Many entrepreneurs never think about business models. A group of my business students met with a successful local entrepreneur for a discussion about his entrepreneurial story. The entrepreneur related his experience of launching the company based on his university hobby of competing in “Magic: The Gathering” tournaments. Having covered business models in a recent class session, one of the students asked: “Did you put together a business model canvas?” The entrepreneur’s response, predictably, was “What’s a business model canvas?”
As with the majority of business skills and functions, a fully-developed business model is not necessarily integral to the success of a venture. Similarly, some entrepreneurs function effectively without detailed theoretical knowledge of finance, accounting, marketing, or management.
At the same time, most entrepreneurs, managers, and businesses benefit from expertise in each of these areas. At the least, businesses with poor functional skills would likely be vulnerable to competitive ventures with more capable management teams.
Business model analysis can be quite beneficial to entrepreneurs and managers. A deeper understanding of a firm’s business model points towards opportunities for improving value creation, identifying new customer segments or markets, and more effectively competing against rivals.
Good business model analysis, however, is rarely a five minute activity. Designing and evaluating brilliant business models requires a modest time investment, especially if the business model should be tested in the real world.