Business Management Terminology Primer
Clear terminology and consistent interpretation are the basis for any meaningful process at a company. Specifically, business terminology that does not lend itself to internal contradictions is at the crux of business decision making processes.
In this short primer we present, according to the Blackblot PMTK Methodology™, the four very basic terms in business management: Business Plan, Business Case, Business Strategy and Business Model.
The first term most people encounter in the business world is business plan. The Business Plan is defined as "an examination of a potential business opportunity on a company level". The business plan process, data and outcome are detailed in a document of similar name.
There are three business plan document variants, each with a different objective:
- Opportunity assessment.
- Raising money.
- Guiding how to manage the company.
The business plan definition is rather straightforward yet it hinges on two other definitions. First, the term Business Opportunity is defined as "a void in the industry that can be entrepreneurially filled by creating a company that will provide products to the target market". Second, the term Industry is defined as "a group of companies which produce and sell a particular product type".
So in lay terms, the business plan process is to help us make a go or no-go decision about whether we should or should not build a new company that would compete in the market with other companies, in a particular line of business. For example, should we create a new hardware manufacturing company which would compete with Apple, Samsung, etc. in the computer tablet line of business? Or should we create a new web and software development company, maybe in the form of a startup, which would compete with the likes of Zoho, Nimble and SugarCRM in the online-hosted CRM applications line of business?
It is important to note that the business plan process is focused on helping us decide if we should create a new company that can compete, not if we should create a particular new product. The business plan process is overwhelmingly geared to the company level, not the product level.
Conversely, the definition of a Business Case is "an examination of a potential market opportunity on a product level", whereas Market Opportunity is defined as "a lucrative, lasting and sizable market problem".
Again in lay terms, the business case process is to help us make a go or no-go decision about whether we should or should not build a new product that would compete in the market with other similar products of the same category. For example, should our present company create a new micro-blogging platform to compete with Twitter.com? Or should our present company create a mobile messaging software application for iOS and Android smartphones that would compete with WhatsApp and Viber?
The business case is focused on helping us decide whether we should create a particular new product and already assumes the existence of a company that operates in a particular industry (e.g. software development, automotive manufacturing, pharmaceuticals).
The company's business strategy is detailed in the company's business plan document. The term Business Strategy is defined as "a coordinated set of long-term decisions that supports a company, being a leader, follower or innovator, in a specific line of business".
The business strategy is a statement of a guiding image of how a company envisions itself in the future and the effort to make it happen. Essentially it is what the company wants to be when it grows up and how it wants to get there.
The type of decisions and parameters with regard to the business strategy only involve the company level - they are not at the market or product levels. These decisions are related to corporate parameters such as manufacturing capacity, makeup of human resources, financials, partnerships, intellectual property, etc.
Lastly, the business model, a misunderstood and ill-used term that is often substituted for business plan or business strategy, is the simplest and most intuitive concept. The term Business Model is defined as "a scheme used by a company to generate economic gain for itself and its shareholders".
The business model is merely a description of how a company intends to make money. For example, selling software applications with a perpetual license, particularly for desktop operating systems, has been Microsoft's traditional business model. Many online content/services providers such as google.com and cnn.com have a business model where they provide content for free and charge for advertising. Some financial services websites and mobile applications employ an advertisement-free, subscriber-based business model.
In summary, business planning poses amorphous questions that demand estimation, conjecture and a resolution process. At the root of effective business planning is a solid resolution process which is supported by a clearly and succinctly defined terminology. This primer provides the fundamentals of a terminology which is at the core of a company's business decision making processes.