Topic 2 Relevance and benefits of business modelling

While every business has a business model – explicit or not – business modelling is the process of describing the model and using tools to shape it proactively.  Business modelling frameworks are useful tools for many organisations. They create a structure or foundation for intentionally articulating, designing and/or building a business model. Being proactive about creating your business model is a very powerful approach to creating an agile and successful business that operates in the world of today whilst also preparing for the world of tomorrow.

1.Benefits of Business modeling

  • It offers opportunities at low cost and risk:

For entrepreneurs and early start-ups, business modelling is fast to use, enabling you to act immediately on your ideas. It opens your eyes to opportunities and innovation and, facilitates better conversations and decisions – both internally and externally with stakeholders – all at low cost and low risk. 

  • It helps you plan from now to the future:

Business modelling in start-ups is often future-orientated. But it should be used in three forms of time contexts: present, past and future. It is a tool to understand the way something functions at a point in time. 

  • It helps you co-create value with your stakeholders:

Creating value is the core of any initiative, project, business, idea or policy instrument. By explicitly defining and specifying exactly how this is planned to be done, you give yourself and your stakeholders a shared understanding of how the business will be successful – the story and the numbers. Through this, the co-creation of value is supported, enhanced and ensured. 

  • It is faster to build the model and check whether it is viable than it is to build the actual thing.

2.Business model vs Business plan

The terms “business model” and “business plan” can often be confusing. A business can often be described as a journey. You need to decide on the destination and then you need the map to get there.

A business model is a description of how to create, deliver and capture value at a given point in time.

And a business plan forecasts, plans, and creates strategies. It also looks at risk and finances so the business can “use” time to develop from the current business model to the envisaged future business model.