Creating a business that does not fall apart due to its structural design

A business model's design has a structural design element to it. No matter how superb an architectural model, if it cannot be physically built, it's just pie in the sky. What is also demanded is quake-proof structure that will not collapse even if there is an earthquake. If you are not constructing your building in a weightless environment, you must also deal with the limitations of gravity.

In a business as well, there is the necessity to check whether a business model can be built into an actual business. Buildings are effected by the limitations of gravity; business has the limitation of revenues and expenses.

No matter how much capital there is, if red ink continues to flow forever, the company will collapse. If a company's structure is weak, it will fall apart with just a small recession or social change or competition with rival businesses. It is necessary to design your business model to stand up to environmental changes in business.

So business model design is, in this sense, the structural design of a business.

In order to confirm whether this structural design will go well or not, ultimately the standard for judgment is the bottom line resulting from revenues and expenses. You check whether the flow of profits and the cost structure are firmly supporting the building that is your business.

For example, recently convenience stores have started delivery services. With Seven Eleven's Seven Meal, if you make a purchase of 500 yen or more, you get free next day delivery. Meanwhile, with Lawson Kitchen, you have service like that found with food cooperatives: delivery once a week.

The cost structure for these two businesses are different. In the case of Seven Meal, although we are talking about the next day, delivery takes place together with an order. If the order is small, you will have high red ink coming from the delivery cost. So, they are making it so you can buy not just meals but products from all the other group companies like Ito Yokado, Sogo, Seibu, and the like, and have bought the mail order company Nissen. Assuming you would have red ink if someone just bought a box lunch, the expectation is that if you buy some other product together with the box lunch, the result as a whole would be in the black.

What you see when you write this up as a business model is that in order to cover high delivery costs, you need a certain order amount for this business or it will not work. This indispensable resource, the securing of a certain order amount, is a life and death matter.

Meanwhile, Lawson has delivery once a week, so it doesn't suffer as much cost burden as Seven Eleven. For that reason, the business risk is lower. As a "building," then, it has stability. However, when this is compared to Seven Eleven which delivers next day, the convenience for the user is hurt to some extent. The fact that convenience and business risk become trade offs is beyond one's control.

In terms of the business model, making delivery once a week lowers delivery costs (although for the present this only applies to Tokyo and seven other prefectures), which allows the realization of completely free delivery. Also, in order to cover for the inconvenience of weekly delivery, Lawson is putting efforts into such special moves as proposing recipes.

In this way, in the delivery business, there is the need to design the cost structure and flow of profits to fit the frequency of deliveries. So, and this is true not only for delivery businesses, the superstructure of the business models is supported by the substructure of cost structure and flow of profits.