What Is A Business Concept Model

A business model is a conceptual structure that supports the viability of the business & explains who the business serves to, what it offers, how it offers it, and how it achieves its goals…Peter Drucker said that the business model is supposed to answer:

  • Who your customer is:
    • The customer forms the heart of a business model.
    • It answers who the company plans to sell its offerings.
    • A business usually groups the customers into different segments with certain homogeneous needs, characteristics, or behavior.
    • It then defines one or more customer segment that it serves or wants to serve, followed by an answer to why it plans to serve this segment.
  • What value you can create/add/deliver to the customer:
    • What are the jobs the customer wants to be done?
    • What are their pain-points in doing the job?
    • What do they gain by doing the job?
    • Once these questions are answered, the business answers another set of questions that relates business to the customers:
      • How does business get the job done?
      • How does the business relieve the customer’s pain?
      • How can the business help the customer get the gains?
  • How you can do that at reasonable costs:
    • How business operates;
      • Key Activities: What all offerings does the business sell to the customers.
      • Key Partners: Who all help the business in delivering value to the customers.
      • Key Resources: What all resources does the business use to develop and deliver its offerings.
      • Key Channels: What channels does the business use to deliver its offerings to the customers.
      • Customer Relationships: What type of relationships does the business maintain with its customers.
    • Does the business make money — Sustainability…This component of the business model focuses on elaborating on the financials & how the business makes money. It’s called the revenue model of the business & has two components:
      • The cost structure includes all the expenses that the business incurs in creating & delivering value to the customers.
      • Revenue streams include all primary & non-primary revenue streams that the business utilizes…tickets, subscriptions, donations, and school registrations

The business model acts as the blueprint of the business and a roadmap for its success (or failure). It is the only documentation that makes clear:

  • The business concept – the market opportunity the business capitalizes on and the industry fit.
  • The target market the business caters toward.
  • The problems the business intends to solve.
  • The solution the business offers and how it creates customer value. How the business gets its customers.
  • The operating model the business follows.
  • How the business makes money and what are the costs incurred to get the same.
  • Moreover, the business model gives a reason for the customers to choose the offering over others in the market.
    • People chose Facebook because it helped them connect and chat with other people around the world (operating model) and it didn’t even charge for it (revenue model).
    • Netflix’s business model was preferred over others as it provided value in the form of consistent on-demand content instead of the usual TV streaming business model.
  • Business Model Examples:
    • Manufacturer;
    • Distributor;
    • Retailer
    • Brick & mortar
    • e-Commerce
    • Bricks & clicks
    • Nickel & dime
    • Freemium (basic services free & charge for add-ons)
    • Subscription
    • Aggregator — business model is a recently developed model where the company various service providers of a niche and sell their services under its own brand. The money is earned as commissions. Examples – Uber, Airbnb, Oyo.
    • Etc.

For more information about developing a business concept model, view the free video entitled Roadmap For Starting Your Business.

Copyright ©John Trenary 2021

One response to “What Is A Business Concept Model”

Leave a Reply

%d bloggers like this: