Last Updated Mar 31, 2010 11:32 AM EDT
Yesterday, when top-down management was in style, it was OK if only the suits in the C-suite knew the answers. After all, they were the ones making all the critical decisions. The peons way down the org chart, like you and me, were just the crew pulling the oars. But in today's fast, flat, and -- more to the point -- empowered organizations, everyone has to understand the company's critical values, strategies and even tactics, because everyone is making important decisions.
Back to business models. The superb question in the headline starts off an insightful HBR.org post titled A New Framework for Business Models, by Mark W. Johnson. To cut to the chase, he suggests a business model must answer a number of key questions including:
- Why would someone want to buy something from you? Identify your customer value proposition.
- How will you make money selling it? Articulate your profit model.
- What, exactly, are the important things you need to do to succeed with the plan? Identify which company resources and which processes are essential to delivering your customer value proposition.
"Identify this model," Johnson writes, "and you will go a long way toward understanding why your company is successful in what it's doing (or at least what it was doing before the recession). And unless you know that, you'll have little chance of working out what you need to change to be successful doing something else -- like meeting whatever challenges the post-recession economy creates this year."Because it so succinctly ties together strategy and execution, Johnson's business model becomes a central business document every employee should have some grasp of. It reveals much more about an organization than a mission statement, org chart or customer list possibly could.
My advice: Heed Johnson's insights into rethinking how your business plan is put together, then share this information with the rest of your company.
How about you? Do you understand how your company makes money (not just sells products) and attracts customers? How can you expect to advance your career if you don't?