Symbiosis is a concept found most often in biology, but it can also be applied to other areas, such as business.
In biology, symbiosis is the interaction between two different organisms living in close relationship that is advantageous to both. Symbiotic relationships are an important component of life. In such relationships, organisms of different species may depend on each other for survival. They can share habitats or lifestyles, even interact in a specific way to benefit each other’s presence.
The same interaction should occur between the Business Model and Business Strategy.
Business Model and Business Strategy, although having a strong interconnection, do not mean the same thing.
The Business Model defines how a company will offer value to its customers and be profitable and competitive, so as endure in the market. The Business Model should answer, among others, questions like: Who is the target customer of the business? What is value for that customer? How can we make money from this business? How can we offer value to the customer at the appropriate price point?
The Business Model, as we have seen in a previous MT, should encompass strategic partnerships, key activities, a value proposition, customer relationships, customer segments, key resources, communication and distribution channels, the cost structure, and sources of revenue.
The Business Strategy, on the other hand, is how the company intends to reach macro objectives, i.e. strategic objectives, deployed based the vision of the future.
Figure 1 illustrates the dimensions of the Business Model and its relationship to the Business Strategy.
Of course, an effective business model is supported by a good business strategy, which, in turn, addresses internal issues – also part of the business – and external ones, especially those relating to environment, competition and the market.
But what comes first? The business model or the strategy?
I recommend to entrepreneurs and managers to think first about the business model.
From the breadth of vision gained by reflecting on the business model, I note that entrepreneurs and managers are “open” to thinking about strategic objectives and strategies more clearly.
Once the strategy is defined, it is important to verify its alignment with the proposed business model. Are they in harmony with each other?
We can assess the necessary balance between business model and strategy through questions such as:
- Does the strategy include the identification and establishment of partnerships?
- Is the strategy focused on key activities?
- Is the strategy aligned with and make feasible the value proposition?
- Does the strategy establish customer relationship channels?
- Does the strategy consider customer segments / niches in all their specifics?
- Does the strategy allow you to leverage the company’s resources / core competencies / essence?
- Does the strategy exploit appropriate channels of communication and distribution?
- Is the strategy compatible with the cost structure?
- Does the strategy consider the sources of revenue?
Often strategy implementation demands investments and costs incompatible with the reality of the company. That’s why you need to be flexible, to make adjustments and corrections. Thus, your business model and strategy need to adapt to changes in the macro environment, the business environment, the market, and the expectations of customers and shareholders.
Maintaining the necessary symbiosis between Business Model and Business Strategy is a continuous and ongoing process that will ensure your company’s competitive advantage.
In your company, is Business Strategy aligned with Business Model?