business model

Three Questions to Create Your Business Model

In a seminal Harvard Business Review article from 2009, writer Joan Magretta defined a business model as “the story that explains how an enterprise works.” Peter Drucker asserts that a business model should answer three questions: “Who is your customer, what does the customer value, and how do you deliver value at an appropriate cost?” For me, the answer lies somewhere in between.

Sure, you need to have a cogent narrative on hand to tell the world why you’re doing what you’re doing when you’re doing business. In its simplest form, it shows up as an elevator pitch in numbers. It will distill your value proposition but it will also allow you to be nimble enough to change it at will.

Infuse those numbers with a solid customer strategy based on Drucker’s answers and add your own story of what success should look like for you– with this business, in this economy, with these specific competitors nipping at your heels—that’s how to make sure your model is innovative. In fact, HBR recently showed that creating yet more innovative business models remains a priority for senior decision makers across the globe:

“Since 2006, the IBM Institute for Business Value’s biannual Global CEO Study has reported that senior executives across industries regard developing innovative business models as a major priority. A follow-up study reveals that seven out of 10 companies are engaging in business-model innovation, and an incredible 98% are modifying their business models to some extent. Business model innovation is undoubtedly here to stay.”

Why? Are these leaders collectively searching for the Holy Grail of business success to handle an increasingly complex global marketplace? Of course they are. But to me, business model innovation not only helps you manage your marketplace but also must do three things in tandem:

  1. Create a value proposition at a speed that beats competitors
  2. Allow the company to identify what it does best and provide a roadmap to continue these activities at the same level, but with an eye for continuous improvement
  3. Quickly annihilate what a company “does worst”.

Like Einstein’s theory of relativity, these three things work together, across time and at the speed of light. For example, the numbers that make up your value proposition are meaningless unless they move with you, allowing you to meet your customer where they live. And you can’t really see what you’re doing wrong unless you track the consequences of what you’re doing wrong: Every solid business model must quickly point out your mistakes in a quantifiable way that shows where they reverberate in your company. Then and only then can you use these missteps as a platform for growth and build processes that prevent your mistakes from reoccurring — and guillotining your goals. Check out CBM’s free SWOT resource for finding out where you are when it comes to business planning from a strengths, weaknesses, opportunities and threats (SWOT) standpoint.

swot template

Use SWOT Analysis to Crank up the Volume on Your Business

Like most people, I have tons to do and not a lot of time to do it. There are just too few hours in the day so I often put even the most crucial activities on the back burner. That’s why I am so grateful for CBM’s SWOT analysis tool. As a small business owner, I don’t schedule time to check in on my marketing plan. (I’ll bet some of you reading this are getting a very guilty look on your faces right now!)

Maybe, like me, you have a pretty good marketing plan, one that you work from because in any given calendar year, certain activities on your plan keep the cogs of your business turning. But when was the last time you took a clear eyed-view of your Strengths, Weaknesses, Opportunities and Threats as they related to your plan? Have you really revisited the plan in light of these? If not, face the music and grab this tool.

The CBM tool is easy to use and intuitive. That’s not to say it’s needlessly simplistic. For example, I was able to look at my products and services in several different ways. I was able to understand that although I had a plan for putting these in front of my prospects, my understanding of what competitors were doing in this arena was foggy at best. I was missing a key opportunity to grow my business by virtually ignoring my competitors. Danger, Will Robinson!
Understand, too, that in most cases, growing my business (and yours) depends mostly on the right networking, which costs money. How much were my various networking activities costing me and which products and services was I highlighting while engaging with prospects? What dollar amount should I be spending for my networking investment based on which services were selling? Were these services the most profitable or were they low-margin services? The CBM SWOT tool uncovered all of these questions and more. Once I was able to hone in on where I should be spending my time, I was able to use my time better.

The fact remains—no SWOT is a “one and done” proposition. But the CBM SWOT analysis tool can grow with me. Once I solve this first batch of “problems” I can check back in on my first analysis and see where my next batch of challenges will be. I can use this tool to virtually guarantee that I am doing everything in my power to keep my business volume cranked up to 11.