The relationship between business models and business strategies is an essential one. Business models refer to the logic of a company's operations, how it creates value for its stakeholders, and how it functions. On the other hand, business strategies are the choices made by a company to compete in the market. Tactics are the residual options that a company has due to the business model it employs.
When it comes to strategic decisions, selecting the right business model is of utmost importance. I have recently developed a new discipline called Business Engineering, which is distinct from how it is usually perceived. A business model outlines how a company produces value, offers value to customers, and collects revenue for benefits. Technical analysis can be used for investing without having to understand much about the business or looking at price patterns over time. This framework uses examples from well-known companies to explain why managers must pay attention to both their strategies and business models for long-term competitive profitability. The term 'business strategy' describes the methods used by a company to achieve its mission and objectives.
This document provides a prescriptive framework to help managers evaluate their companies based on how much attention they pay to their strategies and business models. A well-thought-out business model also allows you to test and review your assumptions about customers, think rigorously about your business, and align employees with the company's mission. For example, a website can have a business model based on providing video content to customers and generating revenue through advertisements placed on the site. On the other hand, a local grocery store's business model could involve buying food at wholesale prices and selling it to end consumers at a higher price for profit. During my MBA, I began to have a more strategic understanding of companies by looking at how they structured their operations, developed their products or services, and the type of monetization they used. Business Engineering is an approach that combines both business models and business strategies.
It helps managers understand how their decisions affect their company's performance in the long run. It also helps them identify opportunities for improvement in their operations. By understanding how different elements of their business interact with each other, managers can make better decisions that will lead to increased profitability. Business Engineering also helps managers identify areas where they can improve their operations. For example, if a company is not generating enough revenue from its current business model, it may need to look at different ways of monetizing its products or services.
Additionally, if a company is not able to compete effectively in its current market, it may need to look at different strategies that will help it gain an edge over its competitors. Business Engineering is an important tool for managers who want to ensure that their companies remain competitive in the long run. By understanding how different elements of their businesses interact with each other, managers can make better decisions that will lead to increased profitability.