If you look deep into the market, Boards of companies do one critical thing: hire a CEO to lead a firm. And the CEO has to do another important thing: commit to a business model or business models, arising out of its business strategy framework. In other words, you hire a CEO to commit a company to a business model! And that makes the Business Model supreme for the success of a firm.
You can have the same product or service. But the business model you commit to can have catalytic impacts on your success. Do you adopt a subscription model? Do you follow pay and carry? Do you execute a freemium model? These are options that arise out of the strategy session.
Business model focuses on encapsulating the essence of the firm because it looks for how the firm will create value. The business model is the logic of the firm and when you commit to one, you have committed all the factors of production in that firm to a destiny. Never play with your business model.
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They fired and replaced that CEO and within quarters, the loss-making company is making money. Why? The new CEO might have changed the business model while using the same staff and products.
Business is a tool to execute a strategy. Strategy itself is all about the vision of the firm. A strategy is successful when the right tool (i.e. the business model) is chosen for it, and that comes through market validation.
Is your business model still relevant? Has it expired because of the Internet? Attend Tekedia Mini-MBA; I will be teaching on business model, vision, mission and strategy on Thur and Saturday.
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