Alex Osterwalder and I have been exchanging e-mails on the subject of business models. Alex’s blog is devoted entirely to this subject, and the graphic above is his ‘business model model’, showing the nine ‘building blocks’ for such models from his synthesis of reading on the subject. The right side of the model is about how the business generates revenue, while the left side is about how it manages costs and hence generates profit. I’ve been advising clients and prospective new businesses how to document and evaluate their business model for years, and in my experience there are three types of business models, that organizations look at in sequence:
This sequence of models can apply to anything from a simple marketing program to the launch of an entirely new business. It’s been my experience that most businesses put insufficient work into the viability assessment, the wrong kind of thinking into the business formation decisions, and too much emphasis on the details of the operating model, and hence on ‘micromanaging’ the operations to ensure they conform to the operating plan. The reason for insufficient work on viability assessment is that it’s tedious, and the people who are championing the idea have already concluded that it’s viable. That’s why in Natural Enterprise I encourage an almost excruciating amount of attention and research on viability up front, tough, shoe-leather-wearing work with potential customers, suppliers and partners until you know that it fits a need, that you have the competencies to fill that need, and that you have some competitive advantage in doing so. If that time and effort is invested, the whole approach to business formation changes. The people and partners who will play the key roles will already be onside and will have essentially self-selected to play those roles. Much of the start-up capital may come in the form of advances from customers who have already indicated an interest in the product or service, and who have been active partners in its design. The total amount of capital will be less, capital needs will be rather obvious, and may be already forthcoming, if the viability assessment has been done well first. At this point, I think, trust takes over. You have the right people in the right places. They know what they have to do and how to do it. They’re motivated, and focused on the customer. Why do you need an elaborate operating model at this stage? Not only will it be telling people what they already know, it will be getting in the way of them doing their job effectively, by imposing the inevitable standards, paperwork, and approvals procedures. And worst of all, it will discourage improvisational thinking and continuous sustaining and disruptive innovation, and will be contributing to what David Ehrenfeld calls “a society managed to death”. But giving them that message at the outset is a lot easier than telling them, after spending years of effort trying to make a flawed business model work, and investing their life savings in it, that they should pull the plug. [I’m in San Jose at the KMWorld & Intranets conference, and for the next two days I’ll be blogging about what I think are the highlights of the conference, and also including my own (two) presentations, on Social Networking and Personal Knowledge Management.] |
Navigation
Collapsniks
Albert Bates (US)
Andrew Nikiforuk (CA)
Brutus (US)
Carolyn Baker (US)*
Catherine Ingram (US)
Chris Hedges (US)
Dahr Jamail (US)
Dean Spillane-Walker (US)*
Derrick Jensen (US)
Dougald & Paul (IE/SE)*
Erik Michaels (US)
Gail Tverberg (US)
Guy McPherson (US)
Honest Sorcerer
Janaia & Robin (US)*
Jem Bendell (UK)
Mari Werner
Michael Dowd (US)*
Nate Hagens (US)
Paul Heft (US)*
Post Carbon Inst. (US)
Resilience (US)
Richard Heinberg (US)
Robert Jensen (US)
Roy Scranton (US)
Sam Mitchell (US)
Tim Morgan (UK)
Tim Watkins (UK)
Umair Haque (UK)
William Rees (CA)
XrayMike (AU)
Radical Non-Duality
Tony Parsons
Jim Newman
Tim Cliss
Andreas Müller
Kenneth Madden
Emerson Lim
Nancy Neithercut
Rosemarijn Roes
Frank McCaughey
Clare Cherikoff
Ere Parek, Izzy Cloke, Zabi AmaniEssential Reading
Archive by Category
My Bio, Contact Info, Signature Posts
About the Author (2023)
My Circles
E-mail me
--- My Best 200 Posts, 2003-22 by category, from newest to oldest ---
Collapse Watch:
Hope — On the Balance of Probabilities
The Caste War for the Dregs
Recuperation, Accommodation, Resilience
How Do We Teach the Critical Skills
Collapse Not Apocalypse
Effective Activism
'Making Sense of the World' Reading List
Notes From the Rising Dark
What is Exponential Decay
Collapse: Slowly Then Suddenly
Slouching Towards Bethlehem
Making Sense of Who We Are
What Would Net-Zero Emissions Look Like?
Post Collapse with Michael Dowd (video)
Why Economic Collapse Will Precede Climate Collapse
Being Adaptable: A Reminder List
A Culture of Fear
What Will It Take?
A Future Without Us
Dean Walker Interview (video)
The Mushroom at the End of the World
What Would It Take To Live Sustainably?
The New Political Map (Poster)
Beyond Belief
Complexity and Collapse
Requiem for a Species
Civilization Disease
What a Desolated Earth Looks Like
If We Had a Better Story...
Giving Up on Environmentalism
The Hard Part is Finding People Who Care
Going Vegan
The Dark & Gathering Sameness of the World
The End of Philosophy
A Short History of Progress
The Boiling Frog
Our Culture / Ourselves:
A CoVid-19 Recap
What It Means to be Human
A Culture Built on Wrong Models
Understanding Conservatives
Our Unique Capacity for Hatred
Not Meant to Govern Each Other
The Humanist Trap
Credulous
Amazing What People Get Used To
My Reluctant Misanthropy
The Dawn of Everything
Species Shame
Why Misinformation Doesn't Work
The Lab-Leak Hypothesis
The Right to Die
CoVid-19: Go for Zero
Pollard's Laws
On Caste
The Process of Self-Organization
The Tragic Spread of Misinformation
A Better Way to Work
The Needs of the Moment
Ask Yourself This
What to Believe Now?
Rogue Primate
Conversation & Silence
The Language of Our Eyes
True Story
May I Ask a Question?
Cultural Acedia: When We Can No Longer Care
Useless Advice
Several Short Sentences About Learning
Why I Don't Want to Hear Your Story
A Harvest of Myths
The Qualities of a Great Story
The Trouble With Stories
A Model of Identity & Community
Not Ready to Do What's Needed
A Culture of Dependence
So What's Next
Ten Things to Do When You're Feeling Hopeless
No Use to the World Broken
Living in Another World
Does Language Restrict What We Can Think?
The Value of Conversation Manifesto Nobody Knows Anything
If I Only Had 37 Days
The Only Life We Know
A Long Way Down
No Noble Savages
Figments of Reality
Too Far Ahead
Learning From Nature
The Rogue Animal
How the World Really Works:
Making Sense of Scents
An Age of Wonder
The Truth About Ukraine
Navigating Complexity
The Supply Chain Problem
The Promise of Dialogue
Too Dumb to Take Care of Ourselves
Extinction Capitalism
Homeless
Republicans Slide Into Fascism
All the Things I Was Wrong About
Several Short Sentences About Sharks
How Change Happens
What's the Best Possible Outcome?
The Perpetual Growth Machine
We Make Zero
How Long We've Been Around (graphic)
If You Wanted to Sabotage the Elections
Collective Intelligence & Complexity
Ten Things I Wish I'd Learned Earlier
The Problem With Systems
Against Hope (Video)
The Admission of Necessary Ignorance
Several Short Sentences About Jellyfish
Loren Eiseley, in Verse
A Synopsis of 'Finding the Sweet Spot'
Learning from Indigenous Cultures
The Gift Economy
The Job of the Media
The Wal-Mart Dilemma
The Illusion of the Separate Self, and Free Will:
No Free Will, No Freedom
The Other Side of 'No Me'
This Body Takes Me For a Walk
The Only One Who Really Knew Me
No Free Will — Fightin' Words
The Paradox of the Self
A Radical Non-Duality FAQ
What We Think We Know
Bark Bark Bark Bark Bark Bark Bark
Healing From Ourselves
The Entanglement Hypothesis
Nothing Needs to Happen
Nothing to Say About This
What I Wanted to Believe
A Continuous Reassemblage of Meaning
No Choice But to Misbehave
What's Apparently Happening
A Different Kind of Animal
Happy Now?
This Creature
Did Early Humans Have Selves?
Nothing On Offer Here
Even Simpler and More Hopeless Than That
Glimpses
How Our Bodies Sense the World
Fragments
What Happens in Vagus
We Have No Choice
Never Comfortable in the Skin of Self
Letting Go of the Story of Me
All There Is, Is This
A Theory of No Mind
Creative Works:
Mindful Wanderings (Reflections) (Archive)
A Prayer to No One
Frogs' Hollow (Short Story)
We Do What We Do (Poem)
Negative Assertions (Poem)
Reminder (Short Story)
A Canadian Sorry (Satire)
Under No Illusions (Short Story)
The Ever-Stranger (Poem)
The Fortune Teller (Short Story)
Non-Duality Dude (Play)
Your Self: An Owner's Manual (Satire)
All the Things I Thought I Knew (Short Story)
On the Shoulders of Giants (Short Story)
Improv (Poem)
Calling the Cage Freedom (Short Story)
Rune (Poem)
Only This (Poem)
The Other Extinction (Short Story)
Invisible (Poem)
Disruption (Short Story)
A Thought-Less Experiment (Poem)
Speaking Grosbeak (Short Story)
The Only Way There (Short Story)
The Wild Man (Short Story)
Flywheel (Short Story)
The Opposite of Presence (Satire)
How to Make Love Last (Poem)
The Horses' Bodies (Poem)
Enough (Lament)
Distracted (Short Story)
Worse, Still (Poem)
Conjurer (Satire)
A Conversation (Short Story)
Farewell to Albion (Poem)
My Other Sites
Dave,I think this post is right on and I would love for you to share this perspective with our members. Your posts have really influenced many of the decisions that I have made as I taken the concept of NPC and made it a reality. I think there is a balance between having an operating plan but also creating a company that is flexible enough to evolve when its customers and environment change. Thanks again for your amazing insight, it has been so helpful.
Hi Dave, let me say that I’m a big fan of your blog and that I enjoy it so much to read your concise and comprehensive postings. I think the talent to share ideas the way you do is something very special.Interestingly I’ve had a discussion with Alex as well last week on the ‘design’ dimension of business processes. While we’ve postponed our discussion to late November you might be interested in the my posting about the conversation at:http://www.design-management.de/archive/2005/11/design-thinking-and-learning-from-each-other/Please keep us posted :-)
Dave, I think the real world “model” includes a box for the top executives called “cash out & run away”. Sorry to be the pessimist here, but it seems that behind every real world “growth” company, there are one or more execs who make sure that additional, cash-out box is buried in there somewhere.
Kirstin/Ralf: Thanks for the info and the entrees. Step Back: I think you’re a realist, not a pessimist, but that doesn’t invalidate business models.