bmg benchmark
TRANSCRIPT
-
8/3/2019 BMG Benchmark
1/10
White Paper
-
8/3/2019 BMG Benchmark
2/10
Business Model Benchmark
Business Model GenerationThe benchmark report is a comparison of the
performance of a company business model1
based on the CANVAS from the Business
Model Generation (sterwalder and Pigneur,
2010)2
1. Value Proposition
. The CANVAS contains nine building
blocks:
2. Customer Segments3. Customer Relationships4. Channels5. Key activities6. Key resources7. Partners8. Cost structure9. Revenue streams
The BMG Benchmark compares two
evaluations of the business model from acompany based on the SWOT analysis3. To
be able to understand and get full insight
of this benchmark an explanation of the
CANVAS and evaluation is necessary prior
to look at the actual benchmark. With the
support of the CANVAS an overview of the
business model is obtained on one page.
Each building block is described and
together they form the logical structure of
the business model and how theorganisation is making money. This is a
blueprint for the strategy of the company
and with the canvas on a large paper it
gives a common language (Soley 2010)4
and understanding how the business
model works.
Figure1Canvas
Within the canvas the structure for therevenues of the company are made clear.
Based on the value proposition the customeris willing to pay for the benefits they obtain
-
8/3/2019 BMG Benchmark
3/10
333
form the organisation. In the structure of the
earnings it is also possible that organisations
give something for free to the customers in
order to receive revenues for other services or
products. For example Google gives away
many software tools for free and still have
great earnings by advertisements, ad-words
and so on. See Figure1Canvas.
Business Model EvaluationDiscussing the building blocks gives the
employees of the company, management and
subordinates, a common language to have a
mutual understanding of the business model.
Once the canvas is finished or there is an
existing canvas the quality of the business
model must be evaluated. Each year
management and employees should take a
look at their business model and evaluate to
see if the rapidly changing circumstances on
the market (van der Zee 2000)5 and within the
company dont lead to bottlenecks in the
business model. A comprehensive set of
questions is the base of the SWOT analysis
that is used to analyse the strengths and
weaknesses of a company and analyses the
opportunities and threats from the market.
For most businesspeople and researchers the
SWOT is a familiar tool to work with and will
lead to a full understanding of the evaluation.
Although there is a kind of resistance6
Company Evaluation
that the
SWOT is a too open tool to analyse the
different processes of an organisation. With
the use of the canvas this cannot be an issue
anymore because of the focus on the nine
building blocks.
Based on the SWOT analysis the results are
placed in a graphical overview and remember
that one picture7
Figure 2 Evaluation from the
company
says more than a thousand
words. The bar graph of the evaluation is
shown in
. For each of the nine building blocks
a bar is shown for strengths and weaknesses
in blue or in red, a green bar is shown for the
opportunities and a yellow bar is shown for
the threats. The fourth bar in purple shows
the average of the strengths, weaknesses,opportunities and threats.
Figure 2 Evaluation from the company
The average will be used in the graph at the
moment two evaluations are compared with
each other and is the results of the
combination from strength or weakness with
-5,0
-4,0
-3,0
-2,0
-1,0
0,0
1,0
2,0
3,0
4,0
5,0
Partners Activit ies Resources Value proposition Customer
relationships
Ch an ne ls Cu st om er
segments
Cost structure Revenu streams
Strength or weakness
Opportunity
Threat
Average
-
8/3/2019 BMG Benchmark
4/10
444
the opportunities and lowered with the result
of the threats.
When the company has a strength the bar is
above zero and is blue. When the company
has a weakness the bar is below zero and red.
The bars for opportunities and threats are all
from zero till five. The higher the bar the
better the strength or opportunity and the
stronger the threat. The lower the bar how
stronger the weakness and how lower the
opportunity or threat. The bar for the average
is purple when the score is above zero and
also red if it is below zero.
This evaluation concerns a company in the
manufacture of machinery and equipment.
This evaluation is based on the input of the
managing director of this company. What can
we see in this evaluation? First of all two
weaknesses being key resources and channels.
Furthermore there are many opportunities
that can be helpful to improve the business
model. Looking at value proposition and
revenue streams it shows that for both
strength is low and that threats are imminent.
The company can, based on this evaluation,
improve on key resources and improve the
cost structure. Making use of the
opportunities at the customer segments will
improve the strength of the revenue streams.
Research Evaluation
Till so far a common analysis of the evaluation
by the company. The next step concerns the
evaluation by the researchers. The same set of
questions has been answered by the
researchers based on the facts the found from
the company itself and the market results.
Looking at Figure 3 Evaluation by researchers
it clearly shows a difference on the different
building blocks with the evaluation of the
company.
Figure 3 Evaluation by researchers
We can now look at both evaluations and try
to analyse the differences of the nine building
blocks. This will take a lot of time and
mistakes are easily made. Therefore the best
solution is to make an new graph in which wecan compare the two evaluations in one
picture. Therefore I have developed the
Business Model Comparison.
-5,0
-4,0
-3,0
-2,0
-1,0
0,0
1,0
2,0
3,0
4,0
5,0
Partners Activit ies Resources Value proposition Customer
relationships
Ch an nel s Cu st om er
segments
Cost structure Revenu streams
Strength or weakness
Opportunity
Threat
Average
-
8/3/2019 BMG Benchmark
5/10
555
Business Model ComparisonTo be able to get a clear overview of the
differences of both evaluations the graphs are
matched in a new overview that shows the
results of both evaluations. With this
comparison of the evaluations the graph
clearly shows where the company and the
researchers have a different opinion. The
managing director of the company based on
his feeling8
researchers based on the facts from the
internal analysis of the company and external
analysis of the market. This results in the
graph of
and knowledge of the company
and the
Figure 4 Comparison Company and
Research where the results of the company
are shown trough the dark purple bar, the
results of the researchers are shown in light
purple and the differences between the two
are shown in the yellow bar.
Figure 4 Comparison Company and Research
When both purple bars are close together
there is almost no difference between the
opinion of the company and that of the
researchers. However we still have to take
into account that a high score is good and a
low score is bad. If the score of the company is
lower than the score of the researchers the
company underestimates the quality of that
building block. If the score of the company is
higher than that of the researchers the
company overestimates itself. The longer the
length of the yellow bar the greater the
difference between the view of the company
and that of the researchers. In the above
example of the company in the manufacturing
of machinery and equipment I will discuss the
nine building blocks separately and after that
an overall conclusion.
1. Partners.Both evaluations are close together so
there is a mutual understanding
concerning the quality of therelationship with the partners. The
score is just over three and that
means an above average score which
is good. However this does not mean
that nothing has to be done. There is
always a possibility to improve. It only
shows that the priority is not at this
building block.
2. Key activities.Although the score of both
evaluations are almost the same it
-5,0
-4,0
-3,0
-2,0
-1,0
0,0
1,0
2,0
3,0
4,0
5,0
Part ner s Activitie s Re sour ce s Value proposition Custom er
relationships
Channels Customer segments Cost structure Revenu streams Average Company
Average Research
Difference
The higher the differnce
bar, the more there is a
difference between
Company and research.
A difference higher thanzero means that the
Company is
overestimatingitself.
A difference lower than
zero means that the
Company is
underestimatingitself.
-
8/3/2019 BMG Benchmark
6/10
666
clearly shows a far less score than the
partners. Fortunately the score is still
above zero but not as good as it
should be. This building block has a
higher priority than the Partners
building block.
3. Key resources.The company scored the recourses
still as a strength but a very low one.
From the research point of view the
strength is much higher resulting in a
difference according to the yellow bar.
The score on the difference is below
zero which means that the company
underestimates the quality of theresources. This building block
therefore has a low priority.
4. Value proposition.This building block shows almost the
same score on the difference however
the scores of the company and the
researchers are higher than with the
key resources. As the value
proposition building block is one of
the most important building blocksthis score should be a signal for the
company to have a better
understanding of its value proposition
towards its customers.
5. Customer relationships.With the customer relationship
building block the company is
overestimating itself to a large extend.
Based on the results from the
research it shows a weakness where
the company thinks it is doing a good
job and sees this as a strength. This
building block has the highest score
on the difference and that means that
this building block must have the
highest priority.
6. Channels.The large difference in the score
between the company and theresearchers in this building block
means that the company has no good
idea how customers are reached and
products are delivered. The risk with
this score is that management focuses
on improving channels, spent a lot of
time, money and resources and only
will improve a little bit.
7. Customer segments.Although researchers see it is no
weakness but still a strength the
company thinks the segmentation is
good. The risk here is that the
company positions itself not quite
right towards the segments in the
target group and therefore can loserevenues. This building block has the
second highest priority.
8. Cost structure.The cost structure appears to be in
better shape than the company
thinks. Starting cost saving programs
will not have the expected results and
can end in demotivated employees.
9. Revenue streams.The company also thinks that revenuestreams are a weakness and therefore
will focus to find more revenue
streams or even increase prices.
According to the research this is not
really necessary because the revenue
streams are still a strength.
Conclusion of the comparison.
Based on the feeling of the company
management will focus on improvements onchannels, cost structure and revenue streams.
This will result in cost saving programs;
increase of prices and improvement of
channels which is in contrast with the cost
savings programs. This is a wrong strategyfor
the company to follow.
The best strategyfor this company is, looking
at the situation based on the evaluation of the
researchers, focussing on customerrelationships9 and customer segments10.
-
8/3/2019 BMG Benchmark
7/10
777
Improving the way the company cares about
the relations with is customers will make sure
that revenues are more sustainable and
predictable. A better focus on segmentation
will position the company on a more focussed
way at the target groups11 so that the
customers better understand the value
proposition and therefore earlier will buy form
the company. Another advantage is the
positioning of the company towards its
competitors. Customers can see more clearly
the added value of the company compared
with that of the competitors.
In this way the overall integrity of the business
model will be improved, management is
focussing on the real subjects that are
important in the decision making12
Benchmark
process
and employees are not demotivated because
of cost savings. This all will result in a strong
and healthy company with a solid customer
base.
Thus far the evaluation of the business model
was based on the feeling of the company and
on facts that researchers found at the
company and on the market. This gives
valuable information to improve the current
business model. Another way of looking at the
business model is benchmarking, Lankfoord
(2001)13
In
. A benchmark is reference to the
quality of performance of another company
based on the same set of criteria. In this case
the evaluation of a company can be
benchmarked against a database that includes
many evaluations. The company can see in
this way how the performance is of the
company compared to the companies in the
benchmark. Selections can be made to
compare with all the companies in the
benchmark, or only the companies from thesame industry, or the companies from the
same country or the evaluations from the
companies alone or from the researchers
alone, or a combination from the earlier
mentioned possibilities. It is even possible to
have an incompany benchmark where the
evaluations of employees are benchmarked
against each other.
Figure 5 Benchmark the same company iscompared with all the companies in the
benchmark.
Figure 5 Benchmark
If the evaluations from both company and
researchers are available it is best to take the
-5,0
-4,0
-3,0
-2,0
-1,0
0,0
1,0
2,0
3,0
4,0
5,0
Partners Key activities Key Resources Value Proposition Customer Relations Channels Customer
segments
Cost Revenu str eams
Company
Total
Difference
The higher the differnce
bar, the more there is a
difference between
Company and research.
A difference higher than
zero means that the
Company is
overestimating itself.
A difference lower than
zero means that the
Company isunderestimatingitself.
-
8/3/2019 BMG Benchmark
8/10
888
evaluation of the researchers because this is
based on facts and will therefore be closer to
reality.
1. Partners.The score of the partners is almost thesame. The company score a bit less
than the total score. A little
improvement is necessary.
2. Key activities.The company scores a bit higher than
the total of the other companies.
However the score is still not that high
but it is not a high priority.
3. A pretty high score on key resourcesand also higher than the companies in
the database. If time and resources
are available improvement here can
be done. Also not a high priority.
4. A very high score on valueproposition. One of the most
important building blocks with a high
score and better than the rest of the
benchmark. Pay attention to make
sure that the score remains at thislevel.
5. The customer relation score is belowzero so a weakness. A large difference
with the benchmark and also a
negative score as we see on the
yellow bar. Improvement of the
relationships with customers has the
highest priority of all.
6. The score on channels is a little betterthan the benchmark. Though thescore can be higher.
7. Together with customer relations thecustomer segments are the highest
priority. When a company doesnt
have a good segmentation the
marketing effort the company invest
in the segments are not really
focussed and will not have the proper
message to the customer who will not
go for this company.
8. Costs are still better than the rest ofthe companies in the benchmark.
However there is still improvement
possible.
9. Although revenues are better than thebenchmark this building block can
even be better by improving customer
relations and customer segments.
Conclusion of the benchmark.
Focus on the two most important building
blocks being customer relations and customer
segmentation and this company will even do
better than it already does compared with the
rest of the companies in the benchmark. Afterimproving these two building blocks it is
important for the company to remain there
where they are and improve partners,
channels and key activities in that order.
Overall conclusion.
Both the Business Model Comparison and the
Business Model Benchmark show a strong
focus on two building blocks CustomerSegmentation and Customer Relationship.
That means the first focus for improvement is
first to start with segmentation and then
decide how to maintain the relations with the
customers in the different segments. To build
a comprehensive strategy for these two
building blocks we will have to look deeper at
the evaluation of these building blocks.
StrategySegmentation14 is a well known subject to
divide customers with the same needs in one
segment to be able to set up a proper
marketing mix11 for each segment. But first we
will have a closer look at the building block in
more detail. The first one we look at is the
customer segments building block. The graph
shows clearly that acquisition of new
customers is a weakness of the company that
has to be strengthened because the
-
8/3/2019 BMG Benchmark
9/10
999
opportunities show a possible growth in
customers. The second building block we look
at is the customer relation building block. The
switching costs bar is zero so it is easy for
customers to switch to another supplier.
The second important issue is the strength of
the brand. This is rather low and improvement
should take place. Furthermore there are
three important opportunities that will lead to
better customer relationships. By improving
and tightening customer relationships and
leave the unprofitable customers, a better
customer relationship will be achieved.
So the final overall strategy consists of the
following activities:
1. Focus on customer segments by:o Acquisition of new customers;o Use the opportunity of growth
in customers.
2. Focus on customer relationships by:o Strengthen your brand;o Use the opportunities of
tighten your relations with
customers
o Look for better way to higherswitching cost
Final conclusionBased on the evaluation with the Business
Model Generation the strategy of thecompany is changed from a risky strategy of a
cost saving program and increasing prices to a
strategy of connecting more to customers and
to raise the customer intimacy. As a result the
risk of customers going to the competition is
lower and better relationships will lead to a
sustainable customer base.
-
8/3/2019 BMG Benchmark
10/10
111000
References
1
Pateli, A. and G. Giaglis (2003). A Framework For Understanding and Analysing Business Models, Proceedingsof the Bled Electronic Commerce Conference2A. Osterwalder, E.Pigneur(2010), Business Model Generation: A Handbook for Visionaries, Game Changers,
and Challengers, John Wiley & Sons Inc. Hoboken New Jersey3
M.Mulders(2010), 101 Management Models, Noordhoff Uitgeverijen.4
R. Soley, ISO 20022, Newsletter, Summer 2010, Volume 3 Issue 15Zee, H. van der (2000). Business transformation and IT: entanglement and disentanglement of companies and
IT, Dutch University Press.6 Eurostat (2001), Seminar on Strategic Planning and Programming of Statistical Activities, Use and Practice ofSWOT Analysis7
Journal of Information Sciences Volume 27 (2001), The use of graphs as decision aids in relation to
information overload and managerial decision quality.8
Zeelenberg, M., van Dijk, W. W., Manstead, A. S. R.,& van der Pligt, J. (2000). On bad decisions anddisconfirmed expectancies: The psychology of regret and disappointment. Cognition & Emotion, 14, 521-5419 P.M.Sias (2009), Organizing Relationships: Traditional and Emerging Perspectives on WorkplaceRelationships, Sage Publications, Inc.10
G.Johnson, K.Scholes, R.Whittington (2005), Exploring Corporate Strategy, Prentice Hall11
P. Kottler, G. Armstrong (2010), Principles of Marketing, Pearson Prentice Hall12J. Davis (2010).Decision Making and Problem Solving Strategies: Learn Key Problem Solving Strategies;
Sharpen Your Creative Thinking Skills; Make Effective Decisions. Kogan Page Publishers13
W. Lankford(2001), BENCHMARKING: UNDERSTANDING THE BASICS. The Coastal Business Journal Volume 1,
Number 114
M. McDonald, I.Dunbar (2004), Market Segmentation: How to do it, how to profit from it, ElsevierButterworth-Heinemann