I have been a long proponent of business models and why by just looking at the core of a business, you see the Profit Pool (http://www.bain.com/publications/articles/how-to-map-your-industrys-profit-pool.aspx) and the business model and you get a very good handle on the business, whether startup or a publicly traded corporation.
Business Model Warfare
What do business model do? They give you a clear understanding of the business? Look at what Dell did. He probably said to himself, I don’t make the Microprocessor, the OS, the display, heck I make nothing and why should I forecast what do with very expensive engineering and scientists and have a bloated SG&A. Instead Dell borrowed from the retail industry catalog, the call centre and then www, aggregated customized consumer queries, broke them into SKUs and then had a Cash Conversion Cycle and Inventory Stock turn that disrupted the OEMs manufacturing for decades to come!
Or like in the telecom and mobile industry how apple with iTunes and Appstore marketplace business model disrupted the long held bastion of OEMs that collapsed the entire ecosystem, creating a new one.
For a great business model 101, By Prof. Michael Rappa. (Michael Rappa is Executive Director of the Institute for Advanced Analytics and a member of the faculty in the Department of Computer Science at North Carolina State University. As head of the Institute, he leads the nation’s first Master of Science in Analytics as its founder and principal architect.)
Why are an understanding of business models so critical to any executive, engineer, product manager, investor, board member, CXO or government? This is where the value of a business either get’s captured or lost! This is where the greatest competitive advantage lies.
So when folks say that this is a potentially a disruptive technology, what they mean is that the IP and the technology changes the way the current business model economics work and radically creates a new model. For example what OTT (Over the Top) like Skype or mp3 did was alter the economics of delivering data and voice over a network that disrupted the telecom companies.
Skype’s Disruptive Potential in the Telecom Market: A Systematic Comparison of Business Models
Case Studies Illustrating Disruptive Technologies: The Impact of the MP3 Format and VoIP
Disruptive Innovation at Wired
Which is why really getting a handle on business models is super critical. For example the framework which I have developed can model any business, startup or large and determine the real value of the company, it’s equity and long term competitive advantage.
Question? Is the core of a business model to move the core inventory of any business? Then what is the inventory of your company?