To succeed in business model innovation, it’s essential to know how to analyze a business model properly and evaluate a business model on the right criteria. A lot Business Model Canvas practitioners dont know exactly how to do this. To help these people, we have decided to write this step-by-step explanation.

Introducing: Charasteristics of a succesful business model

There are several approaches to analyze a business model. We advocate for an assesment of a model against the characteristics of successful business models. This approach looks at both quantitative and qualitative aspects, can be implemented relatively quickly and brings strengths and potential for improvement to the table.

The success characteristics of successful business models have been established through desk research and empirical studies. Well-known sources such as Osterwalder and this article have been a great source of inspiration. The characteristics focus on key dimensions: vision, the market, value proposition, business model, and the external environment.

Steps to analyze a business model

Let’s take a deeper look at how to properly analyze a business model. We recommend following the steps below:

1. Map out the idea on a Business Model Canvas

Use the Business Model Canvas to lay out the idea in detail. This tool will help visualize and structure each aspect of the business model.

2. Execute a startup viability calculation to analyze a businessmodel revenue potential

The next step is to assess the viability of the business model with a startup viability calculation. This step helps evaluate a business model’s potential to generate strong revenue streams. The money tap should not drip, but flow.

3. Map out the businessmodel of competitors

Now it’s time to analyze the business models of key competitors using the Business Model Canvas. Research competitors’ structures to clarify both similarities and differences. This comparison can reveal insights and unique angles.

4. Score & evaluate the business model charasteristics

Evaluate the business model against key success characteristics. You can do this independently or with a management team. If done as a group, discussing the differences in scoring can help refine and align the model.

Score each characteristic on a scale from 1 to 5, where 1 means the characteristic is weakly present, and 5 means it’s strongly embedded in the model.

A. Vision

It all starts with a compelling vision. The impact a company wants to make should be at the center of all decisions. A strong vision guides the business, motivating the team and aligning efforts towards common goals. This clarity is crucial for long-term success and helps to communicate the company’s purpose to customers and stakeholders.

To analyze a business model on this dimension, score the following characteristics:

• Connects with the ambition & core values of the company that implements it.
• Carried out by people who are driven by passion and are proud to be part of the company.

B. Market

The size of the market, the development of that market, and the degree of untapped market space largely determine the growth potential of a business model. A large and expanding market can provide ample opportunities for new entrants, while understanding market trends can help identify where the biggest opportunities lie. Companies that recognize these aspects can better position themselves to succeed.

To evaluate a business model on this dimension, score the following characteristics:

• Operates in a large market (>10 billion) or focuses on high-paying niches.
• Carried out in a rapidly growing market.
• Carried out by a market leader, in untapped market space or in a market without dominant players.

C. Proposition

The value proposition forms the heart of a business model. If the proposition is not solid, then the business model is doomed to fail. It is essential that the product or service addresses a real customer need and stands out from the competition. A strong value proposition attracts customers and encourages them to choose one brand over another.

To analyze a business model on the proposition, score the following characteristics:

• Solves a relevant problem/need for customers.
• Is superior to competing propositions on at least 1 aspect that is important to customers.
• Is a must-have for customers.
• Customers want to be associated with the company and are proud ambassadors.

D. Business model

The revenue model is a critical success factor. The cash flow should not just trickle in; it needs to flow consistently to sustain the business. Additionally, certain characteristics determine how resilient a model is against competitors and how predictable its continuity is. A robust business model allows for adaptability in changing market conditions, ensuring long-term viability.

To evaluate the business model infrastructure, score the following characteristics:

• Is robust and difficult to copy or disrupt by competitors.
• Has a strong lock-in for customers.
• Generates a high profit (margin x volume).
• Has 100% recurring revenue streams.
• Income is received before expenditure is incurred.
• Has a cost structure that is at least 20% lower than the competition.
• Can be easily scaled up without any obstacles.
• Benefits from strong network effects.
• Is efficiently organized with little waste.
• Is part of a dynamic business model roadmap.
• Makes a positive impact on people & the environment.
• Contributes to strengthening (local) ecosystems.

E. Environment

The world changes quickly. The extent to which a business model adapts to developments in the environment is important. This includes factors like timing and momentum. Companies that can anticipate changes and respond effectively are better positioned to seize new opportunities and mitigate risks. Staying aware of environmental shifts is crucial for maintaining a competitive edge.

To analyze how well a businessmodel is aligned with the environment, score the following characteristics:

• Is well attuned to developments in the external environment.
• Is resilient, if the economy is not doing well, the impact will be minor.

5. Refine

Based on the insights gained, make final adjustments to sharpen the business model. To analyze a business model properly, we advice to follow those steps with multiple business model options. After doing the evaluation excercise it’s time to choose which business models you want to investigate further.

Note: Succesful business models rarely contain all the characteristics

Successful business models rarely contain all of the described characteristics. However, it’s often the case
that the more of these described features a business model possesses, the greater the likelihood of success. Therefore, try to design the model in such a way that it contains many features of successful business models.

Ready to create better business models?

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