How an early understanding of your supply chain can help you improve or rapidly create an efficient business model.

Operational Business model deduction

A model is often defined as a template structure or base from which similar entities can be constructed. Models are very good ways to test and develop concepts. Likewise, every business regardless of its industry has its particular way of doing business, governed by its culture and other internal as well as external factors or events and presumably the value proposition of this organization. There is a variation in the manipulation or application of the word business model by distinct business thinkers, leading to multiple definitions (Ovans, 2017). In 1994, in an article by Peter Drucker, hypothesis on what could be done and what could not be done by a business constituted his theory of the business, however, this article never mentioned the term business model but stated “assumptions about what a company gets paid for,” which appears to be Drucker’s definition of a business model as believed by many, which is similar to Michael Porter’s definition of strategy (Ovans, 2017). Following this semantics, it appears that hypotheses are formulated by businesses with regard to their operational scope and context. (Ovans, 2017) “ Michael Lewis refers to the phrase business model as “a term of art.”? And like art itself, it’s one of those things many people feel they can recognize when they see it (especially a particularly clever or terrible one) but can’t quite define.”. Considering a business model as a term of art as stated by Michael Lewis, it sounds more meaningful to have a look at popular definitions of a business model in order to appreciate its nuances and develop an enlightened point of view as well as a more enhanced understanding of the term. (Wikipedia Contributors, 2019) “A business model describes how an organization creates, delivers, and captures value, in economic, social, cultural or other contexts”. The above definition from (Wikipedia Contributors, 2019) demonstrates that a business model takes into account multiple business dimensions, such as the economy and others, nevertheless, all these dimensions or in other words taxonomy of business-related factors could also be seen as a grouping of multiple business factors or parameters, hence the overall business constitutes an ecosystem of business parameters. (Kriss, 2020) states that a business model is simply “an outline of how a company plans to make money”.? (Kriss, 2020) the definition uses the terms “plan”, knowing that a plan could also be described as an intention or an idea, likewise, the definition stated by (Wikipedia Contributors, 2019), uses the phrase “describes how an organization” which could arguably be stated that a business model gives the general ideology that supports an organization. This puts forth the initial intrinsic ideology from Peter Drucker that a business model is a set of assumptions that stigmatizes a business. Without losing sight of the subject under analysis by this paper, there appears to exist a more in-depth, nuanced view of a business model, in fact, the question on the realm, given the multi-parameterized and multidimensional aspect of the business model earlier discussed is to know how do all these variables, parameters and dimensions operate in unison to produce the expected results?? A more contemporary and mature approach to this might be to think of these various interactions amongst the components of a business model as a system of business model components, that we could describe as the business model’s system. Diving deeper, we question ourselves to know could such a system be geared, produce expected results, what are its input, processing and output components and what are the artefacts. The discussion regarding the business model system is beyond the scope of this writing and shall be published in a separate article. Haven discussed and analyzed different definitions and points of view of a business model, it could, perhaps more definitely be defined as an assumptive definition of a? multiparameter ecosystem structured in multi-dimensional business concerns that presumably stigmatizes a business.??

According to Clay Christensen, a disruptive innovation into an existing market is a result of a better business model. This raises another important question, as to what key performance indicators could be used to measure the success and worth of a business model in contrast to another, hopefully, this question is relatively easy to answer, by simply questioning which business model better fulfills its assumptions, and produces a higher return on investment (ROI). In addition to this, Alex Osterwalder based on Drucker’s ideology comes up with a very intuitive tool that permits the effective comparison and mapping of key business model components known as the business model canvas.

Knowing what a business model is, its internals and how its performance can presumably be measured at a high level as well as how we could compare realistically between different models, we seek to understand what is the relation between a? business’s business model and its supply chain as well as how a contemporary understanding of a? supply chain could help in defining or ameliorating a business model as well as terminate by defining a framework that could be used in facilitating this process. Like the business model, a supply chain is subjected to multiple definitions but suffers from less ambiguity.? Every organization could be described as having an input unit, a processing unit as well as an output unit permitting it to adequately service its clients or market. (Kenton, 2020) “A supply chain is a network between a company and its suppliers to produce and distribute a specific product to the final buyer. This network includes different activities, people, entities, information, and resources. The supply chain also represents the steps it takes to get the product or service from its original state to the customer.” (Corporate Finance Institute, n.d.) Provides a more comprehensive definition whereby it is stated that “A supply chain is an entire system of producing and delivering a product or service, from the very beginning stage of sourcing the raw materials to the final delivery of the product or service to end-users”. Summarily a supply chain attempts to realize the value proposition (the value a company promises its target clients or market after consumption of their product or service) of an organization or company. As earlier discussed, it could be said conveniently that the supply chain in contrast to the business model that seeks through assumptive approach to defining the “what” of a business, whilst the supply chain instead defines “who, when and were” of the business from a more operational perspective.?

These paradigms contrasting the intricacies of the supply chain to the business model, equally help enlighten their point intersection, but what then are the points of intersection and to what extent do these two sets of concepts intersect in other words the point here is to define the relationship between both concepts within the context of a business or organization. Whatever the business or organization, conceptual or already operational there always exists a global concept and set of assumptions that describe how it operates or is intended to, a form of stigmatization. Think of that, we could ask a naive but pertinent question, as to know who would want or wish to build a house without having at least some ideas about the house he wants and can afford?? It’s clear that nobody would do that because the simple idea of having in mind to build one already formulates the assumption of the existence of a house. Still within the scope of the house construction example, from a? more operational point of view, a house has a location where it has to be built, after construction it is to house people, but how many of them can it house to full capacity, can the capacity and other attributes be altered to match the new capacity if needed and so on goes the questioning. Likewise, can a business make initial assumptions (business model) that limit its capabilities, and does this initial assumption help define the capability at which it should run? The answer is yes, likewise, if operational capabilities needed are initially already known or copied from an existing business in the industry, could that permit formulate assumptions about how the business could run? The answer is yes. The relation between the two concepts that is the business model (BM) and the supply chain (SC) seems more blur to our dismay as we seek to define clearly. But based on the above discussion we could confidently say that there exists a bidirectional relationship between both concepts and that any full or approximate definition perhaps understanding of one begins to reveal the intricacies of the other. BM and SC are linked for life, with no possible divorce between them. “Because in general, supply chains are designed to improve operational performance, most BM improvements are incremental. Large companies, however, can leverage SCIs to generate new BMs that are complementary to their current BMs” (Abdelkafi and Pero, 2018).

So how can knowledge about a business’s SC help in defining or ameliorating the BM of a new or existing business? knowing that a SC defines the operational details within the scope and context of a business, with the aim to obtain maximum efficiency, these operational details then serve as valuable base information, that could either fit directly into a business model a set of more concrete hypotheses or could be used in combination with other business parameters to draw more wise sets of BM hypothesis. If a business was already an existing business, this approach could help it in its plan to scale out through the implementation of other agencies or branches. Added to that, given the way globalization is affecting the world’s economy, businesses are not left aside hence it could turn in favour of an existing BM model or at its dismay. Whatever the turnover,? the supply chains being the business operational and tactical aspect is the businesses entity that directly and rapidly feels the effect of the change and with effective supply chain management, these changes can be responded to sufficiently quickly and accurately leading to a consequential flip-flop or alteration, and hence betterment of the existing BM, nevertheless poor supply chain management could unapologetically lead to degradation of the efficiency of the existing BM. This globalization aspect does not just affect existing businesses, even none existing businesses of whom the operational details were initially known, would have to reassess the validity of these operational details before it could be validly transcribed onto a reasonable business model else the business model that would be developed would be farther from the reality needed in their respective business context.

Being able to use this approach while developing a BM could greatly help and fasten the speed and ease of getting it right rapidly. At this point, the wrestle remains to define a more tactical approach of the best course of action that could be used to develop a business model from a supply chain. Supply chains vary per industry, technology, workforce, location and many other factors that might come into play. So before one goes into a market it could be advisable that he takes some time to first observe the competitors in the market are operating, from that, he would be able to draft rapidly a guess of what its supply chain could look like and even it is a business that was already operational and that wants to move to another region, this business would have to understand the various factors of where there are trying to enter and carry out a comparative analysis with their existing operational model. That would then lead them to the question of, why is this done this way in this region and so on and so forth. And by so doing a good comprehension of the problem domain begins to surface which would eventually help later in the definition of the BM. Once these preliminary analyses are completed and the problem domain is understood, we can then move to the design phase where necessary changes are then applied to the existing supply chain or a new supply chain is generated and finally, the operational details that result are then converted into a set of coherent business model hypothesis. Finally, this set of hypotheses is then mapped onto a business model canvas to have a more comprehensive view of the business. It is important to note that, operational details could become overwhelming and it would largely help to form aggregates with similar details and define cutting edge assumptions over them to ease the overall process. For the sake of simplicity, this framework of reasoning could be entitled an “Operational Business model deduction” as it defines a business model from the operational view of the business.

Conclusively, a supply chain has a great impact on a business model and could be used to create or update one with the help of the Operational Business model deduction framework. Added to that it was also made clear that any attempt to define either a business model or a supply chain leads to an early demystification of the other. As highlighted in the course of this writeup, a business model could equally be viewed as a system of its own whereby its different components collaborate together it is recommended that these aspects of the business model be fathomed, as well determining a systematized approach to measuring a business models efficiency. Finally, taking into account that there exist multiple definitions of a business model, it was argued that a more reasonable and universal way to define a business model would be to state it as an assumptive definition of a? multiparameter ecosystem structured in multi-dimensional business concerns that presumably stigmatizes a business.