The notion that business model is a stand alone concept was widely accepted in business for quite sometime. Originally founded by Peter F Drucker, business model gained currency with the dot com revolution. Like the dotcom it faded out of fashion soon. Changes that shook technology, economy, social mobility and the way business goes about in the last decade necessitated a second coming of business model. This time it was accompanied with quantum shift in analysis. Gone are the days when business model was treated in isolation. Researchers and practitioners have now begun to spot an integration between strategy and tactics.
What is Business Strategy?
Every business needs a unique proposition, be it a product or service to be offered to the market. Such a proposition must create and sustain value for the business and those elements connected with it. More than that, this proposition must give a distinct and discernible advantage for the business as against its competitors. Sustaining this advantage is a bounden duty of a business that should make every stratagem in order to keep it primary position in the pecking order. That involves two types of actions. One relates to defence and the other relates to attack. In commercial sense the former is developing ability to tide over any adverse eventuality. Attack on the other hand is framing a road map in translating business strategy into practical measures by way of designing a business model.
What a Business Model does?
To answer this question , let me cherry pick three definitions of business model found in academic writings. To begin with look at what Hamel ( 2000 ) sees a business model; it is “ a business concept that has been put into practice”. What is implied is that a strategy of a business is put into practical terms by way of a business model. Secondly, the form of business model and what it does is succinctly stated by Shafer et al (2005) when the authors pen “ We define a business model as representation of a firm’s underlying core logic and strategic choices for creating and capturing value within a value network”. We have got a working definition of the way business model looks like. But wait a minute: what about delivery of value? Osterwalder (2009) has the answer when he writes: “A business model describes the rationale of how an organization creates, delivers, and captures value”.
Now we have the full spectrum of what a business does. It is about time to find out how the model connects with strategy and tactics. In a pioneering research work titled “From Strategy to Business Models and to Tactics” authors Ramon Casadesus-Masanell and Joan Eric Ricart explain in detail about how business model is integrated with strategy and success. Additional reporting by them in recent article tiled “ How to Design a Winning Business Model” (Harvard Business Review Jan-Feb 2011) continues the trend of expositing fundamental theory of business model as the logic of the company and by implementing strategy a business makes choices and face the consequences arising therefrom. They mention choices on policy, asset and governance. They also forecast consequences that are classified as rigid or flexible. The authors turn to the auto industry for an analogy: Strategy is designing and building the car, the business model is the car, and tactics are how one drives the car. By this time we have catapulted into the area of tactics
Business Tactics fill the Rest
These are steps a business take in order to implement the business model. A pre-explanation of how the business will re-act in a given situation could be easily gained from a cursory glance on a business model. In addition to planned tactics a business model allows leeway for the line managers to adopt ad-hoc measures in keeping with over-all thrust of the strategy. These measures could range from non-repetitive tactics, quick-fixes or actions made out of the gut feeling.
Muthu Ashraff
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