In professional circles, one often hears such phrases as "a successful business model", "a breakthrough business model", "a business model that worked", etc., but what does this actually mean? In this article, we will answer the questions of what a business model is, what approaches exist to describing it, and how they are applied in practice.

Popular approaches to designing business models

A business model is a structured system description of a company, allowing one to draw conclusions about the market in which it exists and at what expense, and how it makes profit. There are different approaches to describing business models: universal, for startups, for ecosystems. Among the most common approaches are:

• The Business Model Navigator
• Osterwalder’s approach
• Johnson, Christensen, and Kagermann’s approach

However, in practice, these approaches contain redundant elements or, on the contrary, describe a top-level concept, undergoing changes in order to adapt to the specific goals of the company. SBS Consulting regularly faces the need to describe business models as part of diagnosing the current state of organisations, designing development strategies and business plans. Our company has developed its own universal approach to the development and description of business models of the organisation, based on the analysis of a wide range of existing theoretical approaches, extensive practical experience of project implementation in various sectors of the economy.

SBS Consulting's approach to designing business models (5M)

SBS Consulting's approach to business modelling is based on 5 key factors - the 5Ms, reflecting both financial and non-financial aspects of an organisation's functioning:

• Mission
• Market position of the product
• Methods of implementation
• Monetisation
• Methods of development and management

Mission reflects the non-financial aspects of the organisation's functioning and answers the question "why does the organisation exist?"
In practice, we see that companies define their missions in different ways: often Mission reflects the financial ambitions of the organisation, or focuses on separate aspects (for example, only on the value of the organisation). SBS Consulting has formulated and detailed its approach to the definition of Mission as a non-financial goal of the organisation's existence, which answers the questions "what value does the organisation create?", "for whom?" and "how exactly?". It is this set of elements (the value communicated, the beneficiary, the features of the activity) that defines the Mission of the organisation..

At the same time, the concept of Mission in the 5M approach is clearly separated from Vision, which covers the financial aspects of the organisation, reflecting the peculiarities of its standing in the market. Vision answers the questions "what does the organisation look like now?", "what will it look like in the future?" and includes 3 factors:

— Market position (reflecting product/service description, target customers, market, competitive edge)

— Methods of implementation (essentially a product value chain, where competencies, key assets and unique advantages of the organisation are identified for each stage)

— Monetisation(description of revenue sources, cost structure and finances)

SBS Consulting believes that when describing the vision of an organisation, it is necessary to clearly distinguish between 3 types of vision in accordance with the time period under consideration:

— Current vision – describes the company for the current period (As Is), usually determined at the stage of diagnosing the current state of the organisation.

— Strategic vision – describes the target vision of the company for a specific period (To Be). Strategic vision, as a rule, is the result of the company's strategy development. In this case, the transition from the current to the strategic vision is implemented through activities in the roadmap.

— Conceptual vision is less formalised in comparison with strategic and current visions, it is ambitious and realistic in describing the general direction of the organisation's activities, reflects the future to which the organisation aspires. In fact, it reflects the overall vision of the organisation's shareholders.

The fifth element in the 5M approach - Methods of development and management - reflects the level of management and answers the question "how to ensure the achievement of objectives?"

Methods of development and management are a set of elements that characterise the peculiarities of the organisation's management and determine the effectiveness of achieving the organisation's financial and non-financial goals in the long term. The key components include organisational capital, intellectual capital, corporate culture and control system.

Methods of development and management also determine the company's ability to maintain the organisation's position in the market, so they require revision not only when individual elements of the business model change, but also when external environment factors change significantly. Thus, the proposed 5M approach to designing business models covers all key elements of an organisation's activities that allow building a specific business model with its peculiarities.

5M Approach Case Studies

The 5M approach allows structuring the business model of a company from any industry and can be used as part of diagnosing the current state and developing the organisation's strategy. Moreover, the approach allows to clearly identify the differences between business models of different organisations, as well as to classify business models in the industry. This enables the approach to be widely used as a tool for competitive analysis.

According to the 5M approach, the basis for classifying business models is the difference in Methods of implementation which reflects the product value chain. For example, a number of organisations focus their activities on the development of a unique product, while others focus on providing a range of services.

It is the organisation's focus on a particular stage of the chain that defines the key feature of the business model. At the same time, other 5M elements help to elaborate the business model and form a complete description without excessive details. SBS Consulting has already been actively using the developed approach in practice. For instance, our company identified and described the main business models of market players when analysing the development market using the 5M approach.

The 5M business modelling approach allows to clearly identify and describe the business model highlighting its key and secondary features. It is convenient and easy to apply in solving both current and strategic tasks of the organisation's development.