Simply put, what’s a business model?

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Business model is thrown around a lot these days, especially in the context of Digital Business Transformation. What really is a business model?

At its simplest it is

how do you create value for your customer and capture some of the value in an economical and scalable way that keeps you both passionate”.

Its a very simple formula, easy to understand but hard to master:

  • If you can’t create value for your customer that keeps them passionately coming back, you don’t have customers.
  • If you can’t capture some of the value in an economic and scalable manner that keeps you passionate, you don’t have a business. Its either a hobby or a charity.

The relationship should be synergistic.

Create & Capture Value

Getting the balance just right is the secret formula. Its kind of like a set of gears.

You might be able to create huge value for the customer but can you still serve lots of customers? If not, you’re like the little gear below. You’re going to go mad and finally burn out. That’s not sustainable.

Overwhelmed

Likewise, you might be able to keep up with demand and serve lots of customers but if you can’t do it economically you’ll be out of business and deep in debt. You need to be able to serve many customers and do it economically.

Economic Value Creation

The challenge is getting the design of the business model right. For that we’ll need to dig deeper.

Next we’ll talk about business model design. What are the pieces you should put together and how do you think about what to include and why?

Building a better business model

 

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