talk about ways to assess the feasibility of a scalable business model and go about phase one of validating the initial vision.

Undoubtedly, any great idea is the by-product of some incredible intuition by an entrepreneur. It becomes quite obvious, however, that although there are many great ideas out there, very few of them actually get implemented successfully. Simply put, the majority of businesses fail and very few businesses that set out to reach big targets actually hit them (0.5% on average). In my mind, there should be greater emphasis on the business model rather than the idea itself, in order to ensure that there are strategies in place to help the initial idea gain traction.

So let’s assume that you have gone through the imagination and creativity stages to come up with an idea that has big bang potential and a preliminary strategy to match it.
Now it is time to conduct a feasibility study and begin validating the initial vision. The actual time spent conducing a feasibility study is not of paramount importance. What is important, however, is ensuring that key questions are understood before moving forward on any opportunity. For example:

How many potential customers exist in the marketplace could more effectively get the job done using your product or service?

In order to answer this question, an entrepreneur needs to know two important things:

1) What customers in this market need to get the job done
2) How the experience created by their product or service addresses this need

There needs to be some fundamental understanding of the customer and what they need to get the job done, not an attempt to simply place something in front of them that they say they want. Beyond that, it is important to have a grasp on how many people there are doing this particular job and what products or services they use to get the job done currently. For some, it may be very simple to get answers to these questions, while for others it may take months of research. But for all, it is essential to know the marketplace on a fundamental level.

Once this core understanding is obtained, the opportunity needs to be reexamined in a strategic context. If building an understanding of the market helps us validate that the opportunity has big bang potential, then we need to ensure that the required strategies are feasible to execute. Creative brainstorming is good to get the wheels turning for any idea, but a business model needs to be rationalized in more concrete terms. This includes looking at costs, cashflow and resources required to execute a given strategy. For example, a certain strategy may be necessary to reach customers in a specific market, but the costs to acquire a customer using this strategy would put a squeeze on margins and dampen the whole business model.

Overall, it is important to examine the marketplace and ensure that the strategy to reach that market remains feasible. To build a scalable business model requires a focus on not just creating value, but finding ways to deliver and capture that value. This places an equal emphasis between market opportunity and strategic planning, so that no idea is taken to market without at least some idea as to how things will play out. Obviously things will change greatly as soon as market entry occurs, but the entrepreneur needs to have thought the business out and envisioned the basic structure of the business before any sort of operations begin.

Conveniently, we can help with each and every step of feasibility analysis for your business model. Stay tuned for Part 3, as we talk about validating customers in ways that proves the business is scalable.

Part 3: Customer Validation

+ Download a copy of the business model canvas (click here)


+ Building Blocks – PLAN – the Business Model
+ Strategy Sessions

Crowdfunding Strategy – Summary


Trends and Research – Summary


Read about our collaborative Process

+ Twitter : @LumosBusiness

+ Pinterest : Visualize Trends

+ Discuss : OPEN forum

+ Google + : Hangout

+ RSS : Subscribe

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.

Part 2: Feasibility Study and Initial Validation

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+ Building Blocks – PLAN – the Business Model
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Knowing what a business model is and what types of different models exist is great; however, to take steps towards creating the right business model requires knowledge of the essential components. Today, we will look at what these key components are and how they integrate together.

This week, I ordered a copy of the print version of Alex Osterwalder’s book, “Business Model Generation.” I was inspired by the content, vision and authenticity of his message, not to mention the fact that the business model canvas is a brilliant way to identify the essential elements of a business model.

Today, I’m going to break down the components of a business model and draw the connection between them and the overall success of the business. I will refer to Mr. Osterwalder’s business model canvas (pictured above) to identify these key components and share what I have learned about his team’s creation up to this point.

The canvas contains nine components that collectively integrate to form the entire business model, including the following:

Value Proposition: What unique value does a company’s product or service create for customers.

Customer Segments: What group(s) of customers is a company targeting with its product or service

Customer Relationships: How does a company plan to build relationships with the customers it is serving

Customer Channels: What channels does a company use to acquire, retain and continuously develop its customers

Revenue Streams: How is a company pulling all of the above elements together to create multiple revenue streams and generate continuous cashflow

The components listed above represent the right side of the canvas and combine to form the revenue generating mechanism of the business. Listed below are the components that combine to form the cost structure of the business on the left side of the canvas.

Key Partnerships: What strategic and cooperative partnerships does a company form to increase the scalability and efficiency of the business

Key Resources: What assets and knowledge does a company possess that allow it to deliver its value to customers in ways that other companies can’t

Key Activities: What activities does a company engage in that allow it to execute its strategy and establish a presence in the market

Cost Structure: What are the costs associated with each of the above elements and which components can be leveraged to reduce costs.

Example of the Android business model. Click here to see the larger canvas.

The nine components of the canvas combine to create a complete overview of how a company will go about creating a business that matters to customers. Each component represents a crucial building block in the construction of the overall business. With competition getting stiffer, customers becoming more demanding and the pace of change gaining speed everyday, it is important to see things in the big picture and build something that people get excited about.

By plotting your business on the canvas, it forces you to ask critical questions and think creatively about whether or not your business is focused in the right areas. Once you start thinking about your business on a bigger scale, it becomes easier to identify opportunities and address any areas of weakness.

+ Download a copy of the business model canvas (click here)


+ BM Breakdown – Collaborative Consumption
+ A New Era of Business – FOOD

Crowdfunding Strategy – Summary


Building Blocks – PLAN – the Business Model


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Whether you operate a small business or are part of a global behemoth, a business model lies at the heart of your organization. As you begin to explore business models, greater opportunities and possibilities will present themselves because business models are centred around value creation for customers. Today we will explore a few of the most popular and prevalent business models in the marketplace.

Since there may be some confusion, let’s look at the difference between a business model and a revenue model. A business model is a dynamic, strategic model, outlining how a company plans to create, deliver and capture value. A revenue model, on the other hand, only represents the actual revenue generating mechanism for the business. In this article, we will refer to the models listed as business models, rather than revenue models, because a revenue model is only one, small component of a business model; therefore, a revenue model is not sufficient to create a business around.

Examples of commonly used business models include:

Direct: Whether it is a product or service, a direct business model is characterized by the direct sale of knowledge, or an asset, to a customer. An example would be any consulting business or traditional bricks-and-mortar store.

Advertising: In an advertising business model, revenues are generated from advertising sales exclusively. The most notorious example of this is Google in its original form, which made money of contextual search advertising. Nowadays, advertising models are seen as insufficient standalone sources of revenue.

Subscription: A subscription business model generates revenue by charging the customer a recurring fee (monthly or annually, for example) to receive access to the content, or service that a company provides. An example would be the Wall Street Journal, where users can access unlimited content for a subscription fee.

Utility: In contrast to a subscription model, utility models earn revenue every time content is accessed or a service is used. Generally, this is referred to as a “pay-as-you-go” model, where a customer is charged based on usage. This most common example of this model is telecom companies charging users by the minute, but it is also becoming more prevalent in the online publishing industry as a way to monetize content.

Freemium: In what is becoming an increasingly popular term, freemium business models give users access to certain features of a product or service for free and charge users to upgrade to premium services. Generally, freemium business models require a large user-base, as on average 2-5% of users convert to premium paid services. Examples are everywhere, and include Freshbooks, Dropbox, etc.

Brokerage: In a brokerage business model, revenues are generated as fees from a transaction between two parties. Credit card companies like Visa revolve around a brokerage model, while more obvious examples include stockbrokers and real-estate agents.

Leasing: A leasing model works because it allows customers to use, or purchase, a product or service for small payments over time, rather than having to pay full price upfront. Many businesses use this approach, such as furniture shops, car dealerships, and others, as it creates affordable solutions for items with a high upfront cost.

These are just a few of the most popular business models nowadays. Most businesses adopt a hybrid of revenue streams to create a unique business model. For some businesses, it is desirable to keep it simple and stick with a straightforward business model, but for the majority, innovative solutions are required to stay alive. Over the next few weeks we will dive headfirst into business models and talk about them in a number of different ways. We will have a blog series that focuses on building scalable business models, another one that deconstructs current business models, and some posts that specify ways to use currently available tools to augment your business model.

At Lumos, we believe that minor improvements in business design can lead to big things. While a lot of energy is invested into building technologies, we think that an equal amount of time should be put into designing the business ifself. Shoot us an email if you want to take a look at your business model.


+ Business Model Breakdown: Crowdfunding
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Sometimes in conversations about business, terms get thrown around that are meaningful to some people and completely meaningless to the rest. The one term I think fits into this category is business model, so today I want to explore what it is and what lies at the heart of a business model.

Type ‘business model’ into Google and you will be overwhelmed with all the possible definitions. I decided to sort through the rubble, and I came out with a gem by Alex Osterwalder which says:

“a business model describes the rationale of a how a company plans to create, deliver and capture value.”

I love this definition, and I think it can be further broken down into two essential ideas:

1) ‘the rationale of how a company plans to’

Implies that there needs to be some strategic thinking and foresight about how the company will go about executing its strategy.

2) ‘create, deliver and capture value.’

At the heart of the whole business model concept is value, but this definition takes it to another level by focusing on not just creating value, but also delivering and capturing it.

The word value represents the benefit the customer receives from the experience a product or service provides. Theodore Levitt puts value into context with his observation that “People don’t want to buy a quarter-inch drill. They want a quarter-inch hole.” By focusing on what the customer needs to get the job done, rather than the customer itself, it becomes easier to create, deliver and capture value.

When thinking about a business in terms of a business model, we are able to identify new opportunities to exploit. Typically an entrepreneur only thinks about creating value, which occurs when we bring a new idea to market. Now, however, we can think about ways to deliver and capture value. In other words, instead of just thinking about the value of the product or service itself, think about ways to make it easier for the customer to extract that value. This is how a business can generate new revenue streams and open up new markets.

An example of an innovative business model that reworked the value equation to also capture and deliver value is software-as-a-service (Saas). Saas allows individuals and businesses to access a software application through a web browser and pay a small monthly service fee. Prior to Saas, software was only delivered in a box with a high upfront sticker price and required a full download onto the host computer. The innovators behind the Saas business model saw an opportunity to deliver software as service over the Internet in the form of a cheap monthly subscription, rather than a bulky, expensive product delivered in a box. This opened up the software market to numerous individuals and businesses that weren’t previously using Saas because the model focused on ways to reach both customers and non-customers in new ways. As proof that Saas companies have better business models than traditional software companies, the average Saas company will be bought out for almost 2x as much as a traditional software company with the same numbers.

Overall, it is the customers who will ultimately determine whether a business is adequately able to deliver the value they seek. As the business landscape becomes increasingly more competitive, it is imperative to not only think about the value the product or service itself brings to the equation, but also the mechanism for delivering and capturing that value. If you want to get creative and talk about your business model over a cup of coffee, give us a call. And stay tuned as we dive deep into business models over the upcoming blogs.


+ Business Model Breakdown: Crowdfunding
+ Strategy Sessions

Crowdfunding Strategy – Summary


Trends and Research – Summary


Read about our collaborative Process

+ Twitter : @LumosBusiness

+ Pinterest : Visualize Trends

+ Discuss : OPEN forum

+ Google + : Hangout

+ RSS : Subscribe