Observe an Organization, Discern its Business Model

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In an earlier post I said Development Entrepreneurs can go through iterative OODA (Observe, Orient, Decide and Act) cycles to pursue reforms.  When a DE works with organizations (as DEs often do), he can start by Observing the Business Model of that organization.

A business model describes how parts of the organization work together to provide valuable services and products to clients so that it earns enough income to survive and grow.  All organizations, even public ones, have a business model – after all they offer value to clients though services or products, earn revenues in some way, work with partners using key resources, and they certainly have cost components.

In their book “Business Model Generation” by, published by John Wiley and Sons, Inc., Hoboken, New Jersey, © 2010, Alexander Osterwalder and Yves Pigneur define the nine components of a business model as:
1. Customers
2. Value Proposition
3. Relationships
4. Delivery mechanism or channels
5. Income Stream/s
6. Key Partners
7. Key Resources
8. Key Activities
9. Cost components

Start by defining the customers of the organization. Do they constitute a Mass, Niche, Segmented, Diversified or Multi-sided Market?  The nature of the market affects the way the organization relates to it, the way the organization delivers and prices its services and products.  Observing the market can lead the DE to discern under-served markets (and the way they are under-served), which can lead to ideas for reform and improvements.

What is the Value offered by the organization?  Commercial businesses attract customers by offering novelty, outstanding design, brand or status, low prices, risk reduction, performance, peace of mind (you can count on them to get the job done), tailor-made services and products to fit the client’s unique requirements, accessibility and convenience.  Just because government organizations have a “captive audience” there’s no reason why they should not offer any value to their customers.  At the very least, for example, they can make the experience of paying taxes more convenient and comfortable.

How does the organization form and maintain Relationships with its clients? Do they provide personal assistance? Or do customers help themselves (self-service)? Some organizations maintain relationships through online communities. Others nurture “co-creative” relationships where they collaborate with their customers to provide services and products.

How does the organization deliver services or products to clients? Does it have its own channel, like a sales force or online store? Or does it serve through partners, such as partner stores and wholesalers?

What are the Income Streams of the organization? Does it make money from selling assets? Does it charge fees or subscription fees for letting customers use its products? Is the organization involved in lending/ renting/ leasing something? Or does it make money from licensing?

Who are the Key Partners of the organization? What are their motivations? Are the partnerships based on optimization and economy of scale, or on reduction of risk? Or is the partnership formed because it makes it easier for the organization to acquire particular resources and undertake certain activities?

What are the Key Resources of the organization? Any organization would have physical, intellectual, human, and financial resources.

What Key Activities does the organization and its partners perform on these Resources to offer value to clients? Osterwalder and Yves Pigneur say there are only three Key Activities of any enterprise: either the organization 1) produces something; 2) solves a problem; or 3) provides a platform or network for transactions.

What is the Cost Structure of the organization? The common cost components are Fixed Costs, are Variable Costs. But the entrepreneur (and the Development Entrepreneur) should also look at Economies of Scale and Economies of Scope that underpin the business model of the organization.  They should also see whether the cost structure is Cost Driven (minimizing costs whenever possible) or Value Driven (think Apple and Volkswagen producing premium products).


In the process of describing the Business Model of the organization he is working with, the DE embarks on the next step in the OODA process: he Orients himself to find the reforms that are technically correct and politically feasible. More on that in latter posts.

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