Your business model is the underlying structure of how your business creates value. But what does this really mean? And why is understanding your business model important?
What is a business model?
Your business model is the underlying structure and organisation of your business activities. It defines in general:
- Who your key stakeholders are
- The value you provide to your stakeholders
- The relationship you have with your stakeholders
- The channels and resources you will use to deliver value to your stakeholders, and
- how all of the above differ from your competitors.
Why is your business model important?
Your business model is important as it defines the parameters of what your business can, and does, do. Your business model influences your strategies.
For example, your business model defines your customer stakeholder groups, the channels you utilise to reach these groups and the resources to deliver value. You may develop strategies for interacting with these groups that fit within your model.
If you wish to reach a very different customer group, then your existing channels will need to be reviewed to see if they serve the different customer market. You will also need to review your resources to see if they have the capability to serve this different customer market.
Some strategies work within your existing business model and other strategies involve a change or development of your business model.
It is important to know the difference as more effort is required where you are changing your business model.
This is because the underlying ‘structure’ of your business takes time and effort to establish. Channels, relationships, reputation, expertise all take time to establish and once done, ‘smooth’ your day to day operating. It is easy to take these underlying ‘structures’ for granted.
When you engage strategies that alter your business model, more time, effort and resources will be required to make them successful. It is a bigger scale of change.
Maximising your business model
Not all business models are created equal. Some business models have qualities that make them more valuable and robust than others.
As you don’t want to be changing your business model too often, it is important to ensure you maximise your current model. In these dynamic times it is also important to understand the sustainability of your business model.
Define and maximise your business model
Learn more about business models
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