Business model work spans a spectrum: improving existing models through execution and forecasts, versus inventing new ones through experiments and hypothesis testing. The two require different rules, metrics, and structures. The question is whether a company can do both at once.
Chapters
Thinking about business models in existing companies is slightly different than in a start up. The best way to look at it is by drawing a continuum between improving existing businesses that a company has inventing new businesses that a company plans to build. On the left hand side you have one or several existing business models. The company knows them well and the entire organization is trimmed to execute and incrementally improve them. Here, the company operates in a known environment with existing customers and a good understanding of the market. In such a known environment, it is possible to make relatively accurate forecasts about sales and predictions about growth. Hence, the left hand side is all about executing and improving known business models or improving them incrementally. On the right hand side you have one or several new business models that the company is trying to develop. The models are far from proven and the organization is still experimenting with them. Contrary to the improve end of the continuum, inventing is usually done in an unknown environment. Predictions such as sales forecasts or growth numbers are practically impossible to make at the early stages. The company is still developing a good market understanding. Hence, the right hand side is all about the search for business models that work. The rules of the game are almost totally different on the opposite ends of the continuum for existing business models and their improvement. You make business plans with performance projections. You evaluate people on how they meet those projections. Failure is not an option when it comes to new business models. Detailed plans are worthless. Projections don't make sense for yet unproven business models. What you really want to do is perform many small experiments to test the hypotheses of your unproven business model. You will learn from these continuous small bets which will allow you to improve, adapt or pivot your business model until you've made sure it will really work. Existing and new business models require completely different thinking, different rules, and different organizational structures to succeed. Are you able to play both games in parallel?
