How to Design a Winning Business Model

Ramon  Casadesus-Masanell; Joan E. Ricart

Article | Harvard Business Review | January – February 2011

How to Design a Winning Business Model

by Ramon Casadesus-Masanell and Joan E. Ricart

Abstract

Most executives believe that competing through business models is critical for success, but few have come to grips with how best to do so. One common mistake is enterprises' unwavering focus on creating innovative models and evaluating their efficacy in standalone fashion—just as engineers test new technologies or products. However, the success or failure of a company's business model depends largely on how it interacts with those of the other players in the industry. (Almost any business model will perform brilliantly if a company is lucky enough to be the only one in a market.) Because companies build them without thinking about the competition, they routinely deploy doomed business models. Moreover, many companies ignore the dynamic elements of business models and fail to realize that they can design business models to generate winner-take-all effects similar to the network externalities that high-tech companies such as Microsoft, eBay, and Facebook often create. A good business model creates virtuous cycles that, over time, result in competitive advantage. Smart companies know how to strengthen their virtuous cycles, undermine those of rivals, and even use them to turn competitors' strengths into weaknesses.

Keywords: Business Model; Design; Strength and Weakness; Competitive Strategy; Competitive Advantage;

Format: Print

8 pages

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Citation:

Casadesus-Masanell, Ramon, and Joan E. Ricart. "How to Design a Winning Business Model." Harvard Business Review 89, nos. 1-2 (January–February 2011): 100–107.

Teaching Note | HBS Case Collection | January 2018 (Revised April 2018)

Jumia Nigeria: from Retail to Marketplace (A) and (B)

Ramon Casadesus-Masanell and Karen Elterman

Founded in 2012, Jumia Nigeria, a startup effort by Germany-based Rocket Internet, aimed to become an African Amazon. The company entered the nascent market and immediately enjoyed an uptick in consumer spending fueled by the strength of Nigeria’s oil-based economy. By 2016, however, Jumia’s growth had begun to taper, hindered by plummeting oil prices, the subsequent economic downturn, and the pressure of Nigeria’s limited retail ecosystem. In addition, Jumia’s inventory-intensive retail model required significant infusions of capital that, in the face of a deteriorating economy and the company’s inability to show a profit, was becoming increasingly difficult to obtain. Considering all this and looking to the success of the Amazon and Alibaba marketplace models where third-party sellers largely carried inventory costs, the Board had made a drastic decision: Jumia would shift from an online retail model to a marketplace model. They also made it very clear that a failure to properly implement this transition could mean the end of investor support for Jumia. Senior management wondered how they would meet the challenges ahead. While Amazon in the US and Alibaba in China had found success with the marketplace model, they wondered if Jumia would be able to do the same. Was this the right model for the very different Nigerian environment? Would vendors, many of whom already had retail operations in the country, choose to sell through Jumia? How could Jumia continue to provide the same high quality customer service on which the company’s success had been built while switching to a marketplace model in which parts of this critical aspect would now be in the hands of third parties? Teaching Note for HBS Nos. 718-401 and 718-432.

Keywords: globalization; Expansion; retail; marketplace; Inventory; Nigeria; Africa; ecommerce; competition; funding; Logistics; Competition; Business Model; Globalization; Emerging Markets; Expansion; Logistics; Retail Industry; India; Nigeria; Africa;

Citation:

Casadesus-Masanell, Ramon, and Karen Elterman. "Jumia Nigeria: from Retail to Marketplace (A) and (B)." Harvard Business School Teaching Note 718-467, January 2018. (Revised April 2018.) View Details

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How to Design a Winning Business Model

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