The session has three objectives: review the growth study findings on multiple models, recognize the need to connect marketing better to other functions and especially finance, and learn to engage in business model conversations sooner, with more colleagues, and more often.
The underlying finding is that growth overperformers are significantly more willing to accept new business models and to work with several at the same time, which the session describes as playing chess and checkers simultaneously.
Key findings
- Winning in multiple models requires a strong relationship with finance and other functions, and the examples given are Coke expanding into coffee and Pepsi acquiring Sodastream.
- Building a business case is named as something that does not come naturally to all marketers, which is why the canvas is offered as an alternative to laborious spreadsheets and financial modeling.
- The definition of a business model used is deliberately broad: the rationale of how an organization creates, delivers and captures value, which goes beyond a revenue model.
- Pricing power is defined as the ability to raise prices without curtailing demand or losing share to a competitor, and marketing’s claim on it is that it drives how consumers think, feel and act toward a brand, and therefore their willingness to pay.
- The three key learnings are that overperformers work with different business models at once, that closing the gap with finance means speaking a language finance understands, and that growth leaders explore models often, with many people, and early, rather than building complex spreadsheets before having the conversation.
The nine blocks of the canvas
The canvas starts on the customer side. It asks who the customer is, distinguishing who pays, who receives and who decides, then what value proposition is offered. Value proposition is defined as two things together: the promise and the product, illustrated with a beauty brand whose promise is looking ten years younger and whose product is a face cream.
From there the canvas covers channels, customer relationship, and revenue streams. Together these form what the session calls the front stage, the part the customer sees.
The backstage covers key resources, key activities, key partners and costs. Partners are defined not as the average supplier but as someone who helps increase the value proposition to the customer.
The point of the tool is interaction between the blocks. Adding an online channel can have a knock-on effect on the product and even the value proposition, reach different customer segments, change how customers are charged, and require different resources, activities and partners. The stated value is speed of exploration rather than correctness of answer.
Nespresso, worked through the canvas
The value proposition is a cup of coffee with an experience around it, sold to two segments: good coffee at home and good coffee in the office. The channel question is inverted, because the interesting fact is where Nespresso cannot be bought, namely the average grocery store.
The turnaround came from two changes made under new leadership. First the channel changed, taking the product out of supermarkets. Then the customer relationship changed, into the club. The strategic effect was data: the company knows exactly who is buying what, when and where, while grocery store purchases are anonymous.
Revenue is small on machines and large on pods, and the repetitive sale is what makes the model strong. Key resources are the factory, the pod patent, and the club data. The key partner is the producer of the coffee machines, without which the model would not fly. With the patent expired there is pressure on the model, which makes the brand and the customer relationship more important still.
Pricing power, and the limit on it
The argument for reframing the conversation with finance is that raising willingness to pay drives profit and cash flow, concepts finance understands well. The session also gives a counterexample. During inflation, the chief executive of the second-largest meat manufacturer in the world raised prices claiming costs were hitting faster than pricing could be obtained, and profits doubled.
The alternative offered is humanized pricing power, which delivers value across consumers, colleagues, communities and capital markets, achieved by creating purposeful brands that command a premium because they are meaningful to stakeholders for the right reasons.
The practical advice for the relationship with finance is to align language and objectives: understand the shared goals all functions work toward, then align on which objectives support each other and which conflict and cannot co-exist. The canvas is offered here too, as a shared reality of the business across functions.
Scope and limitations
This is a self-learning session delivered on the program platform rather than a live discussion, and its examples are illustrative company cases rather than measured results.
Source
This page summarises SESSION 6: Multiple Models, by Maaike Doyer, Chris Burggraeve, Robbie Kellman Baxter, Norman de Greve, Deborah Koyama, 2024.