What is a Business Model?
A business model is defined as "the rationale of how an organization creates, delivers and captures value."
The Business Model Canvas, explained below, is a good tool to map out business models conceptually.
The Business Model Canvas was designed by Alex Osterwalder, and is a tool to help reshape the way we look at a business and identify the key components for building a sustainable business model.
Business Model Innovation (BMi) is about developing new ways to bring existing product and services to existing markets. It doesn’t require deep technological change, although technology itself is radically reshaping business models at the core.
One of the key advantages of BMi is that most of the innovation happens beneath the surface, making it difficult to understand and replicate.
But there is no specific process for mapping out a BMi model with today’s current toolset, it requires the help of a deep Management Consultancy .
The Canvas, which is a great tool at the conceptual level, is very linear and one-dimensional, making it difficult to understand how to model changes in the real-world and the projected financial impact over a time horizon of 3 – 5 years, the typical horizon you need to successfully execute on BMi.
We have been working on a new conceptual model to better capture the variables that shape the Business Model. If you were to think about a business (the Micro) in the context of the Macro, then the Canvas would need to be enhanced to capture variables related to:
This a conceptual, non-scientific model that could be coupled with a robust Financial Model to better identify the path towards BMi and the key variables that need to be controlled. This new model is explained here:
In the future, we can imagine tools capable of synthesizing live Macro and Ecosystem data, analyzing profiles of People in the marketplace, and using AI and 3D modelling to construct an accurate view of a new business model.
For today, the best approach is to use some of the conceptual BM tools to map out the vision, apply this framework to understand the key variables surrounding the BM, and apply those into a robust Financial Model to map out the projected cashflow over a 3 – 5 year period.
Vision. Model. Prototype.