A business model is how the organisation creates value, delivers it, and captures some of it back. Most businesses have one. Fewer can describe it in a sentence the whole team would repeat the same way.
How to know if it is creating value
You know by choosing the right metrics — the ones tied directly to your goals and to the most critical parts of the business.
There is no set number to track. What matters is that the number is manageable. Tracking too many metrics is the same as tracking none: focus dissolves and nothing actionable surfaces. The rule of thumb at senior level is three or four at the floor, six to eight at the ceiling. More than that and you have lost the ability to see what actually creates value.
Three tests for a metric:
- Can you measure it? If you track customer satisfaction it has to be anchored to a survey or quantifiable feedback. A feeling around the executive table is not a metric.
- Can you act on it? A number nobody can move is trivia.
- Is it still telling you something? If not, replace it. Metrics are not heirlooms.
The model is not permanent
Business models age, and they age quietly — usually while the current one is still profitable. That is what makes reinvention hard: you have to spend on the next model while the current one still looks like it is working.
When did you last change your business model rather than optimise it?