Making Sense to Kids: Business Models

Jay Dwivedi, is a Vice President at eCreativa. He explains business models in a series of articles.

In my opinion, a business leader should be able to describe her or his company's business model on a single piece of paper in way it makes sense to a sixth-grade kid. If that is not possible, something is terribly wrong with your business model and you need to fix it.

And if you start with a simple business model and it became complicated later on, you need to simplify by destroying it.  Jack Welch used to call it "destroy-your-business". It is perfectly fine to break a business into more than one so that they both have simple business models.

The concept of business model is not always clear to many business leaders. 

I have even run into senior level executives of Fortune 500 companies that have only a hazy idea of what a business model is. Almost everyone knows about all the major elements of the business model (though usage of several terms is pretty standard, and quite acceptable), not many understand the framework in which the key elements need to exist and tie together with each other. In addition to that, it should also be understood that a business model is not a business plan. You will provide an outline of your business model in your business plan, but the two are totally different.

(To read the article on www.iproceed.com, please click here)