Business Models

Tool

Summary

Leaders are responsible for developing and delivering on their business plan and driven to achieve or exceed planned levels of performance by an incentive program that rewards success for so doing. The odds of consistently achieving plan increase the closer an organization holds to a proven business model, such as one of the following five:

  • Service

  • Product

  • Operation

  • Channel

  • Exchange

and how well it executes its core delivery, sales, and capacity development in the face of increasing scale and complexity.

An organization’s business model primarily determines:

  • The way its finances work.

  • Its sales and delivery processes.

  • The competencies it needs to develop.

  • Its competitive landscape.

  • Its target valuation as a function of prospects for operating income as a percent of revenue and growth.

  • Exit alternatives, potential buyers, and timing.

  • Expansion prospects and targets.

  • The degree of risk and difficulty.

It is critical to determine the key source of revenue around which to build the business. While it may be possible to build around multiple revenue sources, it is a hard enough to do around just one revenue source. It is, therefore, best to pursue multiple sources only after at least one is on a solid track for success.

Organizations in the Credible Stage are characterized by a consistent and growing base of revenue and profit, a financial plan, an operating plan, and core leaders in place who are clear about what the organization is counting on from each of them, and a track record of consistently achieving planned performance.

Intelligent Strategies. Successful Ventures.