Over the last 20 years, Silicon Valley has benefited from a once-in-a-lifetime alignment of advantages. American primacy, the ubiquity of cheap capital, the arrival of the smartphone (among other widely adopted tech innovations), and, perhaps most significantly, a benign regulatory environment have all conspired to create a historic concentration of wealth and power. The titans of the Valley and their heirs have been free to roam far ahead of lawmakers, watchdogs, and tax codes. That might not be true for much longer, however.
+ Maëlle Gavet
Why business models matter = narration + numbers
“Who is the customer? What does the customer value?” -- Peter Drucker
A good business model begins with an instinct into human motivations, fears, emotions, challenges, and desires flowing into a rich stream of profits.
Business models at their heart are stories that explain how the enterprise works and makes a profit.
When business models fail, they fail the narrative test (story) and the numbers test (profits + loss don’t add up).
Management consultant and writer Joan Magretta explains business models ask fundamental questions: How do we make money in this business? What is the underlying economic logic that explains how we can deliver value to a customer at a reasonable cost?
Think of a business model like the scientific method - you start with an idea for a consumer need, you then test this need, and iterate as necessary.
Plus, business models serve as an exceptional planning tool - a business model focuses on how the enterprise elements will work together to secure profits.
Business models often fail because they make feeble assumptions about human motivations, fears, emotions, challenges, and desires. Often business models are solutions in search of a problem.
Business models are not the same as a strategy.
Business models describe how the pieces work together, whereas strategy tells how you will do better than your rivals to capture and secure customers.
Sooner or later, if you are right and discovered a human need where you can deliver a solution profitably, you will foster competition. Dealing with this competition is how you deploy your strategy.
Executing the same business model with no strategy to differentiate yourself in terms of what customers and markets you serve will lead to failure.
Failure not because of a business model, failure because you are trying to be all things to all people - there is no difference in experience, engagement, or effect between your company and the other company.
Being all things to all people has no story, no patina, no folklore.
A proper business model tells a good story and can get customers aligned around the same values and culture your company brings into existence.
A good story is easy to remember, and is easy to repeat.
A good business model is easy to remember and easy to repeat.
A good business model is a narration that captures the numbers necessary to serve customers and remain in existence for the long-term.
-Marc | Founder @ Brigadoon
Arii has over 2 million followers. So why did her clothing line fail?
The social media star fell short of selling 252 items in 13 days. 252 out of 2.6 million is just over .009%. If you look at that number as a conversion rate, it’s low—too low for anyone who calls themselves an influencer to aspire to. It’s basically less effective than a display ad, which is saying something.
+ Adweek
Audiences + business models
Like most entrepreneurial endeavors, we rarely know what the market wants or needs - and we often launch a product or service based on guesswork and hope. This leads to revenue mismatch, creating too many offers, and going after too many customers / too many markets.
Bill Aulet has written and lectured extensively on the concept of Disciplined Entrepreneurship.
Aulet is a multi-time entrepreneur and the Managing Director of the Martin Trust Center for MIT Entrepreneurship and Professor of the Practice at the MIT Sloan School of Management.
You can find his materials here and a lecture here.
Amazing resources.
From my entrepreneurial endeavors (and numerous failures), being disciplined, and saying no, staying focused is essential.
You can’t be all things to all people.
No doubt, this is a challenge, but it is critical at the end of the day.
Many times entrepreneurs are going after two audiences, two customers, and two types of revenue.
One B2C and one B2B.
Both demand different types of strategy, tactics, and business organization - not impossible - but a significant challenge to be successful in both.
Consider there is a reason there are so few KFC-Taco Bell joint restaurants - it is a massive challenge even for a well-funded, long-established, giant corporation to produce food for two different audiences.
-Marc | Founder @ Brigadoon