Business models are developed
by visualizing all of the “working parts” that make up a business. A traditional business plan, on the other
hand, is most often a formal, written document that provides details about how
an entrepreneur intends the business to operate.
Learning to develop a sound
business model helps ensure that everything that is critical to the success of
the business is in place and working in harmony.
Developing the business model
depends fundamentally on engaging real customers very early in the creation of
the business so we have a better chance of offering what the market really
One of the biggest benefits I
have seen from using business modeling over writing a traditional business plan
is that it allows for adaptation. We use
what we learn from the very beginning of the start-up to make changes in our
business model as we uncover who our customers really are, what they really
want, and how best to put everything in place to ensure that we deliver what we
promise to them.
This process is known as
“pivoting” the business model.
We all start with a clear plan
in mind of what our business will be.
The problem is, most of the time our plan is either only partially right
or just plain wrong. Successful start-ups
become a series of pivots to the business model we started with as we learn
more and more about where our business really fits best in the marketplace.
“As a founder, keeping your
company alive requires you to think creatively and independently because more
often than not, conditions on the ground will change so rapidly that any
original well-thought-out plan quickly becomes irrelevant,” explains
business model guru Steve Blanks.
note of caution: Pivot with purpose
One of the flaws of the old
business planning approach to start-ups was that many entrepreneurs got so
wrapped up in the process of developing the “perfect business plan” that they
never got to the point where they were able to pull the trigger and actually
start the business. This became known as
“paralysis by analysis.”
I am beginning to see a similar
problem surface when using the business modeling approach to guiding business
It seems that people are
beginning to believe that since pivoting is good for a start-up, more pivoting
is somehow better. When they follow this
logic, we see many entrepreneurs get so wrapped up with pivoting that they
forget the goal is to get the business model right so that you can move
Adjustments to the business
model are important, but once the market tells us that we are finally offering
the right product to the right customer, it is time to slow down the pivoting
and focus on growing the business.
Never forget that the ultimate
goal is not to develop the perfect business plan or the most elegant business
model, it is to identify a need in the market and build a profitable business
that meets this need. Business plans and
business models are just tools that help entrepreneurs achieve success.