Business model / strategy,
business plan


Finding what areas, goals and actions
would bring the most economic value


The business model states the activities chosen to create economic value

The business strategy details how to combine the key activities so as
to optimize the factors of value

The business plan describes for a specific period (usually several years)
the actions and expected performances in those various activities

Captain, where are we going?

Why those tools?
Why not improvise instead?

boat A business, whether existing or in project, needs, like a ship,
to define its destination on the big economic ocean.

=> It is crucial that it devises and states
       1. its model,
       2. its strategy and
       3.
its operational
plans.

That preliminary homework (completed and adjusted from time to time)
is essential in order to:
  • Not only convince sousmoney providers
(venture capitalists, equity funds, banks).
Well, they are judging not only the strategy and plans,
something obviously important, but also the capabilities
of the people who run the business, not only to put the plan
into practice
and to  face ...what cannot be planned.
  • But also clarify and make consistent its decision decisions and
actions, and avoid to neglect some crucial aspects.
It is preparing one's itinerary and travel bag for the
trip.

Of course, however crucial is preparation, keep things flexible!
  • An army general said a strategy
does not survive the first hour of battle. 
Well, at least by referring to the initial strategy we can
understand after starting the engine what to change.
  • Also in entirely new areas, you learn by doing,
the strategy is built only progressively.
  • Of course also to prepare éventail several scenarios 
(plan B, C...) is quite useful so as to react in time.

Definitions

A system similar to a Russian doll

1 The business model
    as the core,
2 The (general and sectoral) strategy

    as a more "practical" layer
3 The
actions plans for a precise period
    as the most visible layer

1. Business model. The "what" (and "why").

It is the specific money-making system the business is built on.
It states, in a few sentences :

* what econsector economic contribution the business brings, the
   role it plays in
the economic area it has chosen.
* the position it aims to occupy in this area
to create
  gem economic value
(for its customers, obviously, for the
    owners
and for the staff as a result, if not why would they
    invest and work?)


All that in one, or maybe two, sentences. Wow !

2. Business strategy. The "how"

It details how the business intends to obtain a clear win competitive
advantage
in its chosen economic areas / circuits by cleverly combining
adequate activities and optimizing factors of values
.
We could call that the "business mix" (an analogy with "marketing
mix").
Strategy is a notion borrowed from warfare, related to defending or gaining
territories.
Precisely a business strategy aims at occupying economic territories.

3. Business plan. The "when"

It describes how the business will apply its strategy for a specific period
(usually several years) by detailing:

* the action actions it plans to perform
* the related
goal objectives
   (operating performances, but also qualitative improvements).

The general business plan include specific sub-plans
for every of its key activities.

Elements to take into account

As the types of businesses in our complex and changing world are
quite varied, there are among those entities large differences
between their main goals, their key factors of success and
key activities
.

=>
There will therefore be many differences between businesses
on how
        their models, strategies and plans are conceived and presented.

Below are listed a broad range of possibilities.

The key factors of value

(detailed in factors of production and of economic value)

* Classical "hard" (physical) factors:

   capital, workforce, natural resources and local environment

* Soft" (qualitative) factors
such as talents, knowledge and, last but
   
not least, innovation capabilities.
    And of course, attractiveness and reputation.

The strategy explains how the factors will be combined.
It stresses what key ones the business is relying on to obtain an
exclusive, or at least relative, advantage
.

=>
A good diagnostic / management tool to use in this respect
        is a
SWOT analysis.

Types of businesses.

The strategy will differ whether the business is:
  • Specialized or diversified
  • Industrial, commercial or services activities
  • Small or large, independent or belonging to a group
  • With local, national or worldwide production / distribution
  • In an oligopolistic (= concentrated) economic sector
or a dispersed one (many similar businesses)
  • Operating in a niche (or several niches) or in a mass market
  • Based on high, medium or low technology / expertise.
  • Dedicated to luxury / upscale products and services,
or to standard ones, or to low cost ones (market positioning)
  • Quite integrated (it does by itself most things in the value chain)
Or operating "in networks", "channels" (many subcontractors
or business partners), if possible as a key part of the "value
chain" 
  • Capital-intensive (huge productive investments and small staff),
Or "work-intensive" (large staff),
  • Depending or not on a few "star" specialists (key talents),
a few products, a few customers or suppliers...

Types of activities / jobs typically seen as strategic

Let us quote a few of the areas of activities within the business
that need their own strategy and plan:


* General structure and management,
   organization, powers and responsibilities, human resources
   (quantitative / qualitative)

* Production
   Products / services (range and
volumes),
   Supply, equipment and other means, processes, technologies,
   Research & Development ...


* Marketing strategy, marketing plan
   (see the related article). No customer, no business !

* Financial aspects (see the related article)

* Etc. etc. depending on the types of activities.
   For example, for some businesses, administrative processes, regulatory
   / legal aspects, designing capabilities, safety rules and tools, or whatever
    other specific professional abilities...).

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M.a.j. / updated : 09 Sept. 2015
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