business - only three requirements

Business is really not that complicated.

But we like to complicate things.

Sure if you have a gazillion SKUs, umpteen "markets" and 234,000 employees stuff can easily become muddled.

But in essence that big one is no different from the local mom and pop bakery. Really.

You need three things, clear and unambiguous, no less, no more and - in exactly this order. Did I mention in exactly this order?

1. A Strategy. As Michael Porter conveys it: "What value are you to deliver to what customers and how are you going to be different?"

With that abundantly clear it follows:

2. A Business Model. As in "and how are you going to use your resources to deliver that value and how are you going to keep some of the value yourself?"

And with an obvious Business Model (yes, with a clear Strategy the Business Model do become obvious) this should follow more or less by itself:

3. A way to Execute.

Simple, not? Me trying to create a blinding flash of the obvious?

Not so, this is what often (mostly?) happens:

1. Strategy

Small: The start-up has one focus; make a bundle of money, build to flip, etc. You've seen them, meaning of life is to become rich, everything else is secondary. Customer is a "market" - a "target".

Big: The big company have long lost their original purpose and have numerous committee meetings to construct "visions" worthy of Dilbert's vision-generator.

2. Business Model

Small: The start-up focus is now on "how to grab most of the cake for myself" with little thoughts about the cake itself. All functions geared towards grabbing cake. Cake seldom makes itself.

Big: The big one with the Dilbertesque vision statements (read no strategy) have lost it's way and survives from mere size. Meaningless re-orgs (read Business Model tweaks) becomes the order of the day. Or acquisitions of course, gobble-gobble.

3. Execute

Small: The start-up focus must now be on pushing something down the throat of the customer so he can fatten himself. Big, big budgets for advertising, PR, marketing are clear tell-tales. Add much ado about secrecy. As nobody really fancies pushing a solid command and control structure is required: Five chaps in a start-up titled CEO, COO, CTO, CFO, CMO - pretty clear message I would think.
(VCs take note: Do not require this, shy away from it! Hah, as if they're ever gonna learn... no C-levels, scary!)

Big: The big one with the iffy or non-existent strategy (yes, most lack the core of "how to be different" so in reality they do not have a strategy) will have to rely on adapting some standard Business Model to execute. Buying structure, implementing industry "best practices" all the way, copying others.

Result? Failure for sure - short or long term does not matter.

What should have been would be this:

1. Strategy

Small: The start-up has a real purpose to make their customers happy, better, richer and know how and why they are different from everybody else.

Big: The big company using it's tremendous knowledge about (remember to record, keep and and make available such amazing valuables!) and connections with their customers to recreate their original purpose as their customers move on.

[If this first exercise does not pan out nicely, stop here and do something else.]

2. Business Model

Small: The start-up Business Model is a snap, you have an abundantly clear purpose and know how to be different so it's just a matter of putting the clearly needed resources into the equation.

Big: The big one differs only in that it has much resources that will often influence it's strategy changes and tweaks. Fair enough as long as it makes clear sense.

[If you cannot create the good value for your custmers and find some to keep for yourself, stop here and do something else.]

3. Execute

Small: Given a simple and easy to understand purpose and knowledge of how to do it not much structure is needed. If all knows abundantly well the whys and the whats, then train and support. That's all what you need.

Big: The same applies to the big one with one caution added: Do not let the existing structure (organisational hierarchy) or culture (this is how we always do it) get in the way.

Did I mention the sequence?

1. "What value am I going to deliver to what customers and how am I going to be different?"

2. "How to use my resources to deliver that value and keep some of it for myself?"

3. "Train and support the people accordingly, then get out of the way".

Why not I wonder... I like it simple being a simple mind etc.

[Update] I forgot the rather obvious, but perhaps not so humble conclusion, so bear with me:

When struggling with Business Model or Execution issues (which includes culture, organisational, product or almost any business issue) - then revisit # 1 - Strategy - again.

If the Strategy is iffy, muddled or plain nonsense then any attempt to fix, tweak or repair in the # 2 and 3 areas would be moot.

And if you do a quick survey of available Strategy / Vision statements on corporate web sites, well, then you may start to wonder why they are spending time on band-aiding when the leg is falling off...

Comments

[Dannie Jost]

you make it sound really easy. i think that i have been thinking it all wrong!

it could also be that i remain a philosopher, and those are not very often the best of business people.

[sig]

Dannie, the question is rather - did I simplify it completely out of whack? Until well counterargumented I'll stand by it, humble retreat will be offered otherwise!

Ah, but philosophy is all about cutting to the core is it not? And that is always simpler... ;)

[John Dodds]

Too complicated - the business model should be implicit in the strategy but otherwise totally right. That's why big business tinkering with 2 and 3 is so futile.

[sig]

John, yes and no in my mind:

Implicit yes, the value and how to be different defined in the Strategy is implemented by the Business Model and often some vice versa effect exists; the resources given opens for value to be delivered (knowledge, expertise etc.)

But I still would argue for a clear split for two reasons:

1. Two different focus.
Strategy is focus on the customer, a result of what constitutes a value for the customer. While the Business model is focus on my organisation, what resources do I need, how am I going to use them to deliver that value.

2. Two different time-scales.
Strategy is long-term: What constitutes value for a customer is mostly a mid- to long-term perspective. I may help him finding new values that he did not know of, but still that takes time, otherwise the value for him could be age-old with little change over time.
Business Model is, or rather should be, a combination of long and extremely short term: Even if the big picture BM could be a bit rigid one should tweak, change and better one's resource use (i.e. Business Model) on an every day basis.

When reading "visions" and "strategy statements" I all too often see a mix of the two, or even a complete omission of a mention of "what value for what customer", but lot's of "how to use resources".

Maybe the worst are where "what value for customer" has been replaced with "what value for me" like "We're going to be number one in our industry!" or "We will seek a x% return on equity..."

And we know what that leads to... (funny, when I read such visions I go "ah, bank robbery is a part of the Strategy...hmmm")

But of course, a note of disclosure: Thingamy is a Business Model builder with instant implementation and execution.

In practice when I do a demo for an end-user I always try to find his strategy (most often I have to simplify it... given above tendencies), and with that at hand commencing to build a Business Model is surprisingly easy!