1 Why are business models important?
Business models enable you to create value out of new ideas. Simply having a good idea for a new product or service is not enough if you can’t answer some key questions about how to take it forward. Likewise, having positive feelings about doing good things for people is not a strong basis for creating a platform on which to deliver important services, especially in sectors such as development and social enterprise. Working with colleagues to give structure to an idea helps to draw out important risks and assumptions associated with that idea (Figure 1).
The Business Model Canvas offers a concise tool for thinking through the business and keeping the key points highly visible to you, your team and your other stakeholders.
Leading global companies, including MasterCard, General Electric, Adobe and Nestlé, use the Canvas to manage strategy or create new growth engines, while start-up businesses, schools, development organisations and other enterprises use it in their search for the right business model.
It is often very difficult to think through every single influence on your ideas and plans: how can you explain what you do, why you do it and how you do it in a simple and structured way? When you are planning or looking back at an initiative it is useful to look at how you are doing things now and how you could do them better in the future.
Activity 1
The section above included the following sentence:
[H]aving positive feelings about doing good things for people is not a strong basis for creating a platform on which to deliver important services, especially in sectors such as development and social enterprise.
In the text box below, explain what you understand by this and why you think the Business Model Canvas would be important in this context?
Discussion
The development sector is focused on helping to lift people out of poverty, and social enterprises emphasise social or environmental change. The reasons people need help are extremely complex, and every development solution needs to attempt to understand the local, national and often global environment in order to bring about an appropriate and sustainable response. A ‘good idea’ about helping people that is not well examined could turn out to be only a temporary, superficial solution, or even cause more harm than good. A tool such as the Business Model Canvas enables you to explore an idea objectively in order to work out whether or not it will make sense in practice.
Key point
The Business Model Canvas provides a framework for obtaining the most amount of value from a new idea while taking an objective look at any potential risks and assumptions it carries.
Introduction