Thursday, June 02, 2011

The Business of You - Introduction

I always thought an MBA would provide the skills to become a successful manager or more recently, an entrepreneur - but I never thought it would be a significant personal development tool. Of course much of this naivety probably stemmed, in hindsight, from a personal bias against the 'soft, fluffy, HR stuff'. While an MBA does focus on the skills that managers need to develop such as greater self efficacy and empathy to their staff, this wasn't where I saw the personal development skills or tools resting. All those provided frameworks, but in specific contexts... e.g. business models and discussions on customer value propositions were related to organisations and businesses, intrinsic motivation and assessment of efficacy was linked to personal development.

I personally saw an opportunity to leverage tools outside of their context to provide a wider breadth and depth of tools. If I may...and I only do so because a 10 minute Google search didn't reveal anything similar to this in terms of an available webpage or blog.
But first a primer on the business model:

Part 1 - Business Model Primer
In broad terms, a business model describes the rationale of how an organisation creates, delivers, and captures either economic, social, or other forms of value. The business model defines how an organisation meets its 'fundamental objective' - the raison d'etre. While there are many frameworks to represent a business model the most commonly used ones include:

Model 1
WHO: The audience or market to whom the product/service/function etc is being provided - the 'customer'.
WHAT: The product/service/function itself that is being provided - the 'product'.
HOW: The mechanism through which this delivery is achieved and the differentiators or competitive advantage - the value proposition.

Model 2
This is tied to the concept of Business Model Innovation - the creation or reinvention of a business.
The business model is considered to consist of four interlocking elements that together create and deliver value.

Customer Value Proposition:A successful business, in this instance, is defined as one that create's value for its customers by doing a job that meets a fundamental problem or need for them. Clayton Christensen refers to this through the phrase: 'What job did you hire your milkshake for?'. He explains this better than I ever could in a video about disruptive innovation.

Profit Formula: The profit formula defines how the organisation creates value for itself - how it makes a profit. This often consists of:
  • Revenue model.
  • Cost structure.
  • Margin model (How much does each transaction need to net gain to cover the cost structure and meet profit targets?).
  • Resource Velocity (How much revenue and how quickly needs to be generated per dollar of assets and per dollar of fixed cost?).
Key Resources: The key resources or assets within the organisation required to deliver the value proposition. This focuses on elements that create value for the organisation and customer.

Key Processes: The key processes that allow delivery in a successfull, repeatable and scalable way. This also includes rules, norms and metrics.
With a couple of frameworks for an organisation business model in place, what does this mean for an individual? More in the next post.

1 comment:

Aditya Prateek Anand said...

Nice one Praz, keep it up.