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It’s The Business Model Not The Product That’s Important

May 9th, 2013

When Bill Hewlett and Dave Packard graduated from Stanford in 1937 they decided to start a new business. They subsequently memorialized their early discussions in a set of “founding notes” which, in relation to the question of what they were going to actually produce, simply mentioned “we want to direct our efforts toward making important technical contributions to the advancement of science, industry, and human welfare.”   The question of what to manufacture was noted in the meeting minutes in the following way … “The question of what to manufacture was postponed.”

Jim Collins, author of several best selling books including Built to Last and Good to Great (both must-reads for anyone in the business consulting space), in a review of David Packard’s book, The HP Way (also a very worthwhile), discusses how he introduced the founding of this business to his Entrepreneurship Class when we was teaching at Stanford.

Collins wrote “In teaching a class on entrepreneurship at the Stanford Graduate School of Business in the early 1990s, I would start the first class session by reading the founding notes from the 1937 meeting, careful to disguise the names of the founders.”

He continued, “Then I’d challenge my students: “Rate this start-up on a scale of 1 to 10, and jot down strengths and weaknesses of their approach. The average score would be about a 3, my MBA students blasting the founders for lack of focus, lack of a great idea, lack of a clear market, lack of just about everything that would earn a passing grade in a business plan class.” Then I’d say, “Oh, one more little detail. The names of the founders were Bill Hewlett and David Packard.”

The students sat in stunned silence. How could this be? “We’re taught that you need a clear understanding of how you will create competitive advantage—a great idea for launching an enterprise.”

“But they had a great idea—the ultimate source of competitive advantage—if you can just see it,” I’d push back. “What might that be?” After ten or fifteen minutes, someone would likely voice the key point: Bill Hewlett and David Packard’s greatest product was not the audio oscillator, the pocket calculator or the minicomputer. Their greatest product was the Hewlett-Packard Company and their greatest idea was The HP Way.

Interestingly, when asked what he considered to be his greatest achievement in business, Steve Jobs, said it was the creation of Apple as a company.  He did not mention, movies, Macs or any of the i-family.  His most important creation was the business.  What’s yours? That’s a question worth asking right at the beginning of a strategic planning initiative – what do you want your business legacy to be?

I raise this now because it’s food for thought in relation to a webinar I will be presenting on June 4 – the topic will be Defining Your Business Value Proposition which is a key element of any business model design and which, among other things,presumes that you have a product or service that enables you to create, deliver and capture value.

I’ll also be sharing my thoughts on business model creation at our co-sponsored conference with Verasage called A Day With The Disrupters on June 8, in at The Bellagio Las Vegas – the disrupters, by the way, include Baker, Golden, Guillemette and me. Our goal for the day is to challenge some cherished beliefs about the profession and most importantly, give participants some real tangible strategies for creating (or re-creating) a business that is positioned to “create, deliver, and capture value” in this wonderful opportunity-rich world we are so fortunate to live in.

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