Why should schools teach Business Modeling?

If an ecosystem needs to be established where entrepreneurship is flourishing, then it is business modeling that should be the first step to be taken in the journey. “A business model describes how an organization constructs, delivers, and captures value, in economic, social, cultural or other contexts.” Essentially a business model describes how one’s business is generating income. In order to have the basics clear, it is very important to know the difference between a business model and a business strategy. The business model on one hand is all about creating value and getting compensated for it. The business strategy on the other hand is about how one is planning on bringing their business to the market and executing it.

WHAT ARE THE MAIN ELEMENTS OF A BUSINESS MODEL?

To simplify, a business model consists of:

  1. What it takes to make something or deliver a service- Design, raw materials, production, labour, machinery etc.
  2. What it takes to sell the product/service- Marketing consisting of advertising, storage, distribution, processing the sale, delivering the service etc.
  3. What and how will the customer pay for the said good/service- Pricing strategy, payment methodology etc.

WHY IS IT IMPORTANT TO TEACH STUDENTS THE CONCEPT OF BUSINESS MODELING?

First, a model can help ensure that the student entrepreneur brings a fairly logical and internally consistent approach to the design and operations of the venture, and communicates this approach to employees. Second, it can serve as a vehicle for demonstrating the economic attractiveness of the venture, thereby attracting investors and other resource providers. Finally, once a model is in place, mapping it can help facilitate necessary modifications as conditions change over time.

HOW CAN BUSINESS MODELING BE TAUGHT IN THE MOST EFFECTIVE MANNER?

  1. By Challenging students to develop original business ideas or concepts, present these to the class, and rate them. Next, have students develop business models for their concepts, and rate the models. Examine differences in the ratings given to the original business ideas compared to those for the business models. Discuss reasons why creative business ideas often do not result in highly successful businesses.
  2. By having the young minds identify businesses that have failed and examine their business models. For those that had fundamentally flawed models, determine what was wrong and design an alternative model that might have worked.
  3. Experiment with having students find examples of businesses that had strong business models but failed, and firms that had ill-defined or imprecise business models but succeeded. Explore the possible underlying reasons for both sets of outcomes.

The best way to instill the spirit of Entrepreneurship is to explain to the young and the brilliant the core of a business, and business modeling does just that. As, in the end, the foundation for any company that wants to be “built to last” is to have a business model that is coherent with objectives, as no matter how good a product/service is, it cannot fix a broken business model.

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