CMS/360 Guide Notes - Business Model

Last updated: 19th December 2016

Theme:

  • Business Model

Topics:

  • Shared Vision and Value Propositions

  • Product Roadmap

  • Pricing Strategies

CMS/360 includes a company's Business Model as the first theme of the framework given its significance to the overall success and failure of a business. We recommend that the Business Model be fully documented and reviewed on a regular basis.

Some key points to note are as follows:

  • Business models have been around for a long time as a strategy tool, and the underlying techniques for analyzing a business model continue to evolve
  • A business model is essential for putting a stake in the ground and needs to be developed and adapted as the business evolves and the competitive landscape changes
  • The business model document and related aspects need to be developed fully and considered of extremely high importance by the whole management team
  • The business model has a different purpose compared to a business plan
  • All companies large and small and in all industries should have a clearly documented business model and should evaluate it on a consistent basis
  • A company's business model should not be confused with a revenue model (often the case) as the revenue streams are only one aspect of the overall business model.

Definition of Terms

Business Model:

business model is an "abstract representation of an organization, be it conceptual, textual, and/or graphical, of all core interrelated architectural, co-operational, and financial arrangements designed and developed by an organization presently and in the future, as well as all core products and/or services the organization offers, or will offer, based on these arrangements that are needed to achieve its strategic goals and objectives. (Definition by Al-Debei, El-Haddadeh and Avison (2008) from Wikipedia). There are 50+ common business model concepts to be aware of.

Shared Vision:

There are many definitions of the term 'shared vision' however all point to defining 'what are we looking to create?'. In the business model definition above this relates primarily to the abstract representation of the organization. As well as painting a picture it is important that it is agreed by senior management and that employees, customers and partners endorse it in order to make it a 'shared' vision.

Value Propositions:

value proposition is a promise of value to be delivered, communicated, and acknowledged. It is also a belief from the customer about how value (benefit) will be delivered, experienced and acquired. A value proposition can apply to an entire organization, or parts thereof, or customer accounts, or products or services. (Definition from Wikipedia). Various techniques exist to help define and test a value proposition.

Product Roadmap:

A product roadmap communicates the why and what behind what you’re building. It is a guiding strategic document as well as a plan for executing the strategy. A roadmap is a high-level visual summary that maps out the vision and direction of your product offering over time. (Definition from ProductPlan.com).

Pricing Strategies:

A business can use a variety of pricing strategies when selling a product or service. The price can be set to maximize profitability for each unit sold or from the market overall. It can be used to defend an existing market from new entrants, to increase market share within a market or to enter a new market. Pricing is one of the most vital and highly demanded component within the theory of marketing mix. (Definition from Wikipedia). There are 25+ common pricing strategies to be aware of.

Recommended Outputs

  • Business Model Canvas Document
  • Value Proposition Canvas Document
  • Product Roadmap Document
  • Pricing Strategies Document

CMS/360 Perfect 10 Score

Achieving a perfect score for the Business Model theme requires at least:

  • A unique and defensible business model agreed by your whole management team, to include a representation of the core elements (customer relationships, partners, activities, resources, value propositions, channels, customer segments, cost structure, revenue streams), with value propositions defined for each aspect of the business model, and documentation of assumptions, constraints, external forces and development priorities
  • A clearly defined product road-map that describes in sufficient clear detail the future set of products and services required to accomplish the shared vision
  • A clear and documented representation of the pricing strategies being deployed by the business across product lines with associated assumptions and research that went into defining those strategies.

About CMS/360

Designed by Creative Media Systems Limited (London, UK), CMS/360 is a management review and planning process along with online support that helps self-evaluation and planning around 7 core themes and 21 topics. Further details can be seen at www.cms360.org.

© 2017 Creative Media Systems Limited. All Rights Reserved. This page contains information that is directly or indirectly copyright protected. The Business Model Canvas has been released for use by Strategyzer.com under Creative Commons License. The Value Proposition Canvas is intellectual property and Copyright of Strategyzer AG.