Strategic

CHAPTER 10Business Model

“The holy grail of strategic thinking is, how do you come up with a business model that differentiates you, creates value for your customers and puts you in a unique position in your industry?”

—Sam Palmisano, former CEO, IBM

At the core of a company is the business model. While the business model receives the white‐hot spotlight of attention during a company's startup phase as it's raising capital and generating the first drops of revenue, it is typically ignored once the organization is launched. Attention turns to products, sales, and budgets, with little ongoing regard for the core of the company. Does your team find itself battling competitors primarily on product specifications and pricing? If so, then you have a tremendous opportunity to separate yourself from the pack through business model innovation.

Research has shown companies that continue to develop and innovate their business models outperform industry peers by 7% in total return to shareholders over a three‐year period.¹ While cool new products garner the lion's share of publicity in business publications, it's the innovation of business models that transforms industries. As Fortune magazine senior editor Geoff Colvin writes, “Business‐model innovation is the new essential competency. It's hard. It will separate tomorrow's winners from the losers.”²

A business model is how your group creates, delivers, and captures value. For instance, a professional services firm in the area of marketing ...