Success = Business Model Design AND Implementation

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by: Alexander Osterwalder

Many people talking about business models fail to distinguish between business model design and business model implementation/execution. Yet, it is crucial to realize the difference between the two because they both require very different skills.

A company will only be successful with a sound business model design AND a consequential implementation. There is no such thing as a successful business model per se. This sounds obvious, but in practice the distinction is not always made. Often journalists, academics and business practitioners blame the business model for the failure of a company while the main flaw might lie in failed implementation.

In the graphic above we make the distinction between sound/flawed business model design and sound/flawed business model execution. Square B is the ideal situation where a company has succeeded in designing a sound and competitive business model and has successfully implemented it.

Square A
is the situation where a company apparently has a very competitive business model, but is showing difficulties implementing it. This can be due to various factors, such as the lack of management experience (e.g. often the case in start-ups), the lack of resources, missing leadership etc. In such a situation the company will aim at moving from square A to square B, given they are a aware of their implementation difficulties.

Square D is the situation where the business model is flawed, but the company is showing good implementation skills. At first it seems strange that such a situation should appear, but it can happen even to previously successful companies with sound business models. This situation typically appears with the rise of new disruptive technologies or insurgent start-ups that rock the boat of established industries with established business models. When a company finds itself in square D the first thing they have to do is re-design their business model before readjusting their implementation/execution.

Square C
is reserved for companies that haven’t succeeded in coming up with a sound business model and in addition are bad at implemention. Their path to success also goes through business model re-design and implementation/execution readjustment.

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