Business Modeling – An Introduction
A business model is a representation of a business that is used to design, plan or monitor the way that business works. Whether it is setting up a new business venture, or closely monitoring “business as usual,” business models of one type or another are a part of running any company.
There are three main uses for a business model:
• Designing how a new business venture or expansion will work
• Planning, budgeting and forecasting
• Monitoring the health of a business (Diagnosing problems and spotting new opportunities)
When setting up a new business or making a major expansion, a business plan is a definition of intent: a model of how you intend the business to work. Usually a written document backed with spreadsheets or other supporting numerical works, a business plan is one of the best known forms of a business model. However, any model that can help define, analyze or predict the outcome of a venture is a business model.
For an established business, executives and managers will look ahead at a forthcoming period and create a plan designed to set out the intent for that period. These plans are business models that typically drive a budget (a model through which the business can be controlled and tracked).
Finally, business models are used to assess the health of a business by analyzing historical data and using it to assess the performance of the business and to diagnose problems and find opportunities. These models usually take the form of spreadsheets and analytical BI tools that display historical data about what happened, allow the user to “explore” and analyze the data to see trends, examine multiple “what-if” scenarios and explain why something happened.
In all these cases, business intelli ...