There have been many developments made in recent years in the development and explanation of a start-up’s business model. Why is it that business plan templates and business planning software ignore these developments? This leads to sub-optimal business plans that don’t communicate as effectively as they should.
The old paradigm
The 4P’s of marketing have been very effective over the years, however they no longer adequately explain the complexity of business models that are evolving as a result of the Internet. This old paradigm was developed in a different era and unfortunately seems to form the basis of all the existing planning software and templates available globally. Some leading consultants are moving beyond the limitations of these approaches, however very few business owners and founders have access to this technology. There is an increasing need for founders to explain their business model in terms that others can understand. These business models are not always oriented around profitability but may be oriented around the growth of a network of users.
The interplay of relationships and interconnectivity of businesses as increased dramatically over recent years. Specialisation has played its role in creating a more interconnected series of relationships between people within the marketplace. Existing software and templates do not adequately explore these relationships and the interplay between profitability and revenue.
Towards a new paradigm
In defining a business model, it should explain the relationship between an organisation’s strategy and the financial outcomes, in other words it outlines how the strategy is translated into cash. This is a particularly important element of a business plan from an investor’s perspective.
Many recent developments by a leading figure in business model design have fundamentally altered the structure and nature of a document. Leading investors are well aware of these improvements in the process however many of these improvements have not yet filtered down to business founders and even consultants providing advice in this space.
There are 9 key business planning elements that must be specifically addressed in order to articulate a business model. The founder must take the reader through a journey between each of these 9 elements. At the heart of a good business model is a value proposition. In modern planning the value proposition should replace the vision and mission statements used in traditional business planning approaches.