How-to... Separation
What is business model separation?
It is not unusual for a company to have several parallel business models at the same time. ("Combined Business Model"). Their existence fundamentally affects the quality and manner of organization and management. That is why their individual recognition and definition are necessary. That is Separation.
It is essential to find out whether the combined business model makes sense because each parallel business model requires certain adjustments in the organizational infrastructure and management method.
The first step is to recognize all the parallel business models that are in operation in the company.
Then, each of them should be formally defined. See: Biz Modeler
This completes the separation of the business model.
Combined business model
How to recognize if there is a combined business model in our company?
It is enough to analyze the so-called market triangle: (1) Customer segments, (2) Our offer, and (3) Competition.
At the same time, it is necessary to recognize how homogeneous or heterogeneous the market triangle is by reviewing the homogeneity of each angle of the triangle.
| Customer segments: | Offer: | Competition: |
| Homogeneous | Homogeneous | Homogeneous |
| Heterogeneous | Heterogeneous | Heterogeneous |
Customer segments are homogeneous when one or more segments with the same or very similar needs are addressed regardless of demographic and other segmentation.
Customer segments are heterogeneous when there are multiple segments with different needs. A common type of heterogeneous segments is when selling indirectly through intermediaries. Although they are not end-users, they're segmented and treated as customers.
Offer is homogeneous if there's one or more products and services that are produced in the same or very similar way and serve a similar purpose.
Offer is heterogeneous if there's one or more products or services requiring different resources (especially technology, knowledge, and employees).
Competition is homogeneous if it is gathered in the same market, with a similar offer, and addresses similar customer segments.
Competition is heterogeneous if they operate in several different markets.
When do we not have a combined business model?
When our customer segments, our offer, and our competition are homogeneous, then we probably don't have a combined business model.
When do we have a combined business model?
Our business model is most likely combined in the following combinations:
a) Customer segments – homogeneous; Our offer – heterogeneous; Competition – heterogeneous
b) Customer segments – heterogeneous; Our offer – homogeneous; Competition - homogeneous
c) Customer segments – heterogeneous; Our offer – heterogeneous; Competition – heterogeneous
Note: If your company has no combined Business Model, you can disregard the Separation and Synergy tools.
Example of separation in Ice Glee LLC
Ice Glee is a fictitious company. Its main activity is the production of mixtures for frozen cocktails delivered to cafes and restaurants, where cocktails are prepared for consumption using specialized devices.
Their primary business model is thus described:
(1) Production and sale of mixtures for frozen cocktails.
It should be noted that they have their own sales force who sell the mixtures to cafes and restaurants. So, they did not sell directly to end consumers but indirectly through intermediaries.
(2) Our own cafes.
They entered retail by opening their own cafes. In it, they sold directly to consumers. This is a completely different business where the consumer segment was unchanged, but to open and run cafes and provide services in them, they needed a completely new set of resources from the material, human and, of course, specific knowledge and experiences.