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  • Writer's pictureHani W. Naguib

Mentor Journey: Misconceptions From The Field - About Business Models

Updated: Mar 30, 2021

A business model is not a strategy

Many entrepreneurs confuse your business model with strategy. It is a critical mistake! A strategy is what you need to do to win the war against your competition. It is developed based on how you understand the current market, the customers, trends, and the competition. A business model is all the details of how you intend to deliver that strategy in a scalable, repeatable, and profitable way. So first, understand your market ( competition + customer ) and come up with a plan. Then, figure out how you can implement it by designing your business model. An excellent business model without a good strategy will not make a difference. It will be a business model implemented without context. A good strategy without a coherent business model will lead to costly losses.

Your business model is not how you will make money

There is a general misconception about what is a business model. A business model is not how you will make money! That is only two-ninths of what your business model is. This wrong approach forces the mindset to focus on how much it will sell (assumed projections) and not what it takes to create such potential revenues. Creating a successful business model requires a more in-depth look into the connections between value proposition and customer, value proposition - the customer - revenue, value proposition - resources - operations, and costs. A business model is more than the sum of its components.

Filling the Business Model Canvas is not your business model

The business model canvas is a visual tool designed to help people communicate and share their thoughts in an organized manner. It is also a thinking tool designed to help people formulate how they will create value for the customer and from the customer.

Filling the building blocks on the canvas is superficial use of this great tool and will only result in superficial results

Instead, focus on understanding the relationships between the building blocks and how they impact each other. Dedicate time to consider alternatives to attain better results from the business model. In other words, think about how you can successfully implement your strategy in different ways by prototyping different business models. Use the canvas to consider alternative possibilities and evaluate the potential outcome of each.

Your business model is not your startup

Many entrepreneurs believe that once they have a business model, they are ready to go! Before you rush into implantation, you must take a moment to understand what kind of culture you need and what kind of people you need on your team to implement this business model. Without the right culture, your business model will not be successful. Culture is the medium through which implementation either breathes or suffocates. You must give it the right amount of attention. I am witnessing the demise of a wonderful business model that is desirable, feasible, and viable. Because the right culture was not contemplated, the founders hired employees based on skill sets only. Despite the great skill sets, they do not have the right attitudes nor mindsets. That created a terrible working environment, and business model implementation suffered. The founders did not consider the company's culture, and the hiring of the people was not well considered before the implementation. Wrong culture and wrong people will end your startup in a blink of an eye!

If a great value proposition needs to be wrapped with the right business model, the right business model needs to be submerged into the right culture! Begin with:

  1. A strategy: How will you compete? Consider rivals, potential customers, Macroeconomic conditions, and key trends.

  2. A business model: How will you profitably implement your strategy.

  3. Constant Validation: Get face to face with your customers, talk to them but most importantly, listen to what they have to say. Find out facts and remove assumptions. Keep doing it until you know enough.

  4. Understand your culture needs: Ask yourself What kind of enabling rules I need to create to make my team thrive, implementing our business model and strategy successfully?

  5. Implement: Ask yourself, what kind of funds and how many employees are needed to execute the business model in the real world?

Goodwill and Respect

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