Is Your Business Model Aligned with your Business Plan? [3 Key Areas to Look At]
Photographer Raw Pixels
Maybe your plan is sound but the way you achieve it is wrong?
The strategy — your plan — has a compass that reads “go north” yet your business is perfectly positioned to head northeast. Your business will come close. It will feel like you are on track for a while, and then the gap will increase until it’s too late to close the gap by year end. So you get the group together and try again.
Rinse and repeat.
A business model represents the way the organization goes about its work: what it sells, its target customers and how it fulfills the customer’s needs in a competitive market. To break it down, think of a business model as having three primary components.
- Assumptions about the market;
- Why the company matters to the market; and
- How it will capitalize on its strengths to serve customers.
Are Your Market Assumptions Relevant?
Assumptions about the market means that you and your team spend time thinking about the external environment — where the general environment is going. It includes considering demographics, technology, your current customer, as well as society in general.
For example, if your business is a supplier to auto manufacturers, where do electric vehicles factor into your view of the future? There are fewer teens now than ever, and those teens are delaying getting a driver’s license. What does that mean for your business?
To the community, you are important; to your customers, you matter if the terms are right; to the market, you matter very little.
There really are not many small and medium size business that matter to the market —other than to provide a place for the owner to "not be an employee" and for the owner to provide for the employees. To the community, you are important; to your customers, you matter if the terms are right; to the market, you matter very little.
One of my favorite questions to ask is: “If your business closed today, would the market care?”
The question is important because we understand that a small business closing will not be disruptive to the entire market, but it leads directly to thinking about whether you are serving your customers in a way that is different than others.
Identifying the RIGHT Core Competencies is Important
If the company has gone through strategic planning and identified core competencies, my guess is that it is wrong. A core competency is measured by something that is valuable, rare, difficult to imitate and benefits the organization.
Small and medium size companies do many things well, but how many perform services for customers that are “rare”?
The company does have strengths, and those strengths could be somewhat unique and should be capitalized upon, but those strengths are not rare in the market. In many cases, some version of “flexibility” is a strength that can be demonstrated over a competitor that is much larger and has more bureaucracy.
Too many strategic plans are simply wish lists of where the owner wants to go without an understanding of whether the company is even capable to getting there.
That is where the analysis of the business model is so critical.
Understand how your business operates today, promote your strengths and fix the glaring holes, and have a process to systematically talk about the future — those are the steps for an effective strategy. Without those steps, your strategy is a plan for continuous improvement while the market continues to change.
Before you jump into your next strategic planning session, be sure that your business model is aimed in the same direction as your business plan.
Results in a Day!
Not ready for a long-term engagement but still need help with getting your business headed in the right direction? Then a one-day, strategic planning session with you and your staff is the way to go.
