January 31st 2020

The FourWeekMBA Business Glossary guides you through a set of key concepts to leverage on to build a valuable company and a sustainable business model.

The continuous quest to problem-solving in the real world

Entrepreneurship is about solving problems by leveraging on markets’ feedbacks to develop products with high potential which people want and desire.

Entrepreneurs then must understand some of the tools they can leverage to build valuable companies able to capture some of the value delivered through their products and services and build sustainable business models.

Entrepreneurship is a continuous quest for real-world problem-solving. The success of a business is measured by how well you helped people solve those problems. While entrepreneurs can rely on methodologies, systems, and processes, they also need to know when to revert to instinct and leverage on their experience.
Read the full guide on What Is Entrepreneurship

Business modeling as a toolbox

One of the conceptual tools that entrepreneurs can leverage is a business model or a framework that helps them identify the key building blocks that by time to time a company is built upon.

Business modeling is useful to build valuable companies but also to observe existing companies in several industries to understand what parts of those companies can be borrowed.

By assembling those parts, and mixing them together with tinkering and experimentation that is how entrepreneurs can build a sustainable advantage.

A business model is a framework for finding a systematic way to unlock long-term value for an organization while delivering value to customers and capturing value through monetization strategies. A business model is a holistic framework to understand, design, and test your business assumptions in the marketplace.
Read the full guide on What Is a Business Model

Business design rather than business planning

In the times in which capital is easily available companies put up hundreds of pages of business plans just to discover the next day how useless they were.

While in the past using business planning made more sense. In the current times also companies with substantial capital injections need fast validation from the market to build something sustainable.

Thus, where in the past massive capital injections would be used as moats, capital without a sustainable business model won’t last long (see the most recent and exemplary WeWork case, but also at the rise of the dot-com bubble the Webvan case). Therefore, a company that wants to build something valuable needs to master business model design.

Business model design is not about scatch on a piece of paper, but that is about experimentation.

Business design enables organizations to deliberately craft a business model to prove sustainability in the marketplace by validating the building blocks of a business model. The business designer can help an organization to build a viable business model by readily testing its riskiest assumptions against the marketplace.
Read the full guide on Business Design

Business experimentation rather than business theory

Business experimentation is the key ingredient also when a company has massive capital injections because that strikes a balance and feedback loop which keeps companies grounded.

In short, a company that just uses capital to grow, without testing whether its growth is sustainable in the marketplace will need a reality-check sooner or later.

For that matter, a company built on the ground-up with a continuous loop with the marketplace can grow organically and yet exponentially.

Business experiments help entrepreneurs test their hypotheses. Rather than define the problem by making too many hypotheses, a digital entrepreneur can formulate a few assumptions, design experiments, and check them against the actions of potential customers. Once measured, the impact, the entrepreneur, will be closer to define the problem.
Read the full guide on What Is a Business Experimentation

Continuous iteration and market feedback loop

Therefore, the key to build a sustainable business model is about having a continuous feedback loop between vision (where you want to be in a decade from now), key customers (representing your ideal market at any given time), and offered value proposition.

Define the problem you’re going to solve, then define the customers for which the problem will be solved. Next, identify the customer and the problem. After that, define a set of possible solutions. After, define a set of possible monetization strategies for that solution, test, and choose your business model.
Read the full guide on How to design a create model

Customer is the key investor

When your key customers love so much your product to make it grow organically and exponentially, that is when you hit the home run! What venture capitalists like to call Product-Market Fit.

Marc Andreessen defined Product/market fit as “being in a good market with a product that can satisfy that market.” According to Andreessen, that is a moment when a product or service has its place in the market, thus enabling traction for the company offering that product or service.
Read the full guide on Product-Market Fit

Revenue modeling as a validation tool

For that matter, revenue modeling is very important in building a sustainable business model. Revenue modeling is about building revenue streams which are in line with the long-term vision of the brand.

A revenue stream is one of the foundational building blocks of a business model, and the economic value customers are willing to pay for the products and services offered. While a revenue stream is not a business model, it does influence how a business model works and delivers value.
Read the full guide on Revenue Streams

Beyond core functions and into psycho-logic

Mastering a core value proposition is a key step and the glue which keeps the whole business model together. Value can be seen from several perspectives, and it’s not just about functionality. In many cases, that is about psychology, what Rory Sutherland calls psycho-logic.

A value proposition is about how you create value for customers. While many entrepreneurial theories draw from customers’ problems and pain points, a value can also be created via demand generation, which is about enabling people to identify with your brand, thus generating demand for your products and services.
Read the full guide on Value Proposition Design

Business model innovation as a competitive advantage

When all the things above are met, business model innovation becomes a propeller that drives long-term advantage.

Business model innovation is about increasing the success of an organization with existing products and technologies by crafting a compelling value proposition able to propel a new business model to scale up customers and create a lasting competitive advantage. And it all starts by mastering the key customers.
Read the full guide on Business Model Innovation

Brand equity as a lasting asset

When business model innovation is achieved, and a sustainable business model is built, a company can also leverage its brand equity as an additional long-term advantage.

The brand equity is the premium that a customer is willing to pay for a product that has all the objective characteristics of existing alternatives, thus, making it different in terms of perception. The premium on seemingly equal products and quality is attributable to its brand equity.
Read the full guide on Brand Equity

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Business Glossary: The Advanced Business Terms For Entrepreneurs