Business-Model-Canvas: How it helped us save 40% of CAPEX 💶
Four examples from the hospitality 🏨 industry. How different company with different sizes used the Business Model Canvas to successfully compete in the market.
In this article, I am going to focus on the importance of using the Business Model Canvas (BMC) created by Strategyzer(1) to help businesses re-starting after the pandemic. This canvas include 9 blocks as you see on the picture below. I will, as usual, focus on the hospitality industry. First, I will show how it did help us saving a large amount of the CAPEX. Then, how three companies are using it to be competitive in the market. Long story short, the BMC structure helps to find out which part of the business is the weakest. And therefore, helps to focus the resources on the right thing.
How did we save 40% of CAPEX and stretched better results?
Quick context information: this tool — Cockpit — only works with integrations with Point-of-Sales (POS) partners, and therefore to significantly grow the user base, we need to be continuously pushed by the POS sales team.
The challenge: on what activity to invest our funds
The team was split 50/50 on what it should have been done next. Either focus on delivering more value for the customers, or improving our distribution channels. Our North Star metric or main goal was to grow the user base. After meticulous product discovery, we were aware of what features we had to build to increase the value proposition of the web-app. As well what investment we had to do to improve our distribution channels.
We had to decide on one or the other.
We asked ourselves, what would not make us reach our goal? the answer was clear, not having polished distribution channels would be the killer of the product. Thus, we decided to invest in improving and innovating the distribution channels 🚚.
If we would have invested in the feature, we would have for sure increased retention, but we wouldn’t have had the confidence that the number of users would increase.
This allowed us to be successful. We reached more than a 100% user growth for the second year in a row. Also by keeping a lower CAPEX investment.
How can hospitality businesses use the BMC to sustain long term growth after this crisis?
BMC helps to be focused on the most pressuring issues which could kill 🚫 the business.
Three hospitality companies had to innovate its business model to be continuously successful for the years ahead.
Fresh pasta 🍝 producer, from B2B to B2C
A small fresh pasta producer during the pandemic opened a B2C channel (e-commerce) on top of the core business which is B2B. I have helped them to do it.
Challenge: Find the right balance between the different blocks for a new customer segment
Delivery for fresh products:
We started delivery e-commerce (B2C) for fresh products, something innovative and rare in the market. The value proposition was clear; super fresh, local and handmade pasta. This value proposition is working very well for the customer segment that acquires the pasta in a retail store.
We hypothesised that also in this direct-to-consumer distribution the value proposition was the same. We got a few complaints, that between the arrival and the expiration date of the products there were not enough days ⏱. The pasta is so fresh and cannot last many days. How might we tackle this challenge? We have to examine the distribution channels, value proposition and the key partnership.
How can the different blocks complement each other?
Key partnership is working well — no need to analyse it.
The value proposition is working also well, the qualitative feedback about the product is very positive 🏆. We have issues with the distribution, the pasta being so fresh it doesn’t last longer than a few days. The short lifetime of the product would have killed the B2C market.
After thorough user research, we discovered that by decreasing the “freshness” of the pasta by 2%🤷♂️ , the product would have last two days longer (please don’t take this number seriously, is just a descriptive example). Moreover, the taste, local products, freshness and perceived value of the product stayed the same. Also according to our customers. In conclusion, thanks to the BMC, we focused on the right issue at the right time.
CitizenM: Technology instead of concierges
Challenge: Different brands with the same star rating were identical and not innovating 📉
CitizenM focuses on streamlining operations:
To become the hotel chain with the highest profitability per square meter — CitizenM (CM) has to master operations(3).
I can write several articles about CM business model as it is one of the most fascinating and sustainable of all the industry. However, I will focus on how they overcame the above-mentioned challenge.
Their focus has been since day one to streamlining operations. On the BMC language we mean, innovate the key activities 🛠.
In my opinion, there are three key activities that they managed to master; technology, efficient usage of space and the employees, which in BMC language is a key resource.
Innovate the key activities:
Technology 🖥: check-in and check-out in less than three minutes. Free wifi. Easy to use and comprehensible Tablet in the room, etc…
Moreover, with their powerful data analysis, back-of-the-house management is centralised for all properties. By combining external and internal data streams, CM can predict which areas of each single hotels need more attention(4).
Usage of space 🛌: every room has the same size and it is prefabricated. This minimizes the cost per m2. Thanks to the high construction standardization they can have more rooms on one floor than any other hotel. This increases the revenue, especially with an occupancy of around 91% throughout the whole year (pre COVID-19 time)(2).
Innovate the key resources:
Employees 👫 are one of the largest cost in the balance sheet. To have such a high profit per m2 CM had to reinvent it. Through intense customer research, they found out what services in a hotel experience are well perceived by their customer segments. And which ones don’t add value to the experience (see below).
Who are the Ambassadors:
The golden nugget invention of CM is the combination of multiple employees’ role into one called; the Ambassador. This figure, can prepare a perfect cappuccino as well as help you go through the digital check-in. However, it won’t help you carry your luggage in your room. Why that? Because according to their customer research the added value of this action is marginal and doesn’t justify the extra personnel cost for CM.
Airbnb — an unbeatable value proposition
Started during the 2008 crisis, it doesn’t need any introduction. The company founded by Chesky &Co created the most innovative and powerful platform in the hospitality industry ever 🏅 (yes, more than Booking.com). What they managed to innovate on their BMC created an upwards successful spiral.
Challenge: the expensive boredom of the hotels for the mass
Booking a hotel room is expensive 💰.
If I am in a Holiday Inn, I can’t tell if I am in Paris 🇫🇷, Jakarta 🇮🇩 or New Delhi 🇮🇳, they all look the same. The customers feel disconnected from the location where they are. Therefore, Airbnb promises:
- Travelers will save money
- Travelers will live more local experiences (5)
Disclaimer: I have nothing against Holiday Inn 🙏, I am often in one in Düsseldorf.
Provide the most powerful and understandable value proposition to your customers
Travelers will save money and live real experiences. Hosts will earn money when renting their properties. Make money and save money. What’s more powerful and straight forward than this?
Airbnb success is supported by another block of the BMC. I strongly believe this is done by the innovative customer relationship created by the company and their hosts/ guests.
How did they establish a strong customer relationship between the parties? 🤝
The three key factors that made it possible are:
- The cool brand 😉
- A trustworthy relationship between parties through the thorough verification of whom will stay in the host house
- Self-service experience to facilitate the check-in / check-out (see how similar it is to citizen M)
How they scaled, is thanks to the key partnership and the famous growth hacking strategy implemented at the advantage of the former competitor Craiglist(6).
In conclusion, keep challenging the business model
We just went through four different cases where the BMC helped companies to keep innovating and overcome challenges that were threatening their existence.
In this time of crisis, I suggest any business, to work with the BMC.
If you are unclear on what next task to focus, analyse the nine blocks of the BMC and ask yourself;
“If I fail one of these blocks, which one would kill my business?”
When you have the answer, you know where to focus on.
References
1 https://www.strategyzer.com/canvas/business-model-canvas
2 https://www3.citizenm.com/company/centralised-business-model
3 https://www.blueoceanstrategy.com/blog/citizenm-hotels-a-blue-ocean-chain-in-a-red-ocean-industry/
4 https://www3.citizenm.com/global/rollout1/valueproposition
5 https://www.slideshare.net/PitchDeckCoach/airbnb-first-pitch-deck-editable
