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Putting Your Business Model in Context

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by Bruce Hughes

Business_puzzle

Even after you have created a business model that all of your stakeholders understand and can collaborate on, you’re not done. The reason for this is that the environment in which your business operates is not static, but dynamic—it is continuously changing.

If you recall my article from our last newsletter, I was talking about using a Business Model Generation Canvas to develop a shared understanding of the elements of your business. It would be nice if that were enough, but given that we are in a state of perpetual change, you need more. If you follow the news, there are events occurring every day that can either positively or negatively affect your strategy. Some examples from recent news:


•    The European credit crisis and whether Greece will exit the Euro
•    The discovery of a chemical reaction that consumes carbon dioxide, creates a useful product, and releases energy;
•    The reversal of the oil pipeline from Cushing, OK to the Gulf coast to facilitate energy exports from the USA; and
•    The presidential and congressional election cycle.

I could go on, but I think you get the picture. To begin to be prepared for the possibilities, you need to spend a little time considering what may change and how your business model can change to accommodate this environmental change.


One writer on this topic is Chet Richards, whose book Certain To Win1  offers an adaptation of the military strategic ideas of John Boyd to business. Boyd postulates a cycle he calls the OODA Loop, for Observe-Orient-Decide-Act, that is the essence of intelligent adaptation to change. Here is a diagram of Boyd’s OODA Loop:

Boyds_OODA_Loop

                                                                                 Figure 1: Boyd's OODA Loop

This OODA Loop is a decision-making and action process that responds to change in the environment. Ideally, you will observe change in the environment, decide what it means to your business, and change your actions in response more quickly than your competitors.


In the context of the business model, you have external forces in the environment that may change the assumptions on which your model is based. By observing macroeconomic forces, performing market and competitive analysis, and using foresight, you can understand your business model in the context of the forces that will impact it as in the image below:

BMG_Canvas__Environment.png

                                                                    Figure 2: Business Model Generation Canvas In Context


This diagram is taken from page 200 Osterwalder and Pigneur’s book2 . You may also want to buy the book. In it you will find an excellent example of using this analysis to make a business model resilient to anticipated change in external forces.


One very important thing to do as a business manager who wants a long-term, sustainable business, is to continue to observe, ask strategic questions, and be prepared to act on business intelligence when circumstances change.

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1 Certain To Win: The Strategy of John Boyd, Applied to Business, Chet Richards, ISBN 1-4134-5376-7, 2004. Richards modifies the OODA Loop for business by removing the Genetic Heritage and Cultral Tradition elements that are mainly relevant in the context of warfare.

2 Business Model Generation: A handbook for Visionaries, Game Changers, and Challenger, Allexander Osterwalder and Yves Pigneur, ISBN-10 0470901039, 2010.














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