By Marcus Coetzee, 24 August 2021
A business model is the unique recipe that an organization uses to earn income and serve its customers and beneficiaries (or participants in the case of a non-profit organization or social enterprise). A business model typically describes what an organization is offering its customers and beneficiaries, as well as its inputs, processes and method of earning income and profits.
Business models design is about configuring the building blocks of an organization so that it is feasible (can work) and viable (can sustain itself).
It is not uncommon for entrepreneurs to play around with different configurations for their organizations until such time as they find one that works. In my experience, this process typically takes around a year.
Business model design is similar to playing with a LEGO set and trying to combine the different size, shape and colour LEGO blocks until they fit together in the design you want.
Business models are a component of strategy. Business models describe how the ‘LEGO blocks’ of the organization will fit together, whereas strategy describes how the organization will move forward to achieve its goals. There is some overlap between the two.
There are a variety of tools out there to help entrepreneurs to conceptualize their business models, including: The Business Model Canvas; The Social Business Model Canvas; The Lean Canvas; The Mission Model Canvas and the Flow Canvas. These are valid tools and they work well in certain circumstances.
However, when unpacking complex and multi-dimensional business models, I prefer to adopt a relationship-orientated approach where I examine all the different parties that are involved in an organization and how they will work together. Only then do I dive into its inner technical workings such as its activities, financial model and legal structures.
Below is a tool that closely resembles the types of questions that I ask social businesses and non-profit organizations when I start to unpack their complex business models – an activity that normally occurs during the startup phase. I hope this tool will assist you to interrogate your own business models.
Click here to download the MS Word version of this tool.