14 Apr How to describe and shape a business model
In a company, a Business Model (BM) describes the mechanisms by which it captures, creates and delivers value. All companies have a BS (at least one) whether they are aware of it (explicit model) or not (implicit model). But how important is this concept?
It is important to be very clear about the MN starting a business, since this way we can evaluate it -by ourselves or by third parties- and we can take the necessary measures to optimize it, since it is a dynamic concept. Some of the biggest historical mistakes of the world´s largest companies have originated from the inability to adapt a successful MN when environmental conditions change drastically.
It is essential to specify the business model when starting a business, because it will allow us to know, as soon as possible and committing the least number of resources possible, whether our business is viable as we have proposed it.
What defines the business model?
A Business Model describes what customers are looking for, how they want it, and what they are willing to pay, as well as how the company is going to satisfy those needs and how it is going to make profit from it. In particular, the MN defines the following points:
- Our product or service and its differential value in the market
- Who our customers are
- The usefulness of the product or service for the customer
- Customer acquisition and retention strategies
- Marketing and distribution strategies
- How to obtain the necessary productive resources
- How profits are obtained
This concept should not be confused with the Business Plan, a document that includes, apart from our business model, its temporal and geographical location. We could say that the model describes the idea, and the plan concretizes that idea in a time frame adapted to our particular environment.
How to shape your MN: the canvas model
There are many ways to describe and shape a business model. One of the most popular ones is the canvas model (The Business Model Canvas, originally proposed by Alexander Osterwalder in 2008). This tool has been adapted by experts to various environments; for example, Lean Canvas, a variant design by Ash Maurya in 2010 that merges the original can vas model with Eric Rie´s Lean Startup methodology.