Business Strategy, Business Model & Tactics

Unlocking the Secret to Business Success
Have you ever wondered how successful companies seamlessly translate their grand visions into day-to-day operations? The answer lies in the intricate interplay between business strategy, business model, and operating model (tactics). According to Harvard Business Review, a business strategy refers to the plan a company uses to gain a competitive advantage in the market by choosing a unique position and set/system of activities. A business model describes the logic of how a company operates and creates value for stakeholders. Tactics are the specific actions taken to execute the strategy within the framework of the chosen business model.

What is Business Strategy?
A business strategy is designed to address fundamental questions or problems related to strategic issues. It consists of a layered set of approaches that tackle essential questions across four key dimensions: strategic direction, positioning and competitive advantage, implementation (functional), and execution (operational).
Each of these dimensions involves addressing specific strategic issues. The solutions to these issues form the layers of a comprehensive business strategy, which include:

1. Corporate Strategy: This layer focuses on the overall strategic direction of the organization, including long-term goals and the allocation of resources across various business units.
   
2. Business Unit and Competitive Strategy: This layer deals with how individual business units compete within their markets. It involves positioning and gaining competitive advantage.
   
3. Functional Strategy: This layer pertains to the strategies of specific functions within the organization, such as marketing, finance, and operations, ensuring they align with the overall business strategy.
   
4. Operational Strategy: This layer focuses on the execution of strategies at the operational level, ensuring that day-to-day activities align with strategic objectives.
   

By addressing strategic issues within these dimensions, a business strategy provides a structured approach to achieving organizational goals and maintaining competitive advantage.
What is a Business Model?
A business model is your company’s blueprint for success. It outlines how you create value, deliver it to customers, and capture it (generate revenue) for stakeholders. Think of it as the system of activities that reflect the big picture, the overarching strategy that guides how you execute the strategy.

What is an Operating Model?
While the business model focuses on the “how you do it,” the operating model is all about the “how you do it day-to-day.” It’s the detailed plan that outlines how your organization will execute its business model. This includes everything from your organizational structure to your processes, technology, and human resources.

The Dynamic Duo: Business Model and Operating Model
Imagine a business model as a well-crafted architectural design for your business journey. The operating model is the construction plan that brings the design to life. Both are essential for a successful outcome. When aligned, your business model and operating model create a powerful vehicle with synergy. Your strategy becomes actionable, and your operations become efficient and effective.

The Role of Strategy
Strategy is the type specification for the vehicle; it guides your business to a successful end. Your business model is born from your strategy, and your operating model is designed to support it. It’s a continuous cycle of planning, executing, and refining.

Real-World Example: The Airport Clipper
Consider a barbershop at an airport. Its business model is centered around providing quick, convenient haircuts to time-conscious travelers and airport staff. The value proposition is speed, quality, and a clean environment. The target market includes customer segments such as: business travelers, leisure travelers, frugal voyagers, indulgent explorers, and airport staff.

The operating model for this barbershop involves:

• Optimized Scheduling: A robust appointment booking system ensures minimal wait times.
• Standardized Services: A streamlined menu of haircuts, beard trims, and shaves caters to diverse customer needs.
• Skilled Barbers: Highly trained professionals with master barber-level skills deliver consistent, high-quality services.
• Efficient Workspace: A well-designed, clean, and modern environment enhances the customer experience.

By aligning the business model with this efficient operating model, The Airport Clipper can successfully cater to the needs of its target market and thrive in a competitive airport environment.

Challenges and Pitfalls
A common challenge for small businesses, especially service-oriented ones like barbershops, is failing to clearly differentiate their value proposition from their service. For instance, a barbershop at an airport offers haircuts, shaves, and other services tailored to the specific needs of travelers. While the core service is a haircut, the needs of customers can vary significantly based on the context. At a neighborhood barbershop, customers might value community and social connection, whereas at an airport, relaxation and convenience are paramount. The mistake lies in not understanding the environment and circumstances, and assuming preconceived notions about what customers value and expect.

To address this, businesses must delve deeper into understanding customer needs and desires within the context of their environment and circumstances. What problem does the service solve for the customer? How does the service improve the customer’s life? By clearly defining the value proposition, businesses can tailor their offerings and marketing efforts accordingly.

Making it Work: Key Considerations

• Alignment: Ensure your business model and operating model are in sync.
• Flexibility: Be ready to adapt to changes in the market or internal conditions.
• Innovation: Continuously look for ways to improve your business model and operating model.
• People: Your employees are crucial to successful execution. Invest in their development and engagement.

By understanding the interconnectedness of your business model and operating model, you can unlock the full potential of your business.