Business models are executed inside a larger environment. The more you understand the environment you are operating in, the better off your business model will be. The specific environment your business model operates in is different depending on your industry and offering. It will also help you develop an understanding of how changes in your environment should affect your business model and how you can adapt accordingly. There are four main areas of your environment than can affect your business model.
Each of these four areas of your environment can be broken down further to address specific environmental forces that affect your business. We won't go in-depth on these now but below is a short overview of what a breakdown can look like.
You need to understand the environment your business model operates in to be able to recognize challenges or opportunities to adapt to these external forces. Many industries are developing so rapidly that it is now normal for businesses that do not adapt their business model to go out of business. Every business should expect to adapt its model over time to gain and maintain an advantage over its competitors.
External forces don't have to limit your business model. If you develop a new business model for your industry, it can even have a transformative effect on the environment that leads to new industry standards.
Think about subscription video streaming services like Netflix. This transformative business model completely changed video rental and even the role of theaters. If Blockbuster had adapted its business model sooner, it would probably still be around. Business model changes can revolutionize industries, and we have to be aware of when we need to adapt. It's interesting to point out that Netflix tried to get Blockbuster to buy them and was laughed out of the building.
Business models are executed inside a larger environment. The more you understand the environment you are operating in, the better off your business model will be. The specific environment your business model operates in is different depending on your industry and offering. It will also help you develop an understanding of how changes in your environment should affect your business model and how you can adapt accordingly. There are four main areas of your environment than can affect your business model.
Each of these four areas of your environment can be broken down further to address specific environmental forces that affect your business. We won't go in-depth on these now but below is a short overview of what a breakdown can look like.
You need to understand the environment your business model operates in to be able to recognize challenges or opportunities to adapt to these external forces. Many industries are developing so rapidly that it is now normal for businesses that do not adapt their business model to go out of business. Every business should expect to adapt its model over time to gain and maintain an advantage over its competitors.
External forces don't have to limit your business model. If you develop a new business model for your industry, it can even have a transformative effect on the environment that leads to new industry standards.
Think about subscription video streaming services like Netflix. This transformative business model completely changed video rental and even the role of theaters. If Blockbuster had adapted its business model sooner, it would probably still be around. Business model changes can revolutionize industries, and we have to be aware of when we need to adapt. It's interesting to point out that Netflix tried to get Blockbuster to buy them and was laughed out of the building.