Entrepreneurship, 6th Edition

5The Importance of Business Models

Uber disrupts the taxi industry with an innovative business model.

Introduction

Once you've identified your opportunity, the next step is to devise a strategy to pursue that opportunity. Although you're probably familiar with the basic strategy categories from previous coursework—differentiation, low cost, niche—many would‐be entrepreneurs fail to grasp the intricacies of devising and implementing their strategy. All strategies are driven by the company's business model. At the heart of any successful startup is a business model that generates enough cash to sustainably grow and gain market share.

Many entrepreneurs focus too much on writing a pitch or business plan for the sole purpose of raising money, rather than to prove out for themselves that there is a large and growing market with an important need or problem to be addressed. When using this approach neither the pitch, nor the business plan hold up to the scrutiny of investor inquiry because the most important questions and analysis are being put off to some future time after ample cash has been raised. While this approach might work well when money is in abundant supply, it ignores the most important depleting asset of any entrepreneur, time. The desire to execute on an idea sometimes outweighs the importance of discovering precisely what you should be building and for whom. ...