On Business Models and Business Plans

The term "business model" simply refers to how a new venture proposes to create, capture and deliver value. In short, it is all about how it will make money. It requires a systematic approach and that is why several approaches have emerged to help structure the process.

Osterwalder’s "Business Model canvass" is a very useful framework that has been extensively used of late. It is a simple graphical template comprising nine essential components: Customer segments, value propositions, channels, customer relationships, revenue streams, resources, activities, partnerships, and costs.

Another approach, somewhat broader and more comprehensive, yet consistent with Westerwalder’s basic principles, is the “7 domains model,” authored by Professor J. Mullins of London Business School. The model separates the proposed new venture into seven "domains": the first four look at the small-scale (micro) and large-scale (macro) aspects of the market and industry, and the other three focus on the team.

Lest we forget what these terms signify (I’ve seen confused writings where they are used interchangeably):

Market: the group of people who are, or will be, buying the new product or service.

Industry: the organizations (competitors) who offer products or services similar to your own.

Lastly, business plans usually come after we’ve articulated a business model and tend to address the following questions:

Where are we now?

Where are we going?

How do we get there?

Most entrepreneurs begin with an idea, frame this into a business opportunity, flesh out the opportunity in terms of a business model and finally create a business plan. The process is of course iterative but it is useful to view it in that sequence.

Note:

John Mullins, a professor at London Business School, describes the 7 domains approach in his book "The New Business Road Test." (2003)