Why have I spent more than a month to talk about business models?… and what is the relationship between a business model and strategy?

A business model is like a painting, it is a snapshot or screenshot tool about how to pass from an idea to a business model, to design a business with the minimum constituents to consider.

The business model canvas from Alex Osterwalder & Ives Pigneur, is one methodology to help you to frame the main premises to consider when you want to pass from an idea to formulate a business and the fundamental questions we must ask ourselves when we are going from an idea to a business model. But this is just a tiny little petite piece of the strategy formulation process. Also, you can utilize the business model canvas to review and change current business models of enterprises which have been operating for quite a while. But we need to see the big picture of strategy and not just “business models”.

A business model is integrated into a strategy formulation process….

But what is a strategy? There is no single, not even one, universally accepted definition. After 20 years of my life I have spent studying several book authors and strategy gurus, such as Henry Mintzberg, Joseph Lampel, Sumantra Ghoshal, Michael Porter, Gary Hamel, Robert Grant, and reading the strategy creations from my London Business School professors such as Don Sull, Julian Birkinshaw, Linda Gratton and others… I have arrived at a conclusion:

“Strategy is defined according to the eyes of the beholder”.

There is no such “one concept” of Strategy. There are more than 10 schools of thought on strategy formulation. There are at least 10 distinct points of view, which have tried to explain the concept of “strategy”. It is not my aim to explain each of them but is important that we know the background.  More than 10 schools of thought have tried to define it, and each of them has both its limitations and contributions.  These schools of thought are:

1. The Design School: see strategy as a process of conception
2. The Planning School: strategy as a formal process
3. The Positioning School: strategy as an analytical process
4. The Entrepreneurial School: strategy as a visionary process
5. The Cognitive School: strategy as a mental process
6. The Learning School: strategy as an emergent process
7. The Power School: Strategy as a process of negotiation
8. The Cultural School: strategy as a collective process
9. The Environmental school: strategy as a reactive process
10. The Configuration School: strategy as a process of transformation

In addition, as a corporate strategy advisor, I can´t help business owners, if I don´t know where they stand with their companies. It is different to help a startup owner, or someone who is at an early stage such as brainstorming his/her idea into a business model, than to help a company that is running and has some revenues or even net profits. It is not the same to help the owner of an entrepreneurial organization, or a mature organization, or a professional expertise entity such as consulting companies than to manage a multinational diversified organization. Each company is situated in a specific context. Each context is a specific type of situation in which the company is positioned. Doctor Henry Mintzberg http://www.mintzberg.org/ is the strategist which has convinced me the most about his research and application of “Strategy”. Henry Mintzberg is an internationally renowned academic and author on business and management. He is currently the Cleghorn Professor of Management Studies at the Desautels Faculty of Management of McGill University in Montreal, Quebec, Canada, where he has been teaching since 1968.  I agree very much with his research and teachings, and I follow his recent developments. Many of the ideas I will share with you come from Mintzberg books and remarkable work. I also agreed very much with the Last Sumantra Ghoshal research. I had the opportunity to meet him before he passed away. Any LBS student, who received courses with him, can tell you how wise was him about strategy themes.

Mintzberg has also developed a classification of configurations of the business organizations, to serve us as the basis for determining the set of context for each strategic management formulation and implementation

In addition, as Doctor Robert Grant explained very well, there are two basic levels of strategy within an enterprise: Corporate Strategy and Business Strategy.

Corporate Strategy vs. Business Strategy

Let me differentiate between both of them:  Corporate strategy defines the scope of the firm in terms of the industries and markets in which it competes. Robert Grant states that corporate strategy decisions include investment in diversification, vertical integration, acquisitions, new ventures and the allocation of resources between the different businesses of the firm. Also, includes the decision of divestments or spin-offs.

Business Strategy is concerned with how the firm competes within a particular industry or market. The firm has to adopt a series of actions to establish a competitive advantage over its rivals. This area is also referred to as “competitive strategy”. How should we compete? The answers to this question are the themes of “business strategy”.

The “business model canvas” helps us only to visualize the concept of our business, it helps us to transform from an idea to a business model… but the business model is not enough to start your business. The business model canvas doesn´t give us any input about how are we going to compete and it doesn´t give us the whole picture about crafting the strategy formulation process either.  So there is still a lot to learn to go on…

Published by eleonoraescalantestrategy

Corporate Strategy Artist, San Salvador, El Salvador View all posts by eleonoraescalantestrategy