Business model

The business model describes the way the enterprise builds and maintains its operation. As it aims to provide such an insight into a complex operation involving a range of internal and external relationships it will naturally involve a considerable number of elements.

As the description of the business model aims to be comprehensive, it provides the best initial overview of all enterprise operations. When combined with an assessment of performance through key performance indicators and benchmarking it is a powerful tool in the assessment of the required areas of concentration for business development.

First, it assists the knowledge centers by identifying areas of critical concern in the creation of strategies and plans within each of their operational areas.

Secondly, it simplifies the analysis of strengths, weaknesses, opportunities and threats (SWOT) for each component, which will be linked to the identification of the key performance indicator and how the enterprise performs against the competition.  An application of this approach is provided in the sample business plan for an existing business, Castellan, available as a download.

Thirdly, it clarifies the responsibility of each of the knowledge centers to create relevant strategies and plans.

Fourthly, it enables the enterprise to develop an information system that meets all the functional requirements of SATURNS.

Finally, it provides a rapid overview of all business operations, enabling the planner to stand back from the detail and consider the overall shape of the business.

These uses of the business model help considerably in developing answers to the three basic planning questions:

Where are we?

Where do we want to be (and when)?

How are we going to get there?

Business model components

Model component

Information

KPI

Abacus principle

Reviews company expenditure in terms of operational requirements

Fixed cost/sales

Absenteeism

Defines rate of absenteeism

Absenteeism

Accounting principles

Defines range of accounting techniques, accrual or cash basis

CAP score

Action standards

Defines response requirements in key areas

Response time achievement, quality achievement, comprehensiveness achievement, problem solving achievement, follow up percentage

Advisors

Defines advisor(s) and rotation policy

 

Administrative policy

Defines administrative strategy and plan

AER

Alphabet soup

Defines enterprise standards on documentation

ISS, customer satisfaction

Appeals process

Defines appeals mechanism

Appeals

Applications

Defines the use of application technology to the development of the enterprise

Application hits

Appraisal

Defines frequency and content of appraisal system

Labour turnover, employee satisfaction

Apprenticeships

Defines the use of formal training programmes

PDP

Arbitration

Defines how enterprise deals with serious disputes

Litigation cost

Assumptions

Defines the assumptions within which the enterprise operates

 

Audit

Defines components of internal/ external audit

 

Authority/ responsibility

How authority/responsibility defined and shared; centralization/ decentralization

Contract of employment, SOP ratio, project ratio, budget ratio, discipline, span of control, budgetary expenditure, Venn diagram analysis, functional overlap ratio

Automation

Defines the level of automation in the delivery of goods and services

Automation ratio

Average position time

Defines how long individuals stay in single position

 

Average sale

Defines average sale value

Average sale

Balanced scorecard

Defines how enterprise objectives interact over time

 

Barriers to entry

Defines how enterprise builds and maintains barriers to entry

Competitors, substitutes, market share, EG/MG

Benchmarking

Defines how the enterprise establishes benchmarks for key performance indicators

 

Blame game

Defines how enterprise deals with failure

 

Bonus systems

Defines how enterprise creates and maintains bonus systems

Average wage, wage ratio, employee satisfaction, deferred compensation

Boundary conditions

Defines acceptable variation within plan for key operating criteria

Balanced scorecard, industry/ regulator standard

Brand dependence

Importance of branding

Unaided recall, price position

Budgeting

Defines budgeting system – historic, zero-based, responsibility, monitoring

Budget ratio, project ratio, forecast error

Business monitoring

Defines monitoring methodology/ philosophy/ management

 

Business planning

Defines planning methodology/ philosophy/ management

 

Business platform

Defines stability of internal and external relations

 

BEV

Identifies break- even point

BEV forecast, BEV days

Cannibalization

Defines destructive impact of products/ services on one another

Purchase portfolio

Capacity utilization

Defines rate of capacity utilization

Capacity utilization

Capital allocation

Defines capital allocation

%, ROCE, capital allocation ratio

Capital expenditure

Defines capital investment

Capex ratio

Capital intensity

Defines capital investment per employee

Capital intensity, capital productivity ratio

Capture theory

Defines the success of the enterprise in managing the regulatory environment

 

Cascade investment

Defines how the enterprise chooses between different investments on IRR and strategic/operational requirements

 

Cash flow

Defines the trends in cash generation

CFROI, FCFPS

Certification

Defines enterprise certification

 

Change management

Defines how enterprise deals with business re-engineering

 

Cloud computing

Defines mixture of in-house and external software provision and data storage

 

Clustering

Defines location of enterprise in relation to other sector occupants

 

Code of conduct

Defines how enterprise sets standards of employee behavior

Disciplinary actions

Comfort zone

Defines the flexibility of the employees

Average position time

Common good

Creates balance sheet to identify enterprise impact on all stakeholders

 

Communication

Defines communication channels and message

KFR, B/S index, employee satisfaction

Communication language

Establishes common communication language

KFR

Community marketing

Defines how enterprise uses social media

Facebook, Twitter, LinkedIn, application hits

Community relations

Defines relationship with local stakeholders

 

Competitive advantage

Defines how enterprise builds and maintains competitive advantage

Industry specific; POD score

Competitive bidding

Defines how enterprise manages competitive bidding

Competitive bidding ratio

Competitive response

Defines the normal competitive response to specific enterprise action(s)

 

Complaints

Defines how effective enterprise is in meeting stakeholder requirements

Complaints, E/FG, response time

Compliance

Defines how management mixes rules and technology to achieve adherence to procedures

Disciplinary levels, regulatory infractions, complaints, customer satisfaction, quality control

Consensus

Defines how far management will integrate different stakeholder perspectives

Customer satisfaction, supplier satisfaction, employee satisfaction

Consolidation

Defines how business continually reviews productivity

 

Contract rotation

Defines what limits are put on advisor service lengths, board member retention

 

Core competence

Defines key expertise and knowledge as focus of competitive advantage

Skills, customer satisfaction

Corporate governance

Identifies how enterprise is internally controlled

Corporate governance achievement ratio

CORRUPT

Defines ethical behaviour within enterprise

Employee satisfaction, litigation, EQ

Cost management

Defines how enterprise manages costs

Cost initiatives, BEV, BEV days

Creative accounting techniques

Defines use of approaches in accounting documents

CAT score

Creativity

Defines the level of creativity and use of creativity techniques within the enterprise

 

Credit management

Defines customer and supplier payment systems

BDR, CR, DR, response time

Critical success factors

Defines core product and service criteria to gain competitive advantage

 

Currency management

Defines how enterprise manages differences in revenue and cost currencies

Currency ratio

Customer care

Defines how the enterprise supports its customers

CLV, average sales, complaints

Customer dependency

Defines reliance on particular customer(s)

Customer spread ratio, joint planning

Customer transition

Defines how enterprise builds customer business value

 

Data capture

Defines how enterprise collects data from electronic and manual systems

 

Data management

Defines storage and access criteria

 

Data mining

Defines how enterprise analyses data

 

Data protection

Defines how enterprise maintains data security

 

Debt management

Defines enterprise control of debt

Interest cover, CR, Z score, M score, QR, DER

Decision making

Defines decision making systems; levels of authority and types of decision (SOT), formal methodology, action responsibility

 

Deferred compensation

Defines level and content of deferred compensation

Deferred compensation %

Deming rules

Defines how enterprise achieves quality control at individual level

Complaints, returns

Design

Defines use of design in layout, product/ service. Rams rules

Service time, upgrade time, assembly time, disassembly time, recycling %, packing time, employee satisfaction, customer satisfaction

Digitization

Defines the level of digital provision of information and services

Digitization ratio

Disciplinary code/ grievance procedure

Defines use of disciplinary procedures in enterprise

Disciplinary proceedings, employee satisfaction, response time

Discounting

Defines use of discounting in price management

Gross profit, average sale, return on capital employed, competitive bidding ratio

Dispute management

Defines how enterprise handles disputes

Dispute numbers

Distribution channels

Defines use of distribution channels

Market coverage

Distributed control systems

Defines how decentralized automated control systems operate

 

Diversification

Defines enterprise attitudes to diversification

 

Diversity

Defines how enterprise achieves diversity

Diversity index

Dividend policy

Defines how enterprise uses dividends

Dividend yield, payout ratio

Due diligence

Describes the methodology for checking suppliers, customers, employees and acquisition targets

 

Earnings per share

Defines returns per share unit

Gross profit, return on capital employed

E-enablement

Defines customer and supplier contact methods

E-enablement ratio

Economies/ diseconomies of scale

Defines importance of centralization to enterprise

Fixed costs/sales

Efficiency wage

Defines wage targets within enterprise

Labour turnover, employee satisfaction, productivity

Elevator pitch

Describes the business for the potential investor

 

Employee satisfaction

Defines level of employee acceptance of company policy

Absenteeism, labour turnover, employee satisfaction

Entrants

Defines the pressure or potential pressure on the enterprise through existing or new entrants

 

Exit plan

Defines long term plan for maximizing shareholder value

 

Expectations/fulfillment

Defines how effective the enterprise maintains the relationship between stakeholder expectations and enterprise output

Customer satisfaction

Extranet

Defines use of Extranet

 

Facilities management

Defines how enterprise manages premises

Health and safety, employee satisfaction, RSM

Fail safe

Describes engineering and policy framework to cope with failure

 

Fashion dependency

Defines reliance on fashion

Product/ service life cycle length

Fear, uncertainty, doubt (FUD)

How enterprise deals with behavioural control of market leader(s)

New customer conversion rate

Finance policy

Defines finance strategy and plan

FER, Cost of finance

Financial headroom

Defines how much additional financing capacity is available to the enterprise

 

First Mover Advantage

Defines how enterprise develops a product/ service lead and maintains it

 

Focus

Identifies concentration of activity

CSF achievement

Forecast case

Defines acceptable level of risk in plan development

 

Forecasting methodology

Defines quantitative and qualitative forecasting systems in forecast grid

Forecast error

Formal/ informal networks

Defines balance of internal influence

 

Fraud

Defines controls for fraud prevention

Response time

Fringe benefits

Defines enterprise support for employees outside compensation

Employee satisfaction, labour turnover

Funding options

Defines funding options

Cost of finance, debt age

Funding plan

Defines choice of options

DER, return on capital, interest cover

Game theory

Describes use of game theory techniques in business planning and development

 

Golden circle

Defines inter-relationship of consolidation, market penetration, market development product development

 

Health and safety

Defines health and safety procedures

Accident, response time

Hedging

Defines enterprise use of hedging

Hedging %

Herding

Defines how closely the enterprise follows other companies in policy development

POD score

Impact analysis

Defines how enterprise understands major changes in environment

 

Implementation routes

Defines methods of implementing strategic choices

 

Industrial relations

Defines contents of industrial relations policy

Days lost, employee satisfaction

Influencer marketing

Defines how important word of mouth promotion is to the enterprise

 

Information flow map

Defines how information flows within the enterprise

ISS

Information overload

Describes how enterprise maintains focus on key operating criteria

KPI, KFR

Insurance

Defines enterprise insurance plan

Insurance cost %

Interconnectivity

Defines how systems interconnect within enterprise to drive productivity

Interconnectivity ratio

Integration

Measures how effectively enterprise integrates acquisitions

Integration ratio, 100 days

Internal competition

Defines internal competition policy

 

Internal marketing

Defines the ability of the enterprise to explain and involve employees

 

Intranet

Defines the scope of the Intranet

 

IT platform

Defines the ability of the IT system to deliver required data

Connectivity %, speed of access, security, downtime

IT policy

Defines IT policy and plan

ITER

IPR management

Defines how enterprise controls intellectual property

Patents, design

Intrapreneurialism

Defines how enterprise encourages individual business development initiatives

NPD rate, employee satisfaction, labour turnover

Inventory management

Defines how enterprise manages flow of components, raw materials and finished goods

STR, incomplete order, backorder %, cycle time

Investment appraisal

Defines how enterprise compares different investments

IRR, project ratio, hurdle rate

James’ rule

Defines how costs and revenues are matched in relevant currencies

 

Job description

Defines tasks, responsibility/ authority, reporting systems

 

Joint planning

Defines the degree of common plans between enterprise and key customers/ suppliers/ stakeholders

Joint planning ratio

Joint ventures

Defines any long term relationships established by the enterprise

 

KISS

Defines simplicity of goals and communication

KFR, ISS, employee satisfaction

Knowledge centers

Defines how enterprise focuses operational skills

 

Language

Defines business common language

 

Layout

Defines how enterprise optimizes layout for performance

Cost per square meter, employee satisfaction, labour productivity

Leadership

Defines how enterprise is directed

Employee satisfaction, shareholder satisfaction, BS index, corporate governance index

Legacy issues

Defines how past decisions are likely to influence current actions

 

Legal alignment

Defines correlation between enterprise and legal environment

Disputes

Legal status

Defines enterprise status

 

Litigation

Defines number of legal actions

Litigation

Lobbying

Defines the uses and objectives of lobbying campaigns

 

Location

Defines location of unit(s)

Cost per sq meter, employee satisfaction, customer satisfaction

Low hanging fruit

Defines poor yielding enterprise resources subject to easy disposal

 

Maintenance

Defines TPM system

Downtime, response time

Management by exception

Establishes budgetary and control levels

Budgetary authority, boundary conditions exception reports

Management by walking about

Describes the importance management give to informal contact with operations

 

Management information system (MIS)

Defines adhoc, daily, weekly, monthly, quarterly annual information requirements

ISS

Management style

Defines management behaviour

Employee satisfaction, labour turnover, labour productivity, disciplinary actions, appeals, whistle-blowing

Market development

Describes how enterprise manages regional and international development

Country spread ratio

Market penetration

Describes how company expands existing sales to existing customers

Customer spread ratio

Market driver alignment

Describes how well strategy fits market reality

 

Market positioning

Defines where enterprise is positioned in the market

E/FG

Market research

Defines primary and secondary research program

 

Marketing and sales policy

Defines marketing and sales strategy and plan

MER

Matrix management

Defines relationship between operational and regional reporting

 

Media channels

Defines the media channel(s) used by the enterprise

Market coverage

Media expenditure

Defines the structure and overall investment in media

% advertising spend, advertising sales return, cost OTS

Media message

Defines the positioning statement used for media investment

Recall, decay rate

Meeting management

Defines how the enterprise optimizes meetings

Rule of eight, labour productivity

Meme

Defines range of false preconceptions within enterprise

 

Mentoring

Defines how the enterprise uses mentoring in recruitment and project management

 

Message life cycle

Defines the number of times specific promotional material can be used before loss of effectiveness

Recall

Message threshold

Defines the required message intensity for maximum purchase propensity

 

Minority rights

Defines the treatment of minorities within the enterprise

ISS, employee satisfaction

Mission creep

Defines whether the enterprise is focused on key objectives

 

Moral hazard

Defines ability of groups and individuals to evade disciplinary action

 

Motivation

Defines how motivational mix is created and maintained

Labour productivity, labour turnover, employee satisfaction, skills, ISS

Multiple lock application

Defines where enterprise combines hardware, software and systems to reduce risk

 

Mystery shopper

Defines the use of independent verification of product or service quality

 

Negotiation style

Describes how enterprise approaches negotiations

 

Networking

Describes the use of networking within the enterprise

 

New business generation

Defines how new business is generated

Cost per lead, cost per converted lead

New product/ service policy

Defines new product/ service strategy and plan

NPDER

New product/ service ideas sources

SCAMPER balance

Ideas numbers

New product/ service commercialization

Measures number of new products/ services commercialized

Numbers, IRR, NPD cycle time

Objectives

Defines balanced scorecard

Balanced scorecard elements

Order processing

Defines order processing methodology

Production/ service delivery cycle, unfilled orders, lost orders, cost, complaints, response time

Option overload

Describes how product range interacts with customers

Product spread ratio

Organisational dynamics

Describes how organisation interacts

 

Organisational spine

Defines key personnel at each level within the enterprise

 

Organogram

Defines structure and inter-relationships

 

Outsourcing dependency

Defines proportion of products/ services outsourced

Outsourcing ratio

Ownership

Defines importance of various stakeholders

 

Payment systems

Defines money transfer systems/ foreign exchange management

Bank charge ratio

Pensions

Defines enterprise pension provision

 

Period of grace

Defines the length of time that new product/ service concepts maintain exclusivity

Period of grace

Personnel policy

Defines personnel strategy and plan

PER

Physical distribution

Defines physical distribution methods, management

% overall cost, cost per kilo/kilometer, emergency delivery

Planning horizon

Defines length of planning forecast

Planning horizon

PDP

Defines number of employees with career path assessment

PDP

Plant age

Defines age of production facilities

Useful life index

Plant flexibility

Defines ability of production/ service system to switch activity

Cycle time

Plant sophistication

Defines ability of production/ service delivery system to deal with wide range

ROP

POLITICS

Defines internal dynamics of enterprise

 

Points of difference

Defines competitive advantage

POD score

Portfolio analysis

Describes methodology the enterprise uses to identify position within market

 

Presentation

Defines the design of enterprise presentations

 

Prestige projects

Defines investment of enterprise in projects with limited economic value

 

Pricing methodology

Defines how the enterprise sets prices

 

Pricing power

Defines the ability of the enterprise to raise prices

Relative price, % margin, price elasticity

Prioritization

Establishes project index

Project ratio

Problem solving

Defines enterprise use of creativity techniques

 

Product age dependency

Defines average age of products

Weighted product age

Product benefit

Defines bundle of technical/ non technical benefits

 

Product dependency

Defines reliance on particular product(s)

Product spread ratio, %, EG/MG

Product support

Defines elements that support the sale of the product/ service

 

Production/ service delivery policy

Defines production/ service delivery strategy and plan

PER

Project management

Defines project management methodology

Project ratio

Project risk management

Defines project risk management methodology

Project ratio

Public relations

Defines use of public relations by enterprise

Response time

Quality circles

Defines use of quality circles in enterprise

 

Quality control

Defines how enterprise manages TQM

Reject rate, customer satisfaction, complaints, response time

Random inspection

Defines the importance of MBWA in enterprise control

 

Reality check

Defines how enterprise brings critical analysis to plans prior to initiation

 

Recruitment

Defines how enterprise manages recruitment

Diversity index, cost per employee, labour turnover

Reference material

Defines how enterprise sources and manages access to background information

 

Reference sale

Defines the importance of word of mouth in achieving sales

Customer satisfaction

Regional dependency

Defines reliance on particular region(s)

Regional spread ratio, %, EG/MG

Regulators

Defines role of regulators in setting strategy and controlling implementation

 

Repeat business dependency

Defines importance of repeat purchase in overall business achievement

Customer satisfaction, CLV

Repeat business maximization

Defines how the enterprise improves repeat business

 

Reference sale

Defines the reliance on reference sales for new business development

 

Regulatory framework

Defines relationships with regulators, capture theory

Disputes

R&D expenditure

Defines policy to R&D investment

R&D expenditure ratio

Retention plan

Defines how enterprise maintains customer base

% churn

Review methodology

Defines how enterprise analyses outcomes

 

Reward systems

Defines how stakeholders receive their return(s)

 

Risk management

Defines risk procedures and risk management/ contingency planning

Contingency plan initiation, response time

Rule of eight

Defines organisation structure, meeting frequency, meeting management, documentation procedures, contract rotation

Span of control, productivity

Sales channels

Defines the sales channels used by the enterprise

Market coverage, sales channel ratios

Sales management

Defines sales organization and policy

Sales productivity

Sales promotion options

Defines choices of sales promotion

 

Sales promotion expenditure

Defines spending on sales promotion

 Sales promotion %, sales promotion return

SATURNS

Defines functionality of MIS

 

Scalability

Defines ability of the business to grow from existing base

 

SCORE

Defines enterprise program for simplification and cost management

 

Seasonality of sales

Defines dependence on seasonal sales

 

Secrecy

Defines level of secrecy within the enterprise

Employee satisfaction, B/S index

Security

Defines physical and intellectual security

Theft, data loss, response time

Segmental dependency

Defines reliance on particular segment(s)

Segment spread ratio, %, EG/MG

Share price

Defines the maximum acceptable level of share price

 

Share buy-back

Defines policy on share buy-backs

 

Shared values

Defines level of shared values within enterprise

KFR, labour turnover, employee satisfaction

Shareholder management

Defines shareholder communication and policy

Share turnover

Shareholder value

Defines how enterprise adds value to shareholder base

P/E, PEG, Dividend yield

Skills

Defines overall skills within enterprise

Labour productivity, skills

Software alignment

Defines the use of software by knowledge centre

Productivity, skills, training

Source and application of funds

Defines cash management forecast

Cost of capital, DER, Interest cover

Special units

Defines existence of specialized groups within enterprise

ISS

Staff

Defines staffing policy

Diversity ratio, temporary staff ratio, core non-core staff ratio, labour turnover, span of control

Stakeholder management

Defines relationships with stakeholders

 

Standard costing

Defines costing systems

Cost variances %

Standard operating procedures

Defines scope of standard operating procedures

Numbers

Standardization

Defines common components and operating techniques

 

Strategic business units (SBU)

Defines size of operating units

Average size of SBU

Strategy

Defines balance of strategic choices

Strategic risk index

Statistical process control (SPC)

Defines controls on components

Component reject rate

Status symbols

Defines excessive expenditure on fringe benefits

 

Stress

Defines organizational stress

Absenteeism, disciplinary actions, labour turnover, employee satisfaction

Structure

Defines operating units, management layers

SBU size, span of control, SOP ratio

Substitutes

Defines pressure on enterprise through existing and potential substitutes for product/ service

 

Succession planning

Defines how enterprise develops key employees for new roles

Apprenticeships

Supplier dependency

Defines reliance on particular supplier(s)

Supplier spread ratio, joint planning

Supplier management (SCM)

Defines how enterprise manages supply chain

Quality, STR, supplier satisfaction, response time

Sustainability

Defines environmental policies

Carbon footprint, recycling %

Synergy

Defines commonality of components and services within enterprise

Synergy ratio

Tax management

Defines tax policy

Tax charge

Team building

Defines the ability of enterprise to build and maintain teams

Project ratio, budget ratio, employee satisfaction, labour turnover

Telecommunications management

Defines structure and expenditure on telecommunications

Cost per employee, employee satisfaction

Technology support

Defines how enterprise uses technology to improve performance

Labour productivity

Technology transfer

Defines acquisition and sale of technology

 

Testing

Defines what testing procedures the enterprise uses

 

Time based competition

Defines the speed of reaction throughout enterprise

Response time, order processing cycle, NPD cycle, complaints

Time management

Defines how enterprise uses time study

Labour productivity

Trade associations

Defines use of trade associations by enterprise

 

Trade offs

Defines understanding by enterprise of inter-relationship of business elements for optimization

 

Training

Defines how enterprise manages induction, maintenance and development training, apprenticeships

Skills, apprenticeships, training days

Transition plan

Defines how enterprise builds business with individual customers

Average sale

Trial

Defines how the enterprise achieves trial and conversion

% trial, % trial conversion

USP

Defines enterprise USP

 

Upcycling

Defines how active the enterprise is in the secondhand market

Secondhand sales %

Useful life index

Defines replacement requirements for plant/equipment

Useful life index

Valuation

Defines valuation techniques employed

 

Value chain

Defines position of enterprise in value chain

%, ROCE, price elasticity, GP

Vendor ranking

Defines methodology for measuring supplier fit with enterprise requirements

 

Vertical tribes

Defines how members of SBU are located

Employee satisfaction

Vision statement

Defines long term direction of enterprise

 

Virtual office

Defines ability of employees to work at distance

 

Wages ratio

Defines wage relationships within enterprise

Wages ratio

Waste management

Defines waste management policy

Waste cost %, carbon footprint, recycling%

Warehouse management

Defines warehouse management

Safety stock, cost per kilo

Web dashboard

Defines how enterprise measures web activity

 

Web management

Defines how web is used in enterprise

Web hits, search position, e-enablement

Whistle-blowing

Defines whistle-blowing methodology

 

Work study

Describes how enterprise applies time and motion analysis to tasks

 

Working capital

Defines working capital requirements for business

Working capital ratio

Working conditions

Defines working conditions for employees

Employee satisfaction, labour productivity