A stakeholder is someone who is involved in a business directly or indirectly from within or outside in setting policies, framing goals, crafting strategies and in practising every activity of business operations. Stakeholder either influences a business or otherwise is impacted by it. In drawing up a business model it is necessary to find out who the stakeholders are and what are their relative positions in the value network, so that their interests are taken care of. Precisely there are nine such stakeholders. Let me chisel them for your reading pleasure:
1. Customers: Top on the list is, invariably, customers who are collectively crowned as kings of a business. They are the ones who give lifeline to business by taking up the value proposition offered to them in the form of bundle of goods or services. Beneath this simple exchange of value lies a momentous story of benefits that are passed on to different segments and markets on one side and to the rest of the stakeholders on the other side. In this equation a business per se becomes just an intermediary
2. Suppliers: The question what is on offer, invariably leads us to the production of good or provision of service. In order to produce goods or provide services a business needs materials that must be processed in a specific manner. Suppliers play multiple roles in a business: providing general materials and supplying critical/ special materials are two key functions allotted to them. A different role model is assumed when they take responsibility in providing specialised technology services. At this point they morph into service providers. Yet another role is when they give business supplier finance, a line of credit that is interest free. Here, they don the clothes of finance providers
3. Partners: Right now, we are unable to limit the role and relative position of partners in value network as they seemingly appear in value creation, delivery and capture. They are sometimes suppliers of materials and in other instances they could come as service providers as in the case of consultant designers in jewellery. Business partnership is struck as joint venture, strategic partnership or assured suppliers like the diamond suppliers in Blue Nile Jewellery. Moreover, agents, representatives and distributors are functionaries in sales who easily pass off as partners. Franchise holders and re-sellers also come on the border line
4. Service Providers: This group of stakeholders have one thing in common: they do not supply any materials. Other than this, they contribute to a wide ranging of activities beginning from the production to the final sale. A typical company deals with several of them in utilities such as power, electricity, and water; in provision of external services required in production function. The case of consultant designers alluded to above is often cited as an example of external service. Accountants, tax advisers and many others even though outside the pale of production are still considered as providers of support services
5. Finance Providers: Banks, lending institutions, leasing companies and finance companies are the main providers of finance in a business model. These offer term loans, overdrafts, credit lines, leasing and finance packages. In addition to these there are government institutions that offer finance for exports and technology. Some suppliers also provide finance. A business can borrow from the market issuing debt instruments by way of a prospectus or by private placement. In every case where such finance raising takes place the owners of these instruments must be treated as finance providers. Typically finance providers support the business operations informally in creating and delivering value and formally in value capture
6. Management & Staff: As key resources management and staff are the backbone of business operations. Their relative positions in the value network encompass every activity. Management plans, supervises and monitors business while the staff carries out the work allotted to them in pinpoint accuracy
7. Regulators: Indirectly influencing business operations, regulators come in with different robes. Government, local authorities and industry associations are few of the common regulators. Internal Revenue service is the government body that collects tax form the business. Goods & services tax or Value added tax work both in value creation and delivery. Income or company tax is inside the perimeter of value capture. Local authorities also impose taxes and dues while regulating a business. Industry associations have similar role albeit in mild manner
8. Capital Providers: Let us call them in a collective word: Equity. They are the risk takers who have put their money on the future potential of a business. In a business model they are like men on the totem poles. If the business model fails they are out of the money; if it succeeds they are in the money. To protect their interest they obtain board appointments to bring in right strategy and policies. They tend to have oversight by forming dedicated committees to examine risk, staff compensation and so on
9. Society: While the eight stakeholders described so far are within the loop society at large is an important stakeholder outside the circle. Business model must ensure that the concerns of the society are addressed, chiefly amongst these are , ethical way of doing business, contribution to economic development, protecting environment and finally enhancing quality of life for stakeholders in particular and society in general. Corporate social responsibility is now firmly etched in every successful business model.
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