From time to time, it is useful to conduct a fundamental strategic review of the business model of the business units in both very young and very mature industries and markets. The questions "how do I make money at the moment?" and "how do I want to make money in the future?" are the starting point. A reversal in the direction of services or new technological developments can also be the driver in this case (keyword: industry 4.0).

Challenges

The necessity of a fundamental assessment of the business model can arise due to changes in market conditions or can be initiated by the aim of a proactive optimization. The earlier a review of the business model takes place, the timelier will be the reaction to changes. An early review even has the potential to coin a whole industry.

Implementation

A systematic analysis takes place on how products and services of the business create value for the customer at the beginning of a review of the business units. Consequently, starting points arise expressing to what extent a new revenue model displays the customers' willingness to pay. Thus, successive cash flows instead of single payments may constitute economic advantages for vendors as well as for customers. Following this principle, several software providers have drastically reorganized their business models away from one-off sales of licenses towards marketing of subscription models ("software as a service").

Hence, three central elements of an assessment of a business model arise: the precise description of the products – of a physical nature as well as in the sense of services –, the description of the pricing model, and the computation of business cases. These business cases involve assumptions about pricing and cost functions as well as quantity structures. When establishing business cases, several scenarios should always be taken into account. In this context, advanced modeling approaches, such as the Monte Carlo simulation, have proven their worth in practice.

The redesign of the business model is akin to surgery on the "heart" of the company. Hence, the preparation of analyses, elaboration of models, and the implementation should all be meticulously executed.

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