Strategy: Your Business Model

It makes no difference if you are a start-up company, a non-profit organization or an established franchise looking to grow in new ways; You better have a business model that works and is understood by your customers and employees.

Three key questions help frame the question of your business model (the who, what and how):

  1. Who we are?
  2. What we do?
  3. How we make money?

Who We Are?: Most companies address the who question with their mission and vision statement but many of these miss the mark because they are too focused on the product side of who they are and not on the outcome they strive to achieve. Take a look at the mission statement for Ralph Loren:

“Ralph Lauren’s mission is to redefine American style, provide quality products, create worlds and invite people to take part in our dreams.”

Walk into any department store around the world and you will see people striving to join Ralph Loren’s dream of style and to have the opportunity to pay a premium for it.

What we Do?: Build your product line with a focus towards what will serve the organization’s mission. Too often companies may engage in multiple activities hoping to hit a home run with one while covering their bases with another. Establishing a list of what we do and what we don’t do helps to clarify the specifics of our products.

Salesforce.com built a disruptive technology by offering a subscription based software product that ran a great customer relationship management product. While there were plenty of good CRM products, Salesforce’s differentiator was being able to make the software available on-line anywhere, anytime freeing sales people from the burden of going back to the office to track their contacts.

How We Make Money?: Many years ago before I sold my first company, I introduced the concept of Open Book Management to my staff based on the work of Jack Stack and his book, The Great Game of Business. Using this approach, I proceeded to provide my staff with complete financial reports on the status of the company (except compensation) and educated them on reading spreadsheets and P&L statements. The result was a greater sense of ownership and engagement that helped our staff understand how their actions on both the revenue and expense side contributed to our and their success.

Most companies delegate off the financial component of business success to the CFO and accounting department but I would suggest that it is way too important to be relegated there and that the question of how the company makes and spends money is everyone’s business.

As business changes at the speed of light, revisiting your business model and how you and your staff understand who you are, what you do and how you make money can only help strengthen your success.

Call us for some ideas on putting these models into play for your organization.

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