Sunday, June 22, 2014

Dots Connecting: Business Model vs. Business Plan

Business Plan" follows "Business Model".

A business model is why this business works; it is a multi-level, zoom-able schema of how a business or an organization creates, delivers, and captures value for stakeholders: Customers, businesses, investors, or society. A business plan is a formal statement of a set of business goals, the reasons they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals. What are the further difference between Business Modeling and Business Planning?

Structural vs. Backbone: Business Modeling is structural and can be both created and changed very quickly. Business Planning is far more detailed and is the backbone of your business objectives. However, both Models and Plans should include figures (revenues. costs and profit), sales channels and the key day-to-day activities of your business...  

Foundation vs. Skyscraper: It is that the Business Modeling is the "foundations" (conceptually) and the Business Planning is the "skyscraper" (implementation) you aim to build and what you'll be working on to day in and day out to achieve?

 Brief vs. Detailed: Business Modeling is the basic and key business system you need to design, test and validate, before developing a deeper plan, a business plan. In a completely new uncertain environment, you need a faster and better tool to capture opportunities and eliminate risk before sticking to plan A (so the logic scenario is to find the right business model and then create the business plan).

WHAT vs. HOW: Look at the business model as the "WHAT" the business is about or what it will do for customers. The business plan is a more detailed definition of "HOW" the business will execute the model. It is much easier and cheaper to iterate what the business is about using the canvas before ever putting the wheels in motion to build everything in the plan needed to bring the model to life. Validate your business model, there is such a massive leap from validated framework to the detail which is required for a working business.

Mock-up vs. polished: Look at the difference between the model and the plan analogous to software user interface design. The business model is a lower fidelity, less precise "mock-up" of the business that can be quickly iterated on without putting too much detail into it. The business plan is like a detailed, polished user interface design with all interface elements fully designed out and ready for building. The evolution of a business model will evolve through various iterations from a very crude view to a refined view along a gradient of preciseness validated by customer feedback.

Rational description vs. Formal statement: A Business Model describes the rationale of how an organization creates, delivers, and captures value (economic, social, cultural, or other forms of value). The process of business model construction is part of business strategy. A Business Plan is a formal statement of a set of business goals, the reasons they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals.

The most important difference between business model and business plan is the "fitness for use": When do you use a Business Model? Regularly you use it to review, adapt or redesign the basic building blocks of a Business; when do you use a Business Plan? Regularly you use it to raise funds of shareholders and financial Institutions to invest in the business.


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