BM.14 Generate ideas for the cost structure block

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OVERVIEW

This activity aims to generate ideas for how to address hotspots or strategic changes related to the cost structure block.

INPUT

Hotspots or strategic changes related to the customer segments block from the activities ST.7 Do a SWOT Analysis, BM.2 Gather additional data on the business model, and BM.3 Gather additional data on operational performance.

OUTPUT

Specific ideas for how to change the Customer Segments block to address the hotspots or strategic changes, used in the activities BM.4 Generate business model concepts at the big picture level – if taking a ‘Bottom-up’ approach, BM.15 Evaluate the benefits, and BM.16 Evaluate the costs and BM.17 Evaluate the risks.

TEMPLATE

HOW TO GO ABOUT IT

For cost-driven companies, you should explore ways to reduce operating costs. Resource effciency projects can be a good starting point for this.

It is also important to look for new ‘economies of scale’ or ‘economies of scope’ benefits that could be developed. Economies of scale benefits are reductions in the cost per unit of production that occur as the number of products produced increases for a single type of product i.e. through ‘bulk purchase’ discounts from suppliers. Economies of scope benefits relate to reductions in the cost per unit of production that occur as the number of products produced increases across two or more product lines i.e. one marketing team can support multiple product lines without a significant increase in cost.

Care must be taken when discussing the potential economies of scale or scope benefits to also consider the potential negative social sustainability impacts. For instance, increasing and intensifying production by adding a ‘night shift’ to the production schedule could have negative consequences for employees who may be required to work unsociable hours and for local residents if it means noisy delivery lorries arriving and departing during the night.

— Success story from Peru

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