Seven Essential Questions for Establishing a Superior Business Model

Many people have trouble deciding where to start when considering possibilities to establish a better business model. With these questions, you'll make more effective changes ... and faster.

Let me start by describing what a business model is so that you'll better understand the questions. A business model incorporates all the ways that a company provides its goods and services, receives value for its efforts, and affects others. Consequently, a business model is the combined

-- "who" (stakeholders such as end users, customers, distributors, partners, employees, shareholders, lenders, suppliers, regulators, those who live in the communities where you operate, and anyone affected by what you do),

-- "what" (your offerings of goods and services),

-- "when" (the timing of providing your offerings),

-- "why" (reasons end users and customers select your offerings),

-- "where" (locations where offerings are produced, provided, and used),

-- "how" (methods of providing and using offerings), and

-- "how much" (price of offerings, plus the costs of acquiring and using them) associated with your organization's activities, whether for-profit or nonprofit.

With this definition in mind, let's now turn to the essential questions for establishing a superior business model:

1. Do you feel inspired by your organization's current business model?

If your situation is like that of most people, the answer will be "no." That's just the beginning of your learning. You should go on to ask yourself, "What's missing to make me feel inspired by our business model?" Ask at least five other people, and exchange ideas about what is missing. As you think about potential business models, focus on these missing areas.

2. Does your company's business model provide greater benefits for all stakeholders than the alte
ative of not doing business with your company?

In asking this question, consider each stakeholder. If not, what's missing? These answers should help you see ways your business model could be improved to create a more supportive relationship with stakeholders where their self-interest is furthered by your success.

3. What would have to change for the economic and non-monetary benefits your organization provides to double for each stakeholder?

Most people focus heavily on customers. But the most successful business model will distribute the rewards it generates in supporting customers extremely well to all stakeholders who contribute to enabling the company to operate excellently and to prosper.

Answering this question should flesh out whether your challenges are to push innovation in new directions, or simply to redirect the way the fruits of that innovation is shared. Most organizations will have issues in both dimensions.

4. How long would it take an existing competitor or new entrant to overcome your business model's advantages for stakeholders?

If the answer is less than ten years, you definitely have some work to do.

5. What are the biggest risks your company takes now that could set back your progress?

Although it is exciting to "bet the company," the most successful business-model builders avoid doing so unless they see no other choice. It only takes one loss when the stakes are high for disaster to follow.

6. How can you exchange those big risks for ones you can handle better?

For example, if each new investment is too big for setbacks to be easily swallowed, can you share the risks and rewards with others? Or, if you lack resources, can you team with organizations that complement your own?

7. If all of your business-model improvement tests were successful, how close would they come to providing an outstanding business model?

If your operation is like many organizations, there will still be significant gaps. How can you fill those gaps? Tests aren't the only way to establish new business models. Sometimes new business relationships are needed because it is too slow and expensive to add the resources internally.

To give you more perspective on why these questions are so essential, Dean Alan Guinn of Rushmore University offered these observations about business models, their importance, and why focusing on them is so essential:

"Business models in most companies change little over the decades, if at all. Such a lack of improvements leaves most such companies vulnerable to improved business models that make the value and pricing of their offerings uncompetitive.

"Those who first apply an advantaged business model enjoy enormous benefits such as rapid sales growth with high profit margins, much public attention, and a premium value for the company's shares."

My own view is that continually improving business models is the key competitive battleground now and in the future.

How soon can you start answering the seven essential questions for establishing a superior business model?

What are you waiting for?