Goldman Sachs Our Thinking. In a special series, Goldman Sachs Research explores emerging trends poised to fundamentally change how we live and work. Business Strategy The Economist Pdf' title='Business Strategy The Economist Pdf' />From disruptive technologies to paradigm altering social developments, our analysts offer the stories that could be tomorrows front page news. Annual report STRATEGIC REPORT 2 Fiveyear summary 3 Group overview 5 From the chairman 6 From the chief executive 7 From the editor 8 The Economists digital strategy. Plan on becoming an MBA student Strategize with Economist GMAT Tutor, Manhattan GMAT, Kaplan GMAT courses and more top Business School prep classes. Join GMAT. The Value of Project Management Looking for a way to stay ahead of the pack in todays competitive and chaotic global economy, companies are turning to project. Reinventing Your Business Model. In 2. 00. 3, Apple introduced the i. Pod with the i. Tunes store, revolutionizing portable entertainment, creating a new market, and transforming the company. In just three years, the i. Podi. Tunes combination became a nearly 1. Apples revenue. Apples market capitalization catapulted from around 1 billion in early 2. This success story is well known whats less well known is that Apple was not the first to bring digital music players to market. Business Strategy The Economist Pdf' title='Business Strategy The Economist Pdf' />How technology endowed with creative intelligence changes the way companies generate and distribute content. A company called Diamond Multimedia introduced the Rio in 1. Another firm, Best Data, introduced the Cabo 6. Both products worked well and were portable and stylish. So why did the i. Pod, rather than the Rio or Cabo, succeed Apple did something far smarter than take a good technology and wrap it in a snazzy design. It took a good technology and wrapped it in a great business model. Apples true innovation was to make downloading digital music easy and convenient. To do that, the company built a groundbreaking business model that combined hardware, software, and service. This approach worked like Gillettes famous blades and razor model in reverse Apple essentially gave away the blades low margin i. Business Strategy The Economist Pdf' title='Business Strategy The Economist Pdf' />Tunes music to lock in purchase of the razor the high margin i. Pod. That model defined value in a new way and provided game changing convenience to the consumer. Business model innovations have reshaped entire industries and redistributed billions of dollars of value. Retail discounters such as Wal Mart and Target, which entered the market with pioneering business models, now account for 7. Economics By Michael Parkin Pdf there. Low cost U. S. airlines grew from a blip on the radar screen to 5. Fully 1. 1 of the 2. Fortune 5. 00 in the past 1. Stories of business model innovation from well established companies like Apple, however, are rare. An analysis of major innovations within existing corporations in the past decade shows that precious few have been business model related. And a recent American Management Association study determined that no more than 1. Yet everyones talking about it. A 2. 00. 5 survey by the Economist Intelligence Unit reported that over 5. A 2. 00. 8 IBM survey of corporate CEOs echoed these results. Our Thinking. People from around Goldman Sachs share insights on the global economy, markets, and topics related to our business. MACROECONOMIC INSIGHTS. Business Strategy The Economist Pdf' title='Business Strategy The Economist Pdf' />Our latest thinking on the issues that matter most in business and management. Nearly all of the CEOs polled reported the need to adapt their business models more than two thirds said that extensive changes were required. And in these tough economic times, some CEOs are already looking to business model innovation to address permanent shifts in their market landscapes. Senior managers at incumbent companies thus confront a frustrating question Why is it so difficult to pull off the new growth that business model innovation can bringOur research suggests two problems. The first is a lack of definition Very little formal study has been done into the dynamics and processes of business model development. Second, few companies understand their existing business model well enoughthe premise behind its development, its natural interdependencies, and its strengths and limitations. So they dont know when they can leverage their core business and when success requires a new business model. After tackling these problems with dozens of companies, we have found that new business models often look unattractive to internal and external stakeholdersat the outset. To see past the borders of what is and into the land of the new, companies need a road map. Ours consists of three simple steps. The first is to realize that success starts by not thinking about business models at all. It starts with thinking about the opportunity to satisfy a real customer who needs a job done. The second step is to construct a blueprint laying out how your company will fulfill that need at a profit. In our model, that plan has four elements. The third is to compare that model to your existing model to see how much youd have to change it to capture the opportunity. Once you do, you will know if you can use your existing model and organization or need to separate out a new unit to execute a new model. Every successful company is already fulfilling a real customer need with an effective business model, whether that model is explicitly understood or not. Lets take a look at what that entails. Business Model A Definition. A business model, from our point of view, consists of four interlocking elements that, taken together, create and deliver value. The most important to get right, by far, is the first. Customer value proposition CVP. A successful company is one that has found a way to create value for customersthat is, a way to help customers get an important job done. By job we mean a fundamental problem in a given situation that needs a solution. Once we understand the job and all its dimensions, including the full process for how to get it done, we can design the offering. The more important the job is to the customer, the lower the level of customer satisfaction with current options for getting the job done, and the better your solution is than existing alternatives at getting the job done and, of course, the lower the price, the greater the CVP. Opportunities for creating a CVP are at their most potent, we have found, when alternative products and services have not been designed with the real job in mind and you can design an offering that gets that joband only that jobdone perfectly. Disk Drill Crack here. Well come back to that point later. Profit formula. The profit formula is the blueprint that defines how the company creates value for itself while providing value to the customer. It consists of the following Revenue model price x volume. Cost structure direct costs, indirect costs, economies of scale. Cost structure will be predominantly driven by the cost of the key resources required by the business model. Margin model given the expected volume and cost structure, the contribution needed from each transaction to achieve desired profits. Resource velocity how fast we need to turn over inventory, fixed assets, and other assetsand, overall, how well we need to utilize resourcesto support our expected volume and achieve our anticipated profits. People often think the terms profit formulas and business models are interchangeable. But how you make a profit is only one piece of the model. Weve found it most useful to start by setting the price required to deliver the CVP and then work backwards from there to determine what the variable costs and gross margins must be. This then determines what the scale and resource velocity needs to be to achieve the desired profits. Key resources. The key resources are assets such as the people, technology, products, facilities, equipment, channels, and brand required to deliver the value proposition to the targeted customer. The focus here is on the key elements that create value for the customer and the company, and the way those elements interact. Every company also has generic resources that do not create competitive differentiation. Key processes. Successful companies have operational and managerial processes that allow them to deliver value in a way they can successfully repeat and increase in scale. These may include such recurrent tasks as training, development, manufacturing, budgeting, planning, sales, and service. Key processes also include a companys rules, metrics, and norms. These four elements form the building blocks of any business.