Platt Perspective on Business and Technology

Moving towards dynamic performance based business models 1: strategically pursuing a route to sustainable relevance

Posted in startups by Timothy Platt on March 3, 2013

My goal in this posting is to at least begin a discussion of a basic approach for developing and fleshing out a best-fit business model for a specific business and its context, so as to gain and sustain operational and strategic effectiveness and competitive strength for it. And I begin this with the fundamentals:

• The core operational objective and strategic goal for any business, should be to sustainably offer a source of value that a marketplace of customers would see as offering value to them.
• This interest and appreciation from that marketplace, would lead to positive revenue streams going to back that business.
• For a for-profit business this means a reliable flow of profits and for a nonprofit that means a more robust incoming revenue stream that can be devoted towards its mission and vision goals.
• In either case, and for not for profits as well, this means that the underlying business model in place should be centered around providing value and supporting production and distribution of that source of value.
• And I add that this at least preferably means offering uniquely defining sources of value to a marketplace, that would make the providing business stand out from its competitors. It is market-based recognition of value provided, and response to it through revenue generation that sustains the business as a whole. And when a business offers its customers that they uniquely value, this drives increased market share for it.
• And that is where business models enter this narrative. The structure and functionality outlined in a business model should be entirely centered around and oriented towards this prioritization, and every feature and detail included in the business model should positively contribute towards this goal of sustainably, financially effectively providing a defining source of value to the business’ marketplace.
• That is very important – extraneous complexities in the business model and extraneous organizational complexity and operational steps that stem from them add operational delays and serve as avoidable cost centers within the business, reducing competitive capability. And unnecessary complications in organization or operational structure reduce ability to adapt to change and to remain maximally competitive too.

I have been writing about lean and agile organizations in this blog, and cite my series: Virtualizing and Outsourcing Infrastructure as a general reference on lean and agile approaches (at Business Strategy and Operations, postings 127 and loosely following for its Parts 1-10.) I add here that lean and agile begin in the underlying business model and in the reasoning and prioritization that go into its design and execution. And with this as a working foundation for further discussion, I reintroduce a term and concept that I first explicitly defined in this blog at least, in the context of a specific functional area within a business: its Human Resources department – the performance model (see When and If it Might Make Sense to Outsource Human Resources 6. To offer a general definition:

• A performance model is the combined product of the suite of business performance metrics that are effectively in place and in use in an organization.
• This ensemble of metrics should all meaningfully contribute to measuring the performance level of the business, and should collectively do so in ways that meaningfully map out its strength and competitive position and in its immediate here and now and predictively as it would move forward.
• Ultimately, all of the metrics that enter into a performance model should connect into and inform that business’ financial strength and performance, and any metric that cannot either directly, or indirectly but unequivocally do so should be trimmed out of the model as not providing informative value.

So when I write about performance based business models I am writing about performance models in this sense and about lean and agile business models that are driven by the priority of achieving, maximizing and sustaining financially based competitive advantage. And that is what this posting and this series are about.

I am going to follow this posting with a next series installment in which I will more explicitly discuss evaluation and selection of possible performance metrics and the relationship between business processes and practices and the performance metrics that are in place. Meanwhile, you can find this and related postings at Startups and Early Stage Businesses. I add that this series strongly connects to a second series that I have been working on in that same directory: Moving Past Early Stage and the Challenge of Scalability (see Startups and Early Stage Businesses listings 96 and loosely following.) You can also find related material at Business Strategy and Operations and at its continuation page: Business Strategy and Operations – 2.

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