Your Business Model Cheat Sheet

The best Business Models can be communicated in a few words, documented in a couple pages, and managed with a few meetings. Your Business Model should fit on one or two pages. It should be shared, known and worked on by everyone in your business.

Create a Cheat Sheet (n: a written or graphic aid that can be referred to for help in understanding or remembering something complex).

Let’s explore how to document your business model.

What is a business model:

Simply put, your business model documents how your business works and what makes it unique from the many other business out there. It should:

1. Identify and make explicit what is unique
2. Document and communicate those differences in a way that creates a compelling vision for the future and aligns the performance of all activities
3. Ensure progress toward implementing, sustaining, and improving to deliver the vision

I use the following format to help give definition to the elements that make up a business model:

On the right side of the diagram is the hierarchical list of elements that define your Business Model. Your Business Model focuses mainly on these elements. As we go down the list, terms are getting more near-term and more detailed.

• The Positioning terms are the elements that are ten plus years out and should endure time, technology and people in the organization. They define why the business exists.

• The Strategy terms are three to five years out and create a picture of what outcomes are priorities.

• Plans are made annually and quarterly to guide how to achieve the Strategy through daily, weekly, and quarterly actions.

Issues are called out under Plans, but can impact success at any level of the strategy. As such, it is important for teams to rigorously manage and solve Issues at all levels. It starts with uncovering and tracking a prioritized list of Issues. This includes any important decisions or problems that can impact success. Teams must then have a shared approach for solving Issues that identifies their root cause and first principles. This exposes the best solution to solve them and make them go away in a verifiable way.

All of this projects on a shadow of the Context that impacts strategy through internal resources and capabilities relative to external trends like customer needs, innovation, competitive positioning and social and regulatory impacts. This Context can help to accelerate your success or create impediments. Your business model must consider and define how you will compete to win within this Context through a good product market fit, go to market activities, and other Themes.

The left funnel is the people piece of the Business Model. It documents the concepts needed to be great at people.

How to Create Your Business Model

Positioning

Positioning includes the strategy elements that should be rock solid: Mission, Values, and Vision. These guide key choices and help to give direction when uncertainty rises. When you get them right, you can carve them in stone to endure beyond anyone’s tenure in the company.

You may already have positioning statements documented for your company. If they serve you well, you may not need to modify them. But, most businesses that are just starting to implement a Strategy OS will want to revisit them to ensure they are solid touch stones for at least the next 10 years and ideally indefinitely. If you are stuck, look to other companies, brands, and people for inspiration. Here are a few examples:

To start, make sure you have a documented statement for each Positioning element as you start to implement your Strategy OS. Create your Mission, Vision and Values in a working session that allows key leaders and influencers in your company to give input. This will produce a better result than any individual can create. Test drive your positioning for a quarter and revisit whether it is serving the intent at the next quarterly meeting (see 6, Execution Rhythm.) When you have a couple quarters with no changes, it is time to start making these statements the corner stones on which the Strategy OS is built and run. Publish them widely. Refer to them when evaluating all other components of your strategy and your people. Point to them for decision guidance.

Strategy:

Strategy in this context refers to the dictionary.com definition: “a plan of action or policy designed to achieve a major or overall aim.” In this case, the overall aim is to achieve the Positioning created above. Strategy connects near term action from Plans to the long-term why of Positioning.

A useful construct in creating your strategy is to organize around the major Themes that advance your Positioning. Themes are broader than plans or programs in that they offer guidance about what is needed without limiting possible plans of action or timeframes. They are destination statements describing with details what the business looks like at some future date from a variety of perspectives. Since it is difficult to envision a clear future much further out than about three years, use this as your timeframe to create destination statements describing your major next achievements. Make these statements challenging and motivational, but within the realm of possible outcomes.

These destination statements come from assessing how you can best use your business talents and unique capabilities to win given the business’ Context. Being good at talking to your customers to uncover issues, ideas and insights is the best way to understand context.

From the universe of possible destinations, group, prioritize and focus on the top 3 to 5 (no more than 7) that can have the largest impact on success. Give them short titles that become your Themes.

Once you have your priority Themes, ensure they are well understood by giving each at least one descriptive Outcome and Measure that demonstrates attainment of the Theme at the end of the planning horizon. This process helps make the Theme more concrete and allows the right focus of resources needed to achieve the Theme. Be flexible; as the example suggests, some Themes’ Results may be less tangible than specific measures in this planning horizon. But it should always be easy to determine whether the Result was achieved or not.

Every Strategy must include two specific Themes: Your “Go to Market” and “Financial” themes. The Go to Market or marketing strategy Theme is how you will sell and win business within your Context. If you need a structure, borrow from what is described by Wickman (pg 55-65.) The elements are summarized with examples below:

The Financial theme defines your revenue model and includes at least two associated Objectives: revenue and net margin with associated Results. As you learn key drivers of your financial results add them as leading Results to give early indication of success. SaaS companies for example generally emphasize financial drivers by including Results like annual recurring revenues, customer acquisition costs, retention rates, customer lifetime value, and average revenue per user. Service companies focus on utilization and average hourly rates. Find the few key leverage points that drive your bottom line success and give early indication of the health of your business. Elevate these measures to the Financial Theme and give them Objectives and Results matching your strategy time frame. Finally, you must ensure the company never runs out of funds to operate. Cash management and fund raising are essential parts of the Financial theme especially for early stage companies.

Plans – Annual

Annual planning, as the name suggests, involves envisioning the company one year out and setting Targets and Initiatives for the next 12 months. This step works much like the strategy exercise to create Themes, but the timeframe is narrowed to one year and more detail is added to create clarity of focus for the next year about key results that will work toward the Strategy outcomes. Stay light weight. Planning can be as simple as creating Targets and Initiatives for each strategy Theme. Then give these a Budget that includes people and dollar allocations. Annual planning is a special iteration of the Quarterly Strategy Refresh meeting.

All plans come with risks and uncertainties. Creating plans is a good time to raise known or possible Issues that could impact your ability to deliver them. The Issues list is a key tool for decision making, barrier removal, and problem solving. You might solve a couple priority issues in your annual planning. Most Issues are managed by keeping a priority list that is worked on during recurring leadership team meetings.

Plans – Quarterly

People are programmed in a way that makes it difficult for them to stay on plan much past 3 months without a need to refocus on priorities. Quarterly Refresh creates the checkup and resetting that ensures efforts are still aligned and making progress toward the annual plan created above and ultimately the overall Strategy. The format is much like above, but this time the timeframe is narrowed to only 3 months, again with more detail. Create quarterly Goals that support the annual Targets, and Rocks that support annual Initiatives. These define key results for the near-term that ensure progress on a daily and quarterly basis is contributing to deliver longer-term Objectives.

Rocks are a Stephen Covey, 7 Habits “First things first” concept. It uses and analogy of filling a jar (representing limited time and resources.) Consider that you have a pile of sand (everyday tasks) and rocks (big priorities) to fill the jar. If you put the sand in first, there is not enough room for the rocks. But, if you put the rocks in first, the sand can fill empty space left between them allowing all to fit. So, if you want to accomplish big things with limited time and resources, prioritize and work first on the big priorities represented by Rocks. Rocks and Goals are set quarterly to make commitments to the next key milestones that are most important to be delivered in the near term.

Each Rock and Goal has an owner. Each person on your executive team should have 1 to 4 in total. These are decided, tracked, and refreshed in Quarterly (or more frequent) Strategy Refresh meetings.

In most companies, Budgets are set annually and only adjust if circumstances change dramatically. We continue to measure quarterly progress against the annual plan. This adds stability and commitment to planning. In more nimble companies, dollar and people changes can be made quarterly as long as revenue and margin target impacts are acceptable and people don’t feel whip lash from frequent, dramatic changes.

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You can find my editable Business Model Cheat Sheet here.

If you would like help in creating and executing a Strategy OS, find out more about workshops I run or schedule time with me on the About page to discuss your specific needs.