20 Jun The Importance of a Business Model (And the Tool to Create One)
The Business Model Generational Canvas is the secret sauce for businesses and non-profits. It doesn’t happen very often anymore, but every now and then a concept comes along that changes how I work at the core. And the BMG Canvas is one of those things that is a core to my business teachings. The BMG is the best business tool that I know. It has given us the vocabulary to manage the vital business foundation: the business model.
Success is no longer driven by either the best product or the best service. Success is increasingly driven by best business model. Now you need a great product and service, but the business model, strategy with execution as I like to say, is what carries you to the finish line. Now managing business models is not a new concept. But managing business models with purpose and at the pace I learned and now teach is new. Entrepreneurship, innovation and transformation are driving change. The BMG is a clever framework to articulate these.
What is a business model?
- A business model is the overall rationale of your business. This includes how you get stuff (product), what you do with it, how and who you sell it to, and how you keep the track of the movement of money.
- A business model is a simple articulation of your business. Your business model will clearly separate the few items that make you different from everything else you just have to do. Of course you have to keep track of taxes, etc, but the BMG will show you your unique areas to keep focused on. It will help you define your business!
- A business model is a vocabulary that you and your team share. This is a wonderful thing to have. You’re all on the same page and know your language. The language I use in my non-profit Wealthbuilders is slightly different from how we discuss Tricord Global issues–which is vastly different from the vocabulary we used in Great Clips! Being equipped with your language will empower you and your team to make better and faster decisions.
- The Business Model is not alone. Never forget that your business model is relative to others and the industry you exist within. This means that just because you have a strong BMG you don’t have to take into consideration governmental regulations, competitors, and other environmental issues that affect your business. The BMG doesn’t stand alone– but it is the best tool I know to articulate your business.
I hope I’ve set up what the BMG can do for you–why it’s important. I’ll list out the vital sections of the BMG below. It’s up to you to learn more! (Hint: Come back next Monday for deeper discussion!)
- Customer Segments
- Value Propositions
- Customer Relationships=Revenue
- Key Resources
- Key Activities
- Key Partnerships=Cost
- And Revenue–Costs=Profits (AKA, the goal)
The book we use in the class I teach on this subject is called “Business Model Generation.” I highly recommend buying it!
Have you started on your business model?
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