First Kill Your Business Model

That’s correct, but not quite. It should read, kill your business model driven strategy and adopt strategy driven business model. Strategy is about  making choices, making choices about the market you want to play in, the customers you want to serve, deciding the customer needs you are going to solve with your offering and deciding what is ownable so you can perform head and shoulders above the competition.

Business model is about how you add value to the customers you chose to serve in the market you chose to play and doing so in a way that you get to capture a share of the value created in the presence of competition.Business model comes from the ways you chose to realize strategy, in other words it is an artifact of strategy execution.

Strategy requires commitment – you cannot straddle and despite claims of “Fast Strategy”  you cannot change course everyday. Business model is not a commitment, it is not unique and it is not a competitive advantage. When the strategy implementation changes, and it will, the business model should change with it. Failing so will result in a misalignment in the near term and eventual demise.

A leader who knows and follows this, is NetFlix CEO, Mr. Reed Hastings.

Reed Hastings, thinks his core business is doomed. As soon as four years from now, he predicts, the business that generates most of Netflix’s revenue today will begin to decline, as DVDs delivered by mail steadily lose ground to movies sent straight over the Internet.

Mr. Hastings is predicting the death of, not his core business as the WSJ paraphrases, but the death of  NetFlix’s current strategy implementation (delivering DVDs by mail) and its associated business model. NetFlix’s strategy is to deliver entertainment that best fits a customer’s interest, time and place- it started out as DVDs by mail , switching now to on-demand streaming and probably something else (dynamic content discovery or even content creation based on user’s profile and whim?) in the future.

That is a lesson not only on strategy but also on leadership.