test business models

Keep in mind that we are still in the Restaurant business in Texas. We have detected a place to enter the market, possible target customers, and used Porter’s Generic Model of Competition (1985). Remember the wedding cake example? Here is where your creativity begins.

Purpose

The purpose of this assignment is to test business models, describe customer value propositions, identify our value adding activities, and look for pivots (changes). It is best to start the assignment with the graphic and work around the boxes.

Mechanics

Start with page 165 of the textbook and view the lesson videos in Canvas. (Please submit the assignment as Lastname.Firstname.BusinessModel.docx. ) You will notice that much of this is covered in section eight of the business plan template. Your written report should be key boarded, utilize the American Psychological Association (APA) citation format, and be 2-3 pages in length (including exhibits, tables and appendices). Use 12 point Ariel font, 1/4 inch indentions, and single line and character spacing. All assignments will graded as to content, format, Grammar, spelling, punctuation, word use, subject-verb agreement, and other hallmarks of University level writing. Turn in your Word files to Canvas for submission to www.turnitin.com. Late submissions will not be accepted.

Dear Class:
I can see that you have started the third assignment by the questions coming in. Let me summarize and provide guidance.
1) The questions to be answered are located on the Word document attached to the assignment and announcement. Let me demonstrate headings.
                                                                  Develop/ Test the Business Model (Level one, centered, boldface, and uppercase)
Customer Segments (Level two, left justified, bold, and uppercase)
       For whom are we creating value? (Level three, indented ¼ inch, bold, sentence style, and punctuation)

2) Within the value proposition box, the target market will dictate what they want, how they want it, and how much they will pay for it. The IBIS report will shed some light on this topic. You may also consider Google searches. Be sure to note what type of relationship you wish to create.

3) What about a pivot? The word means to “change.” I want you to look at your motel with a critical eye as to possible pivots. Remember my silly idea of a Cat motel where customers brought their own cat? What if we pivoted and provided the cats (comfort animals)? What about other possible pivots? There are three that come to mind. The product/ service pivot, customer pivot, and the revenue pivot. So, let’s look at some examples.
a. Remember my brother-in-law (Jim) with the water licenses? His pivot was to teach classes that led to certification for his students. He now makes more money at one sitting than actually performing the work himself. Jim adds value by using Constant Contact to update everyone on new laws (State or Federal) or changes to the Uniform Plumbing Code.
b. Jim also had a customer pivot. The original customers were individual plumbers and irrigation people. His new customer group includes cities, counties, State and Federal agencies, and companies. All of these new customers require less advertising, have lower customer acquisition costs, better payment terms, and pack the house on training day. Jim no longer spends days recruiting to make a class.
c. Jim’s revenue model changed in that he no longer replied on individuals with hot checks and bad credit cards. Nor does he listen to sob stories about why people can’t come to class. He bills the new customer group directly and gets paid quicker.

4) Here is another example of product pivot. I had a Police officer (Sam) redesign first responder flashlights. There were several improvements he wanted to make. Patent #1, change the texture pattern on the barrel of the light. Sam found that wet hands or wet gloves slipped off most flashlights. Patent #2, he wanted both a tail and barrel switch for convenience. No manufacturer had both. Patent #3, he wanted to increase the power of the light by adding more batteries. He engineered barrel extensions.

The customer changed (pivot) to manufacturers which changed distribution channels ending with first responders. Let me explain. Sam insisted on having his flashlight manufactured to sell on online and through retailers. Therefore, I helped him find an ISO certified manufacturer in China. We made 10,000 of these things. He still has some in his garage at home.
I finally convinced Sam that the value of the flashlight was in the patents! He now leases his patents to other manufacturers that sell to retailers. That is why you see these features in Surefire, Streamlight, and others. Sam has since become a millionaire and retired at the age of 34.

5) Can I innovate in other boxes? Yes! You can innovate and change in all boxes though, fixed cost are usually the hardest to change. You can minimize variable costs by closing the doors and firing all employees. The remaining fixed costs are the mortgage, notes on equipment, inventory and materials on hand, work in process, and insurance.

6) Let’s talk about channels, resources, customer relationship, and cost structure. My UNT students took on Enterprise Rent a Car (big E) as a client a few years ago. We all know the distribution model in that you went to Enterprise’s location to pick up the car. Heck, they would pick you up. The UNT pivot got Enterprise in to Classic Dealerships, Autonation, and Jim McNatt. Also, the big E had cars at the dealership for immediate rental. Big E doubled locations overnight! Resources and costs changed in that the dealership provided the office space and in return were able to offer customers added value.

7) The bottom line with possible pivots is to focus on the target market. For instance, they may insist on paying with cryptocurrency. If there is a large enough group of customers and how do we make that happen?