The Business Model: Soul of an Enterprise

They say doctoral theses are meant to be written, not read.

The depressing truth of that statement dawned on me while slogging through the writing of my dissertation on business models.

Nevertheless!

I believe business models are important to everyone, personally and professionally, and vow that my thesis on will be readable, if not widely read, and will be useful to businesspeople, if not to academics.

Here’s my definition of business model:

The strategic and economic logic by which an enterprise profitably acquires and keeps customers.

This is important professionally because it encapsulates how the organizations for which we work provide value to both customers and to society. It’s important personally because it helps us conceive of ourselves — in a useful way — as one-person enterprises providing value to various “clients” and to society.

The specific focus of my doctoral research is “international business model portability.” In plain language, the research question is: Why do some business models transfer well to overseas markets?

For example, why has Japanese educational services provider Kumon been successful in every major market on the planet, when few Japanese service firms succeed overseas?

How does one go about answering such a question?

Well, universities prefer robust, scientific approaches to such investigations. But unlike hard science research in a laboratory where individual variables can be isolated, controlled, modified, and measured in carefully planned experiments, the business world deals with a squishy, chaotic, complex, difficult-to-define, changing-as-we-speak entity (“the enterprise”) operating in a chaotic, complex, difficult-to-define-and-impossible-to-control environment (“the natural world”).

Launching an enterprise like Kumon involves a messy, unquantifiable mix of psychology, finance, sociology, politics, anthropology, economics, law, and real estate. And all that’s aside from actually executing the core “job” — whatever a business does on behalf of customers.

The “job” itself — the essence of a given business model — might involve engineering, construction, physical therapy, chemistry, botany, art, computer science, sports, or any of a hundred other different disciplines.

In other words, designing and implementing a business model has more to do with intangible, qualitative uncertainties than it does with tangible, predictable certainties. Call it soul over science.

Kumon provides a good example. This Osaka-based provider of after-school K-12 math and language learning services has achieved extraordinary worldwide success, establishing operations in Africa, South America, North America, Asia, Europe, India, and Australia. It’s a stunning example of true international business model portability: the Kumon model has proven viable everywhere.

Why has Kumon proved so successful worldwide — in culturally, administratively, geographically, and economically distant markets — when Japanese service sector firms generally perform poorly overseas?

The answer, I believe, is simple. Kumon’s Value Proposition — its job — is to help every child reach his or her full potential. That’s something parents everywhere want for their children, and Kumon delivers.

In highfalutin academic jargon: The hypothesis that emerges from my grounded theory approach suggests that international portability depends on the universality of the Value Proposition.

In regular English: Global success appears attainable to the extent that the model touches what is deeply, universally human. One might say that an enterprise’s soul is embodied in its business model.

You may be thinking, Jeez, Clark, did it take you two years to figure that out?

Yes, it did.

So in upcoming posts I’ll share more on business models, their relationship to entrepreneurship, and how business model thinking can jumpstart personal careers.

In the meantime, take a look at my latest book, Business Model Generation: A Handbook for Visionaries, Game-Changers, and Challengers. It explores just about everything you might want to know about business models. A 72-page sampler (approximately 5M PDF) is available now for review.

You may also enjoy:

“The Soul of an Entrepreneur, the DNA of a Business“

“What Am I Doing With My Life?“

“Entrepreneurship: A Primer“

“The Hazards of a Career, The Rewards of a Vocation“