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Lex maniac

Investigating changes in American English vocabulary over the last 50 years

Tag Archives: strategy

business model

(1980’s | businese | “business plan,” “grand strategy,” “big idea”)

Putting a business model into practice requires a lot of attention to detail, but the business model itself doesn’t. It can usually be summed up in a few sentences, a statement of general means to achieve broad goals, or a couple of concepts connected loosely with a method of bringing them about. These are not the fiendishly complex models of the hobbyist; they’re like economic models that set up a highly simplified map of how money moves around intended to make reasonably accurate predictions about real life. Business models look to the future, and they are subject to change; executives must recognize when they need a new one, lest the firm fail or fall behind. A start-up might boast of future profit infallibly brought to pass by their business model, while an established concern is more likely to tout a business model that is serving them well in the present and doesn’t need changing, thank you very much.

In everyday use, the expression is pretty casual, but there is a bit more to it. A 1990 definition in Computerworld magazine broke it down thus: “[Business] models, generally developed by a data administration unit, describe current and planned business activities and the related information requirements. A model is typically a four-level hierarchy that identifies business functions, the processes within each function, the activities within each process and the information needed to accomplish each activity.” At some level there must be attention to detail, even in the most devil-may-care industries.

Before 1990, “business model” also meant something else and was more likely to be paired with institutions of higher learning, or perhaps government agencies and even individuals. The idea was “act like a business,” that is, subscribe to the reigning corporate nostrums and show no regard for employees. If you did that, the financial poobahs would congratulate you on following a business model. That use remained in play into the nineties, which is when today’s understanding of the term took over. The tech companies dragged it into prominence; the computer industry seems to be the first that was generally expected to produce “business models.” That’s probably because new firms can’t attract funding without one, and computer start-ups were a dime a dozen in those days. Also because with a few off-the-charts exceptions, most computer companies have never quite figured out how to be profitable, even with an enthusiastic customer base and lots of love from investors. (In that respect the tech industry resembles American society in general, where a tiny minority is staggeringly prosperous while the vast majority does its best many levels below.) But even an unsuccessful venture may pull the wool over the eyes of investors long enough to free them of their money and give the principal shareholders time to grab the capital and run.

For the business model is the blueprint for making money. It helps if it has been proven by others; if it’s untried, you’d better have a good line of patter to back it up. A common way to disparage an enterprise is to say that its business model is the same as that of another company that failed or is in the process of failing. But how much success can be traced back to the business model? If the product’s no good, the business model won’t save it; if your employees don’t do their jobs, your big idea won’t go far. If the theory isn’t put into practice effectively, it doesn’t matter how good it is.

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