Management
Issue No. 59 - June/July 2011
How to define your business model
by Andrew Leunig
There is nothing like the blowtorch of a 1-in-100- year GFC to get people thinking.
As panic subsides to uncertainty, more people are realizing we are not going back to ‘business as usual’ any time soon.
The Western World is transitioning from 20 years of spending more than we collectively earn to saving some of what we earn.
And while pulling the fluff out of their corporate navels, many firms are also reflecting on their business models. Some are even asking the question, what is a business model?
What is our business model? What can we do better? What can we do faster, cheaper, sexier? How can we do more (revenue, cashflow, profit, fun) with less (assets, debt, resources, risk)?
These are good questions.
Defining a Business Model
I’ve always described a Business Model as the “The strategic and operational architecture of a firm” - if you like, the bits and pieces of the business jigsaw puzzle we combine to create the operational, customer value and economic model of the business.
Noted Business Model thinker, Alex Osterwalder defines a Business Model as:
“describing the rationale of how an organisation creates, delivers, and captures value - economic, social, or other forms of value.”
Warren Buffet describes the perfect business as “the only toll-bridge into town”. No-one says simple is bad!
How do you go about Developing / Renovating your Business Model?
Teasing out the Business Model definitions we can get some groupings that are at least conversation starters.
I tend to think about it in this way :
• Value Proposition: what do we actually do for the customer? How is it of value?
The “Front - End”
• Who are the target customers? Ho...
