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Manage your Business Model across the business lifecycle

There has been an explosion of posts on Business Models in the past several years. Many of those posts relate to start ups / new ventures yet business models need to be actively managed throughout the entire business lifecycle. The half life of a business model has shrink from 20 – 100 years (Railroads, steel) to 7-10 years; this means that the business model can no longer be assumed, it needs to be actively managed.
There has been an explosion of posts on Business Models in the past several years. Many of those posts relate to start ups / new ventures yet business models need to be actively managed throughout the entire business lifecycle. The half life of a business model has shrink from 20 – 100 years (Railroads, steel) to 7-10 years; this means that the business model can no longer be assumed, it needs to be actively managed.

There are multiple business model schools of thought (
Slideshare); they have their strengths and weaknesses so pick an approach that best suits your business and situation.

Business Models Lifecycle



Start-up phase

Need: A “good enough” business model design that can evolve as the start up launches and learns. The leadership team needs to focus on the critical assumptions underlying the business model and document those. If you are working with an advisor, it will be important to transfer business model knowledge so that the business knows how to evolve its business model over time and can get to a solid definition before the growth phase.

In Practice: With the advent of Lean Start Up and the focus on launching a Minimum Viable Product, there has been less attention devoted to the business model. Having worked with a number of start-ups, I have found a lot of chatter around business models but very little real effort and focus on the part of the founders. There is a Ready – Fire – Aim approach to launching the business and issues start when the business reaches the growth phase without a solid business model in place.

Recommendation: The easiest way to get to a good enough business model is to use the Business Model Canvas. It provides the structure and the process to get to a good enough business model. Document the underlying assumptions so that those can be validated as the business learns.

Examples: Countless

Growth Phase

Need: A solid, validated business model design. After launching your start up with a good enough business model, get to a defined business model before ramping. Assumptions need to be validated, Customer Value Gaps need to be researched, the economic model needs to be established, the scalability of the model needs to be established.

In practice: As the growth phase starts, mind share is focused on the requirements of delivering growing demand for the product/service and putting in place all the structures and processes required to support a growing business. The business model design is often considered important but not urgent and does not get the required attention. Growing the business without a solid business model only makes it more difficult to change down the road and a flawed business model scaled up can be catastrophic.

Recommendation: Early in the growth phase, monitor the business model to ensure that is remains relevant and that new information and knowledge is used to continue validating the business model. When the first signs of maturity appear in the growth phase (business deceleration), start the business model evolution and innovation process. This activity is what will lead to the next growth phase and help you avoid reaching the decline phase.

Examples: HP Inkjet where in 1995 the systems model (Razor / Razor blades) was implemented and fueled a new growth phase.

Maturity Phase

Need: How do I evolve the business model to get back onto a growth phase or add a line of business that is in a growth phase? Can I evolve the business model based on changing assumptions and/or do I need to transform the business model? Early in the maturity phase when profitability and cash flow are there to support this new exploration is when it is the easiest to tackle thinking about evolving your business model.

In practice: The business has grown to the point where senior executive attention has shifted to internal management of the business and a focus on delivering consistent quarterly results. Customer knowledge is often obtained through many market research studies and executive customer visits. No one is actively managing the business model and often the original design has evolved due to strategies, acquisitions and operational changes that were not always aligned with the business model. The strategic context will have shifted and likely the business model is no longer aligned with the Strategic Context.

Recommendation: Without significant effort to re-establish a business model that delivers a new growth phase, the business is likely headed for the decline phase. The longer you wait the more difficult it will be to overcome inertia. This is when an external perspective is most needed, whether bringing in an expert to work with the management team or bringing in an outside team to design an evolved or new business model.

Examples: Outerwall (Redbox, Coinstar), HP Printing

Decline Phase

Need: Your market value is declining and your revenues and profit are relatively flat. The business model is in need of transformation at a time when the business is doubling down on wringing efficiencies out of the current operations. At this point the business model cannot just be evolved, it requires significant research and analysis to understand whether the business model can be evolved or if it will need transformation.

In practice: Senior executives are loath to make significant changes and want to continue their current practices – after all that is what made them successful. Changing the business model represents not only business but also personal / professional risk. Change often does not happen until a new management team is brought in to turn the business around.

Recommendation: The easiest solution is to avoid getting into this situation in the first place. The best time to put energy into evolving your business model is while still in the growth and early maturity phase. It does not appear to be urgent and important at that time while the reality is that it is a critical activity. Successfully transforming a business model is one of the hardest things to do and the recommendation would be to bring in the best business model experts that you can afford. This is not a capability that is internal within companies.

Examples: Kodak, Radio Shack, IBM, HP

About the Starcher Group LLC – We have been working Business Model projects since 2002, working with $1M to $25B businesses across 18 industries and counting. To date we have identified and designed $2.5B in value for our clients.