3 Where do business models come from?

Figure 3 Rustic jam jars on sale in a shop or at a market

While in some situations a business model might emerge on the basis that it is the ‘right thing to do’ or it just makes sense, at other times – such as when considering specific opportunities or challenges – you will need to plan and make conscious decisions about your business and how it will grow and develop.

A simple example might serve to illustrate this.

Imagine you have started a business selling homemade jams at local farmers’ markets. After several months of doing this successfully you might recognise that the ‘natural thing to do’ would be to augment your offering with a range of fresh breads that customers could buy with their jam. Adding bread would be an extension of the product range and would complement and provide added value for your customers.

Importantly, this diversification of your offering would, among other things:

• bring additional revenue streams

• broaden the range of customers

• change the supplier base

• impact the business costs.

Now fast-forward 12 months: your business has been so successful that you have been approached by a major national retail chain that wishes to stock your product. A decision to accept this offer would mean a complete change in virtually each of the nine areas of the Business Model Canvas: new partnerships will be required, different resources will be critical, your revenue and cost structures may well be radically different.

What might seem like the big opportunity you have been waiting for could force you to radically change your business model in new and unexpected ways. This can lead you to consider the unique value proposition that you are offering to the market, and most particularly how you are creating value for existing and potential customers.

It is consequently important to recognise that while the ‘natural thing to do’ can serve you well up to a point, it is critical for the growth and long-term success of a business that the business model is consciously reviewed and updated on a regular and structured basis. This is to ensure that the business model remains fit for purpose and that strategic decisions made earlier in the business’s life cycle are not now impeding its future growth.

This review might involve some simple tweaking, or perhaps full-scale business model innovation (Jarrell, 2017).