The Explainer: What is a Business Model?

↔️ ↕️

Sharing buttons:

Today, business model and strategy

are among the most sloppily used terms in business,

but these are separate concepts with enormous practical value.

And when it comes to concepts so fundamental to success,

no organization can afford fuzzy thinking.

The term business model emerged when personal computers

and spreadsheets became common says

Joan Magretta, a longtime editor at Harvard Business Review.

Managers could use these tools to literally run

the numbers to see models of how various decisions might affect

the bottom line.

A new business model might hinge on either a different way

to make something or a different way to sell something.

Take discount retailers like Kmart and Walmart, for example.

These pioneers applied supermarket logic

to the conventional department store

and developed a discount retail model

which involves slashing costs by eliminating chandeliers,

carpets, and personal service in exchange for lower prices.

While business model is a description