We've been discussing different approaches to strategy formulation. We started by talking about the more typical, traditional, formal, strategic planning process. And then we've talked about some alternatives to that. The strategic war room approach, the rapid prototyping approach, and the design thinking perspective. So I want to talk about one more, and this is one that's known as the business model canvas. So what is this, what's the point of the business model canvas? Well, it's kind of an alternative to the sort of traditional business plan approach, and the idea here is that it kind of hits a sweet spot, it's not overly complicated and detailed, like a business plan can often be. But it gives you a little more clarity into what's going on in your organization than just some sort of back of the nap can quick idea. So it tries to kind of split the difference between those things, and I think ideally that accomplishes several things. First of all, it really allows the organization to focus on what's important. So again, once you strip away the sort of 40 plus pages of stuff that's in a typical business plan. You might be able to improve the clarity, and the focus of what's really driving your business. And that's why the business model canvass is used a lot in the tech sector, for example. This is something that's used quite a bit in that industry because it allows for some sort of quick, to the point focus, on what the business model is really all about. So that's the focus piece, I think another thing that it can bring you is flexibility. So, the brevity of the business model canvas can also mean that it's easier to tweak it, it's easier to adjust and react, get input from others as they look at what you've laid out, and you can make some adjustments, make some changes. So it might provide for a more flexible way to really alter your strategy to think carefully about it as you sort to iterate through different ideas. And finally, it can also bring transparency. I mean, this is where your team might really better be able to understand what your business is all about and understand the business model. Remember, earlier we've talked about how strategies sometimes emerges. An emergent strategy sometimes can come from lots of different places in the organization. So ideally, you want people throughout your organization to really have a clear understanding of what your strategy is as an organization. So, the business model canvas is a way to sort of convey that succinctly and the brevity of it sort of allows everyone in the organization to understand with some clarity what the business model is. So ideally, the business model canvas is something that you can put on one piece of paper. So picture a typical one sheet of paper sized thing, and we want to be able to capture the essence of what an organization's business model is on that one sheet of paper. And typically, a business model canvas includes nine elements. So, it's going to say something about customer segments, who are your customers? What is it that they're looking for, what do they think, what do they see, what do they feel? How do they interact with you as an organization as they pursue, or purchase your products or services? So, understanding the customer is an important aspect. Another aspect is, you need to have some clarity around the value proposition of your organization. What's compelling about the value proposition of your business? What is it that you can do that customers really want to buy or to use or to partake in. You need to understand the channels. If we understand what our value proposition is how is it that we promote that, and sell that, and distribute that, and is it working? Are the channels for distribution and sales and things of that nature, is that working? Are those things working as well as they could? Fourth, do we understand customer relationships? I mean, how do we interact with the customers? What is their experience like? What's their journey, so to speak like, as they encounter and interact with your product, and service, your organization. Fifth, you need to understand clearly what the revenue streams are, so, if we have this value proposition and we have some understanding of what our customers are looking for, how is that able to bring in revenue? What's the model for earning revenue from that value proposition and do we understand clearly what that is? Next, we might focus on the key activities. What are the things we really need to do that are sort of uniquely strategic? What can we do that is really important for executing on this value proposition and distributing it out to our customer base? We need to understand key resources. So closely related to activities. Do we have the right assets and capabilities? Do we really know how to do what we need to do in order to create value from this particular product or service offering. So, is there something unique about that? Are those resources difficult for our competitors to acquire, to imitate? I think that's important. Eighth, do we understand key partnerships? Now, we might think of that as do we have valuable business partners that are important for us to sort of serve well and create value for. But I think you can also think of the key partnerships as, is there some stuff that we don't have to do ourselves? What is it that we can offload? What is it that we can enlist the help of partners and help create value for them, and also have them create value for us? As we execute on this business model. And finally, we better understand our cost structure. Do we understand what the cost are? Where they come from? What are the cost drivers and what does it really cost us to execute on this business model that provides this value to our stakeholders. So visually here's an example, and the type is really small here, but you can go to the Internet and search business model canvas, and you can find all sorts of templates that tend to look something like this. And again, this is what you can do with your one sheet of paper, you create a bunch of sort of boxes, it's sort of a matrix where you hit on all nine of these essential elements of the business model matrix. And again, the point, is to sort of do it succinctly in a way that's sort of easy to understand and transparent. But it also gives you some insight into all those aspects of your business model and allows everyone to understand what's really going on. So let's back up. Again, as we think about strategy formulation, I've talked about sort of formal processes. I've talked about war rooms, and prototyping, and design thinking in the business model canvas. There's other things I could describe. There are a host of other approaches that organizations can take to strategy formulation, and again, this is by no means an exhaustive list, this isn't even necessarily the five most successful ways to think about it. But what I wanted to do was just give you a sense of what different approaches to strategy formulation look like. What they look like in real organizations. The approaches that organizations take to forming strategy can really vary. And these are a variety of ways I've given you at least a flavor for how that process can vary. And I challenge you to think about other ways to approach strategy formulation. The point is, can we get out of just the sort of annual cycle, budgeting, resource allocation mindset, and can we get in a different mindset that might facilitate the generation of better, more innovative ideas as we put our strategy together going forward.
