A recently-published research paper written by Dr. Philippe Chereau, associate professor at SKEMA Business School/SKEMA Ventures director, highlights how misaligning strategy and business model choices may significantly affect firms’ performance. The paper also suggests ideal strategy-business model combinations.
“You should rethink your business model!” We hear this often from mentors or coaches supporting startups. This may or may not be true. Since the term business model (BM) was first used by Peter Drucker (1954)1 and conceptualized by Magretta (2002)2, subsequent developments in the BM literature have focused mostly on the debate surrounding the definition of this concept and the scope of its application. Today, this debate seems over, and a firm’s BM is now widely accepted as the reflection of its realized strategy (Casadesus-Masanell and Ricart, 2010)3.
The debate has shifted its focus to “why and how each model is successful as a business, and why it is profitable”. This question implies a direct relationship between the BM and performance, with the implicit assumption that some BMs are superior to others. Accordingly, a superior performance could be delivered if the firm designs and implements the “right” BM. However, such reasoning could result in misleading interpretations on what is a “right” or a “wrong” BM, thus disconnecting the firm’s superior performance from the imperative to align strategy and BM.
A research paper written by Dr Philippe Chereau4 bridges the gap between theory and managerial practices by exploring the performance implication of strategy-BM fit on a sample of 156 small and medium-sized French enterprises in the manufacturing sector. The results firstly highlight a limited set of BM configurations across firms’ strategic profiles, confirming that a BM reflects a firm’s strategy as a means of realizing strategic choices. Secondly, it reveals that deviating from ideal strategy-BM alignments significantly affects firms’ growth and profit. Consequently, from a performance standpoint, it recommends “ideal” strategy-BM combinations which allow managers and entrepreneurs to check ex-ante the consistency between strategic choices and their implementation.
To access the article, visit https://www.emeraldinsight.com/eprint/SEEQAQXYPQAVDISSMMB9/full
1 Drucker, F. (1954), The Practice of Management: The study of the Most Important Function in American Society, Harper & Row.
2 Magretta, J. (2002), “Why business models matter”, Harvard Business Review, Vol. 80, No. 5, pp. 86-92.
3 Casadesus-Masanell, R. and Ricart, J.E. (2010), “From strategy to business models and onto tactics”, Long Range Planning, Vol. 43, No. 2, pp.195-215.
4 Chereau, P., Meschi P.X., (2018). “The performance implication of the strategy-business model fit”, Journal of Small Business and Enterprise Development https://doi.org/10.1108/JSBED-04-2018-0122