There’s been a lot of talk over the last month or so about taking business models that were successful in a market and replicating the model in a different area. (Think Rocket Internet Group) From a 10,000 ft view, seems like a great idea. Human beings across the world have pretty similar needs. #Maslow
However, from an operational perspective, business models are a direct function of the customer, complimentary industries, and the firm’s competitive advantage. Ultimately, the business model is how a company responds to market forces to execute toward their business goals.
M-pesa is a great solution for the lack of access to banks and the mass availability of mobile of in Kenya. Mobile money/wallet has become a key strategy for any payment geared business in Africa. However, mobile wallet adoption is slow in the Untied States. It is just recently that Apple launched Ipay, and Google Wallet has been around for ages, but customers in the United States are just so use to the current payment processes in place. Sometimes, your competition doesn’t come from a company but from user habit and that takes a while to wear down. Finding a significant customer pain point trumps user habit all the time, but user habits change based on market.
There are complementary industries in particular markets that cause a business model to differ. E-commerce in the United States is a great example. As an e-commerce site like Ebay or Amazon, I can depend on a company like UPS or DHL to mitigate my cost for delivery and get to my customer. Jumia, based in Nigeria, has to solve for the last mile (among other things) to get their products to consumers. It’s a larger investment but it creates a larger barrier for competitors. Companies that see critical gaps in the market often find themselves in one or more businesses to scale. Jumia is an e-commerce, delivery, sales company. Alibaba is an e-commerce, payment, bank, search engine company. In each example, the economics only makes sense once you scale multiple parts of the business which, once again depends on the market forces at work.
An emerging competitive advantage can change a business model significantly. A company like Dangote Group can flood the market with products at low-cost because of standardized manufacturing processes and better established distribution networks. Companies that have great customer support have higher customer retention rates and don’t have to spend as much on customer acquisition. A sustainable competitive advantage can change the game when it comes to localizing a business model.
Moral of the story: Business models are not copy and paste. The best ones take into account the customer, complimentary industries, and the firm’s competitive advantage.