This post is an extract of my forthcoming book on business model innovation. The innovation book looks at why business model innovation is needed and how it works. You can read more about it here. These posts are early drafts of planned content and I’m putting them out to get feedback. Please do comment below, or subscribe to these pages to get each new section as it is published. In today’s post, we will be looking at finding opportunities in this new world.
A business model is a way of quickly describing how a business works to make communication faster.
One of the memes of entrepreneurial pitches is to say that “We are the Uber for X” or the “Facebook for Y”. If you have familiarity with Uber or Facebook, you can quickly port the way they do business to a new situation, and understand the core of the idea in seconds.
When you look at a business model, you can break it down into its different parts. If you use a consistent way of describing all the different parts of your business, you have a shared language. Back when I did the first startup, I was advised to break my business plan into Marketing, Sales, Operations, and Finance.
In each section, I had to put down all the important information. But as we know, a business is far more than just those four sections. We have questions about how the operations impact finance and what impact sales have on operations etc. Trying to understand if those questions are answered or even addressed in a big business plan and walls of text is difficult.
How does a Business Model work?
So, a business model gives you a powerful way of communicating the important aspects of how the business works and how they relate to each other. In the process of communicating what you are doing more clearly, you invariably get far more understanding of what is involved.
This understanding is critical. Many entrepreneurs approach a new project and play to their strengths. We tend naturally to do what has worked before. When we do that, we have two choices; build a business around the strength or build a business around inappropriate use of the strength.
The strength: affiliate marketing, dev ops, partnerships may not be a fit for this business. Unless you recognize that, then your business model has a powerful flaw deep inside that will cause problems later.
A business model also helps you to prepare for the future. In my first startup, we entered a booming market and were initially very successful. When the great recession in 2008 hit, we saw our business model fail in so many areas as the market and the environment changed. Over the next 8 years, we moved through 27 major and minor versions of the business model. As we sought to identify new ways of doing business, pivots to finding new sources of revenue, and ways to maximize our strengths and minimize weaknesses.
If You Want to Read More
I keep everything structured on my niftily titled business model innovation book page. Head there to browse, binge, read straight through, or cherry pick. Please do take a moment to comment below or upvote comments that you agree with
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