Finding a Better Business Model
the key factors and driving forces are ranked on the basis of two criteria: (1) how important they are in determining the success or outcome of the critical issue identified in the beginning, and (2) the degree of uncertainty surrounding them. One is looking for the most important and the most uncertain. The factors that are most important and most uncertain will now form the axes along which the eventual scenarios will differ. The purpose is to end up with just a few scenarios whose distinctions make a real difference to decision makers. These sets of issues must be reshaped and regrouped in such a way that a logic for each one emerges and a story (the scenario) can be told. As Stuart Wells says, “The essence of this process is writing stories about the future as if we were viewing the past” (Wells, 1998).
Perhaps a benefit of equal importance to the value of the insights gained from developing sce- narios is the learning that takes place during the process. This learning should be integrated into the strategic-thinking and decision-making processes. Liam Fahey (2003) suggests the following scenario-learning principles:
• Scenarios are only a means to an end and should primarily inform decision makers and influence decision making.
• Scenarios should be used to carefully form questions about the present and the future and guide how they might be answered.
• Each step must aim to identify, challenge, and refine manager mindsets and expertise, rather than attempt to perfect scenario content.
• Scenarios bring to light information that enables managers to track and monitor how the future is developing. In this way, the learning process is ongoing.
3.5 Finding a Better Business Model Section 1.8 introduced the concept of a business model as having elements that describe how a company goes about attracting more customers, making money, and growing. A more detailed model of the firm can be more helpful when doing strategic thinking on how to improve one’s business model or find a better one.
Discussion Questions 1. Because there is more than one possible future, we don’t know how things are going to turn out;
that is, we don’t have a crystal ball. Explain why going through scenario planning might provide more useful information than just getting the latest forecast from the Wall St. Journal or New York Times.
2. In your opinion, is the cost of engaging an expert on scenario planning and all the management time involved worth the benefit? Give reasons for your answer, particularly with respect to what benefits might be produced.
3. Scenario planning is a complex, time-consuming activity. Can you think of another way to gener- ate similar results at much less cost?
4. Can strategic thinking be done without some form of scenario planning? 5. Are scenario planning and other similar methods only possible for large corporations? Can you
think of any way in which small companies might access those benefits?
CHAPTER 3Section 3.5 Finding a Better Business Model
This model, shown as a “business-model canvas” in Figure 3.5, has nine building blocks (Oster- walder & Pigneur, 2010):
• Key partnerships (KP)—the outsourced activities and resources acquired outside the company
• Key activities (KA)—the activities required to deliver the above elements • Value propositions (VP)—why do customers buy from the company? • Customer relationships (CR)—the relationships established and maintained with each
customer segment • Customer segments (CS)—which ones does the company serve? • Key resources (KR)—assets required to offer and deliver the above elements • Channels (CH)—communication, distribution, and sales channels used • Cost structure (CS)—the cost structure of the elements of the business model • Revenue streams (RS)—revenue streams that result from the value propositions success-
fully offered to customers
Key Partners (KP)
Key Activities (KA)
Value Proposition (VP)
Customer Relationships (CR)
Cost Structure (CS)
Revenue Streams (RS)
Key Resources (KR)
Channels (CH)
Customer Segments (CS)