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How well do you understand your Business Model?

How Well Do You Understand Your Business Model?

When I was at American Express, Ken Chenault the much-respected CEO at that time, would regularly brief the staff and sometimes talk about the need to fine tune aspects of the company’s business model.  People in the audience would sort of nod in agreement, but I suspect most had only a vague notion of what he was talking about. After all, what exactly is a business model?

Of course, a model is not the real thing, just like an Ordnance Survey map is not the real terrain of a geography. Rather it’s a simplified representation of reality. The aim of a model is to help us comprehend that reality, and likewise your business model needs to help you understand your business. Fine I hear you say, but what exactly does a business model look like? Isn’t it just the same as a business plan, an annual budget or a multiyear strategic plan?

Well no, it’s not! At least not in my view.

Several years ago, my entrepreneurial son bought me a copy of ‘The Business Model Generation’ by Osterwalder & Pigneur. Sad as it may seem I thought it was a great present and having read it multiple times, I think it’s a brilliant piece of work. I would also strongly recommend it to anyone who is keen to grow their business and yet isn’t totally clear as to where to focus their attention.

In summary, my take on ‘The Business Model Generation’ is that there are 2 fundamental ideas. First, that every business needs to understand all of its principal parts, and the book proposes 9 discrete components – including customer segments, value proposition and of course costs and revenues. Second, that all the parts need to come together to form an integrated jig-saw or value-chain and not be separated into functional silos.

Of course, the need to understand the parts and integrate them is not new, however, it is the way the Business Model Generation, and its underpinning framework called the Business Model Canvas, explains the whole thing that is so brilliant and very accessible. Creating an effective business model can really help business owners bring together all the aspects of their business in order to quickly see where there are deficiencies and opportunities for improvement.

At Martyn Carr Coaching we take a strong coaching led approach to working with our clients and the Business Model Canvas is one such tool we use to help business and product owners. Please feel free to contact us to have an initial chat.

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