Hey, happy Monday!
While writing Make Progress with OKRs, I met with dozens of entrepreneurs and executives on the topics of strategy and growth to whom I was able to ask a simple question:
“How was the current business model chosen?”
It is surprising how consistently I have received this response:
“We didn’t choose it; all our partners, competitors-the whole industry-work this way.”
9 times out of 10 the business model is not designed: it comes right away.
Business Model vs. Business Canvas
First, I would like to point out that.
the business model is not a canvas!
It is not a workshop, nor is it a pdf to download and fill out. Alexander Osterwalder was among the first to provide a synthesis method for representing the interactions between the company and its customers in the execution of business activities. His celebrated Business Model Canvas has been downloaded millions of times and has contributed to the widespread understanding of this component of business strategy. However, it rarely succeeds in representing realistic growth patterns.
What is your experience with this?
What is a Business Model and why is it important to know how to model your own?
The art of creating value for people and monetizing along the way. Join
According to Gennaro Cuofano, founder of FourWeek MBA, which has been analyzing hundreds of different business models in detail for more than a decade, a business model “is a framework for finding a systematic way to unlock long-term value creation, and understanding how to design and test hypotheses in the marketplace.”
Today, November 14, at 6:30 p.m., we will meet in the 21st STRTGY Meeting to take a detailed look at the building blocks that make up each business model and what engineering steps can be taken to synchronize it with the various stages of growth.
The business model defines the rules by which an organization satisfies its customers and creates profits through the creation of products, their distribution, technical, organizational and financial choices.
It protects, supports growth and unlocks innovation–as it did with Apple.
How Apple undermined Meta’s business model and broke the advertising machine
With a simple design decision to limit user tracking on its devices, Apple has undermined the effectiveness of business models based on selling advertising space–except for its own!
Here is a graph showing the growth of Apple Search Ads compared to those of competitors in which it is evident how its decision has compressed the playing field for all competitors.
A great article by WiredUK headlines “Apple is now an advertising company. Pushing more advertising to users would offset slowing smartphone sales…”
I have prepared this second chart to show you the stock performance of the big 4 in advertising–Facebook, Google, Meta, Amazon, Microsoft. The vertical gray line marks the release date of iOS 14.5, April 26, 2021. It is amazing to observe the run-up of Apple’s blue line on the others.
This is only possible when you have full control of your business model.
Business Model vs Business Plan: do we need both?
Another major moment of confusion occurs when the meanings of business model and business plan are mixed up.
The business plan is the roadmap of business model implementation. It describes the assumption of costs and profits that the company intends to realize in a given period of time.
But is there really a need for both? Honestly … the quality of the business plans I have been able to read over the past few years, even taking into account the cost in terms of time and money required to produce them, leads me to think I can do without them as long as I adopt other tools to align strategy with execution.
I definitely see more value in investing the minimum necessary in setting assumptions-business planning and budgeting-and increasing energy in delving into forecasting and goal setting techniques such as OKRs.
How many types of business models exist?
FourWeek MBA is a gold mine. In this article alone, Gennaro described 17 of them:
- AIaaS
- Asymmetric
- Blockchain
- B2B2C
- Direct Distribution
- Fast Fashion
- Fintech
- Franchising
- Marketplace
- Platform
- Razor And Blade
- Real-Time Insurance
- Real-time Retail
- Retail
- Slow Fashion
- White Label
- Wholesale
I believe, however, that this is only a subset of those available and that-paraphrasing an article by Fred Wilson-disruptive innovation happens at the business model level and it is this that gives meaning-financially sustainable-to the technological innovation we all see.
What is the most important building block of any business model?
When considering a business model, it is necessary to understand the scale of execution. That is why it could even be dangerous for a small company to adopt a business model a-la-Amazon, a-la-Netflix or [insert big tech as desired].
Their business models evolve to solve specific bottlenecks that when solved lead the organization to reach new levels of impact.
That said, certainly, distribution is crucial. Reaching thousands or hundreds of millions of people with your products completely changes the rules of the game. Along with the ability to monetize and retain profits to adequately support growth ambitions. We will explore the effects of operational scale in the live session with Gennaro Cuofano.
Anticipate your questions
This email is sent to more than 4,500 community members. If you would like to attend the live event, I recommend that you complete your registration before seats sell out.
The quality of the event also depends on the quality of the questions, so here’s how to contribute and get the most out of this event:
1 / Find a quiet place and turn on your webcam and microphone: this is not a webinar, but a guest call. Raise your hand to speak whenever you want.
2 / Anticipate your questions using this form, they will be the first to be answered and if for some reason you are unable to attend you can find them in the registration.
See you in the room,
ALWAYS MAKE PROGRESS ⤴
