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Business Model Alignment

For an organization to succeed it needs to know what success looks like.  That means having a business model and bringing all elements of the business into alignment with it.  This business model alignment is an essential step to strategic planning and measuring outcomes to success.

MLA Companies offers business model alignment and strategic planning.  We are a business finance, strategy, and solutions provider with offices in Dayton and Cincinnati Ohio, and Virginia Beach, Virginia.

Business model alignment, or strategic alignment, means that all elements of a business — including the market strategy and the way the company itself is organized — are arranged in such a way as to best support the fulfillment of its long-term purpose.

While a company’s purpose generally doesn’t change, strategies and organizational structures do, which can make chasing “alignment” between strategy and the organization feel like chasing an elusive always changing goal.

Consider the following two questions:

  1. How well does your business strategy support the fulfillment of your company’s purpose?

Purpose is what the business is trying to achieve. Strategy is how the business will achieve it.

  1. How well does your organization support the achievement of your business strategy?

“Organization,” as we’re using it here, includes all of the required capabilities, resources (including human), and management systems necessary to implement your strategy.

Level 1: Alignment & Fit of your Business Model Building Blocks:

At the very least you must achieve a fit of the different business model bricks of your company. It means that the building blocks of your business should be mutually reinforcing and form a coherent whole.

For example, you must find the best distribution channels to deliver your value proposition. But when you have found those channels you must ask yourself what the best distribution channel design is for your specific customer segmentation.

Then you must go on and ask yourself what kind of customer relationship you should build up with these customers for your particular value proposition and how your distribution channels can support this.

Once you have designed these customer-facing aspects of your business model you have to go on and achieve a fit with the infrastructure-related aspects of your business model.

You must ask yourself what kind of activities you have to perform to deliver your value proposition? What kind of resources and capacities do you need in order to build the customer relationships your business model requires? What kind of partnerships make sense to leverage your business model?

And finally, all this has to fit together in a cost structures and a revenue model that allows you to maintain a healthy profit. That’s basic business model alignment.

Level 2: Alignment & Positioning of your Business Model in the Environment and Competitive Landscape:

The second level of business model alignment is with the business model environment and competitive landscape. What sense would it make to have a business model with neatly fitting building blocks that can’t withstand the stiff wind of competition?

Having a business model that is aligned with competitors mainly means understanding the competitive environment and designing your business model accordingly. More broadly your business model should be aligned with the 5 forces of your business model environment: Technology, Competition, Customer Demand, Social Environment, and the Legal Environment.

Level 3: Alignment of your Business Model with Future Scenarios:

Good companies are those that have a business model with a perfect fit and a strong competitive position in the market. Great companies are those that have a business model or a portfolio of business models that are ready for the future.

In terms of alignment, this means that if you want to move from level 2 to level 3 you have to try to understand how the 5 forces of your business model environment could evolve in the future. You should reflect on how technology, competition, customers, society, and laws will change and what possible impact this could have on your current business model.

There are many different techniques to evaluate possible futures, such as scenario planning, prediction markets, systems dynamics, and so on. All you need to do is to map these possible outcomes of an uncertain future back to your current business model in order to be better prepared for the rough days ahead of you.