Importance of Business Model Reinvention

Business Model Dynamics

• Changes to one element of a business model can affect others, creating a ripple effect.
• Barriers to adopting new business models include cognitive, strategic, and tactical constraints.

Business Model Change

• Change is often required in response to external pressures, such as changes in competition or technology.
• Recognizing the need for fundamental change is crucial for business survival, as it allows companies to adapt and stay competitive.

Business Model Fundamentals

• The cornerstone of a business model is the Profit Formula, which outlines revenue streams, cost structures, and margins.

Profit Formula

• The Profit Formula element of a business model outlines how a company generates revenue and manages costs to achieve profitability.

Business Model Innovation

• Business model innovation is less commonly practiced due to the complexity and risks involved in changing existing models.

Industry Profitability

• The profitability of an industry can be limited by factors such as competitive forces, substitute products, and powerful suppliers or buyers.

Competitive Forces

• A deep understanding of competitive forces and their underlying causes helps in assessing an industry's attractiveness.
• The analysis of the five competitive forces informs company positioning within the industry.

Five Competitive Forces

• The five competitive forces that shape industry strategy are:
  • Threat of New Entrants
  • Bargaining Power of Suppliers
  • Bargaining Power of Buyers
  • Threat of Substitute Products or Services
  • Rivalry Among Existing Competitors

Threat of New Entrants

• The Threat of New Entrants influences industry profitability by increasing competition and potentially disrupting the market.

Supplier and Buyer Power

• Powerful suppliers and powerful buyers can impact industry profitability by exerting pressure on prices and margins.

Substitute Products or Services

• Industries can protect their profitability in the face of substitute products or services by differentiating their offerings and creating barriers to entry.

Blue Ocean Strategy

• The primary focus of the Blue Ocean Strategy is to create uncontested market space and make competition irrelevant.

Cirque du Soleil's Blue Ocean Strategy

• Cirque du Soleil demonstrated a successful blue ocean strategy by combining circus arts and street entertainment to create a new market space.

Blue Ocean Strategy Principles

• The Blue Ocean Strategy suggests that industry boundaries are not fixed and can be recreated.
• The strategy recommends companies approach competition by creating a blue ocean, rather than competing in a red ocean.

Characteristics of Blue Ocean Strategy

• A defining characteristic of the blue ocean strategy is the simultaneous pursuit of differentiation and low cost.
• Blue ocean strategies create barriers to imitation by making it difficult for competitors to replicate the strategy.

Sustainable Growth

• Sustainable growth in the context of blue ocean strategy refers to the ability to maintain profitability over time.
• Cirque du Soleil demonstrates the blue ocean strategy by continuously innovating and expanding into new markets, achieving sustainable growth.