Business model is one of those terms that takes on the meaning of its user, and we should begin with a clear understanding of what it is and isnt. You cant always be sure that one persons business model is not anothers value proposition, business case, revenue model, strategy, and so on. When I use the term business model, I mean something quite different than the traditional financial model definition often referenced in most daily corporate dialogues: In my view, a business model is a much bigger picture, one that captures a snapshot of the enterprise and communicates direction and goals to all stakeholders in an attempt at effective and strategic execution.
In fact, Im going to use a different term for business model altogether: strategic enterprise architecture, or SEA. This will allow me to break it down into its components in a way that makes it an operational definition. Of course, the term architecture can mean different things to different people as well, so let me narrow it down.
Enterprise architecture isnt just technology. Some people assume that enterprise architecture describes only IT assets. By ignoring business architecture altogether, this misconception encourages companies to develop a road map that innovates IT but with no direct connection to business and process.
Business architecture isnt just processes. Others make the mistake of interpreting business architecture to mean just the business processes the company performs. This ignores the big-picture view of the business and makes it difficult for decision-makers to determine not only what processes exist but why these processes are executed the way that they are.
A question often asked is how to quantify the value of a SEA and how that value can be demonstrated in financial terms. Perhaps the best way to visualize what an SEA is and how it adds value to the firm would be to show the types of information it might include. Typically, it classifies elements into four broad areas:
The overall identity of the firm - This might include such elements as brands, the corporate mission, and reputation of the firm in the marketplace, as well as the target market and general differentiators against competitors. It might also include elements that describe the companys unique culture, such as values, office rules, and behavioral expectations.
The strategy for the firm Elements in this category could describe how the firm translates its mission and values into concrete action. An important component of this role might be the ability to coordinate between multiple business units, each of which presumably needs to play a unique role to help meet common, strategic goals. Strategy might include elements like goals, a time frame for achieving those goals, the resources that are required, and custom performance indicators.
The internal assets that help the firm to achieve its strategic goals This could include all of the resources that the firm might muster to pursue its strategy. These might be products and services; organizational assets, including the reporting structure, geographic distribution, roles/responsibilities, and individual resources; financial resources; intellectual property; distribution channels; and physical assets like real estate, operational and information technology, and so on.
The external business environment in which the firm competes This would include customers, suppliers, partners, and competitors. In addition, it could include demographics for the market and industry; potential entrants; information about compliance; emerging technologies; the external availability of technology resources, and general trends that influence the companys position in its market.
Each of these elements has subjective and objective (or, textual and numeric) attributes (metrics, priority, and feasibility, for example) that help give the SEA the depth of description and interaction that distinguish it from a simple diagram or drawing. For example, the element high-value customer could include attributes such as a textual description of who is considered a high-value customer and numerical values that describe the estimated number of customers that fall into this category as well as the revenue a customer needs to qualify as high-value. This information provides an important basis for developing business scenario models. Scenarios could vary according to the revenue required to qualify as a high-value customer.
Keep in mind that explaining an SEA by example poses somewhat of a problem. Companies arent limited to one empirically correct set of elements that should make up the SEA. So while the categories and elements expressed here provide a pretty good example, they shouldnt be considered a cookie-cutter mold after which every SEA should be patterned. Each companys culture will inevitably produce a unique approach, none of which is necessarily better or worse than any other.
One of the first things we notice about successful companies is they have a mission, an identity, a personality, a story to tell about what they are and what they are trying to achieve. This not one of those jargon-laden, abstract mission statements framed and hung here and there in the halls. Rather, this is a clear understanding and articulation of the reason the firm exists.
Faisal Hoque is an internationally known entrepreneur and author, and the founder and CEO of BTM Corporation. His previous books include Sustained Innovation and Winning The 3-Legged Race. BTM innovates business models and enhances financial performance by converging business and technology with its products and intellectual property.
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