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What is your Market Value story? Ask your business model!

Major changes in Market Capitalization are driven by Business Model decisions (or lack of decisions). With every major consulting firm writing about Business Models, it is clear that this is an area of great interest with senior executives.
What is your Market Value story? Ask your business model!

Major changes in Market Capitalization are driven by Business Model decisions (or lack of decisions). With every major consulting firm writing about Business Models, it is clear that this is an area of great interest with senior executives. Let’s look at some Business Model stories of successes and challenges:

IBM 1975 - 2008

IBM’s Market Cap was in decline in the late 70’s, having missed the shift to minicomputers and it was only when IBM launched the desktop PC in 1981 that its Market Cap grew again. An ill-fated decision to outsource what would become the principal Desktop PC profit pools of Chip and Operating Systems to Intel and Microsoft in the mid – 80s led to a long decline in Market Cap. It was only reversed when IBM made the decision to launch its Services offering that the Market Cap grew again.

IBM Pixel Iphone

Dell 1995 – 2013

In 1995 Dell innovated the PC Business Model by offering PCs Direct to Business over the Internet. The lower prices, customization and online ordering were enough to achieve over $100B in Market Capitalization growth in less than 5 years. But without any significant means to prevent competitors from copying the model and the Dell business model ill-suited for the market shift to consumer PCs, Market Capitalization started to slide as fast as it grew and was only mitigated temporarily when Dell applied its Business Model to new categories (Storage, Printers, TVs). That Business Model evolution worked temporarily but was reliant on finding new categories that were commoditizing so scalability was limited. Its attempt to enter the Services business by acquiring Perot Systems in 2009 and an acquisition spree did not add any significant value as IT Services were already commoditizing.

Dell Pixel iPad

Apple 1994 - 2016

There are two distinct Apple Business Model phases:

1995 – 2005: The MacBook franchise period that grew Market Cap by close to $100B on the strength of a vertically integrated approach and a product experience that was simple and elegant. By being vertically integrated Apple was not sharing its profit pool with specialist firms (e.g. Microsoft)

2005 – 2015: The iPhone franchise period that grew Market Cap by $500B on the strength of the combination of a product experience that was simple and elegant, a computing device that also had voice capabilities and the creation of an ecosystem of device and applications where Apple played the role of Keystone. As a keystone, Apple created significant value for a number of ecosystem players and at the same time kept a significant portion of the total value created for itself.

Post 2015: Apple will need to innovate its business model across new categories and the question is whether any potential watch, TV, car or other Business Model Innovation will be sufficient to offset declines in its current franchises?

Apple Pixel iPad

Every company, big and small, has a Business Model story. There are two parts to that story. The Business Model lifecycle with Market Cap / Value growth, plateau and decline, and the Business Model decisions that can chart a new trajectory for the business, both good and bad. There are a finite number of patterns to look for, each with its own story.

Pixel iPad Market Cap Patterns

Some key questions for you to ask:

What is my Market Cap /Value profile?
Why do I have this profile?
Where am I in my Business Model Lifecycle?
What is my Business Model story?
What Business Model actions can I and do I need to take?

In an earlier article “
Demystifying Business Model Innovation”, I introduced the notion that Business Model Innovation can be reduced to 2 activities:

1) Evolving existing business models for existing businesses and
2) Defining and evolving business models for new businesses.

The process to accomplish this is quite simple, yet behind that process is a complex body of knowledge and experience that is required to deliver.

Pixel Process market value


Bruce Starcher is the Managing Director of Starcher Group LLC, experts in Business Models since 2002. He is also a Fellow with Maddock Douglas, an Innovation Consulting Firm and volunteers his time with Springboard Enterprises, coaching women entrepreneurs in the area of Business Model design and innovation.