4 Elements at the Core of Your Business Model

You understand your business model, right? 

Of course, you do. 

Today, the phrase “Business Model” is overused and has a variety of meanings. So, although you understand your business model, I bet your team would be hard-pressed to define it the same way.

As a strategist, I find that management teams are not clear on how the pieces of their business fit together to form their unique business model.  To develop a new strategic direction, you must first understand what is at your core before you start messing with changes to it. Therefore, I have honed these four elements to ground strategy discussions.  Although they are not everything that you need to define your business model and outline a winning strategy, I find that gaining clarity on these four elements goes a long way to anchoring the rest of the important aspects of your business to create a true competitive advantage.

1. Your Target Audiences

Defining who you serve with your product or service offering is the first core element of your business model.  It is highly likely you have multiple and overlapping targets. Grouping these targets into clusters and ranking them in terms of their importance to your business focus is an important first step.   Once defined, you can more easily explore the knowledge and beliefs about each target group and how your relationship with these audience groups may need to evolve as your business model evolves.

2. Your Market Offering

Mapping your product and service offerings against your target audiences and defining the needs your current offering strives to address will bring discipline to product/service development.   As organizations grow, they can expand their product/service offering for a variety of reasons.  Deliberately aligning your offering to your target audiences may result in you redefining what you offer, or it could identify a new target to serve. This exploration often results in greater clarity on what to eliminate and where to increase focus in the near term.

3. Your Essence

The concept of "essence" in business strategy comes directly from marketing strategy or brand development strategy.  I don’t recommend diving deep into your brand essence is this first pass, but understanding the concept of your entity's essence is critical for shaping a unique position for yourself in what is almost always a crowded, highly competitive market.  I define essence very simply: what you are best at and what is most important to you. As you look ahead, you will continue to invest and protect what you are best at and seek partners and collaborators who share what is important to you.  Making this clear upfront saves a lot of back-and-forth conversations in planning later on.

4. Your Unique Strategic Position

We all want to be unique!  Organizations have an imperative to distinguish themselves, a competitive imperative.  If you don't strive to establish your difference in the hearts and minds of those you serve, the market (your competitors, partners, and customers) will do so for you, and you may not like the result.  Executing a powerful marketing and communication plan is the way to ensure that the market holds you in the exact space you desire.  Defining your ideal unique strategic position is a core element of your business model that you must address early on and continually test against.

The next time you are discussing changes to your “business model,” I strongly recommend you stop and reground your thinking around these four core elements before proceeding. Who knows, you may find that the shift someone is advocating is not good for you.