Introducing the Management Model Canvas© - Part 5: Business Model
In parts 3 and 4 of this series, we’ve looked at purpose and direction as the foundation for any management model and at results as the specific manifestation of on organisation’s purpose in the real world.
We now turn to the first of three pillars that connect the two, which itself is made up of two building blocks: business model and execution capabilities. This post focuses on the business model building block, while the next will look at execution capabilities in more detail.
A business model describes how an organisation creates and delivers value to its customers in a profitable way. It connects to purpose and direction in that it clarifies customer segments, value propositions, delivery and profit mechanics. As such, it describes how an organisation intends to achieve some of its intended results (mainly customer outcomes and financial health metrics).
As Alex Osterwalder has put it, “the business model is the blueprint of your strategy”.
From the outset we’ve argued that part of an organisation’s success formula are both a great business model and a great management model. We now take this a step further: not only do you need both, but the two also need to be a good fit. That’s why the business model needs to be embedded in the management model.
From a management model perspective, the business model not only helps connect purpose and results, it also provides critical guidance to configure other parts of your management model, such as decision making, sharing or contribution - as we shall see later in the series.
At this level of the management model, we require that you clarify not only what your current business model(s) are, but also how, as an organisation, you think about business models: how you describe them, challenge them, improve them and management them through their life cycle.
For that, it is important that you make a careful choice regarding which tools and models you use. Obviously, we very much like the Strategyzer tools around the Business Model Canvas.
Of course, there’s other options like the Business Model Navigator from BMILab/University of St. Gallen or Clayton Christensen’s Business Model Reinvention, to name just two. The MMD Library, which you can think of as a repository of management theory and tools, will feature other possibilities - as well as guidance for when to choose which and how to integrate them with other parts of your management model.
What goes in
The business model (or portfolio of business models) describing how the organisation delivers value to customers (identify and name each separate business model)
What business model pattern underlies each business model?
For more clarity, you can also name the value proposition(s) and/or other key components of your business model (optional)
How do we think about and describe business models and value propositions?
How do we think about managing a portfolio of business models, including how we adapt and improve them through their life cycle?
Questions to ask
How many distinct business models do we have? What do they have in common? Do they reinforce each other? What distinguishes them?
How does each business model support our purpose and strategy?
If we have a portfolio of business models, what is their relative importance now, and in the future?
At what stage of the lifecycle is each business model?
How do we see each business model develop over the next few years? Will it still be successful? Why? Why not?
Why did we choose the underlying theory and tools we use to think about business models? How does that choice represent a good fit with other parts of our management model?
Apple really has two main (and very different) business models: a devices & ecosystems model and a services model. Nespresso has a single business model that follows the razor blade pattern. Its value proposition focuses both on convenience and quality: allowing everyone to create the perfect espresso - at home and in less than a minute.
It’s important to note that as part of a management model design exercise, we don’t expect you to also do a full business model design exercise. We would assume you have already done that by the time you start to think about your management model. Here, we only expect you to clarify what your business model is, how as an organisation you think about business models and - very importantly - begin to think about the implications of your business model for the design of your management model.
We will follow up on these implications in the next part of our series when we’ll look at the second building block of this “exploitation” pillar of the management model: execution capabilities.