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.

Customers

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.

Complementary Industries 

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.

Competitive Advantage

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.

I’m currently testing his algorithm for this years bracket. His though process seems sound…. Let see what it can do!

Word of the day….Geoarbitrage

Earlier this week, I had the chance to catch up with a hr friend of mine over a couple of beers. We caught up on jobs in the  DC region, family, and challenges with filling positions for his clients.

We spoke in depth about the Mid-Atlantic region and the demand for engineers and I ignorantly thought that the demand had decreased a little more due to what I thought was a huge flow of engineers to the area over the last couple of years. The DC area is a hot destination for engineers. (always has been with the government but we are starting to see more engineers come to DC for other industries)  Did you know Bethesda, right outside of DC, has the highest average STEM salary in the country, beating the likes of Boston and Silicon Valley? (Check out the article on that here)…I digress once again.

Long story short, we concluded that there’s still a high demand for engineers in the market but its not for the reasons you’d think. Most engineering jobs are for A engineers but there are only so many A engineers in the market. There are a ton of B and C engineers but most companies don’t have the capacity to mold and develop engineers which probably would be cheaper than throwing an absorbent amount of money at an A engineer.

Most companies that are successful in the early stages do so by developing talent and skill of their B and C players. A teams are too expensive to assemble and too difficult to scale.

Moral of the story: Developing talent is as important as developing product or services….Might be more important… It’s one of the best ways to ensure the sustainability of your company.