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Making Useful Business Models

Economists, consultants, theoretical physicists, and many others in the thought leadership business couldn’t function without models. Models facilitate communication by simplifying the complex. But is there a model of making models?

Here is a simple 4-part model for modeling.

  • Powerful – a good model must have important implications and high relevance. Otherwise, why bother?
  • Elegant – clean, simple neat. A really good model might even elicit a smile of aesthetic appreciation.
  • Guidance – there should be no more than a small leap from the model to action. It should guide on both what to do and what not to do.
  • Scalable – this is optional, but a really good model should offer guidance for both micro and macro situations.

For example, I use a model called ROADMAPP that offers powerful guidance on how to be more effective in defining and achieving goals. It is elegant in that it is easy to memorize and is comprehensive. It is scalable in that it guides me in everything from planning effective meetings to building successful businesses to living a great life.

Similarly, the Econ 101 graph of supply and demand powerfully and elegantly illustrates the concept of equilibrium, guides pricing decisions, and scales to any non-commodity market.

PEGS. A model for models.

Does PEGS work for you? Is anything missing in this model?

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2 Responses to “Making Useful Business Models”

  1. Bing Chou says:

    I thought I’d share this recent post by Steve Blank, author of The Four Steps to the Epiphany, about using a template to map out a business model:

    http://steveblank.com/2010/10/25/entrepreneurship-as-a-science-%E2%80%93-the-business-modelcustomer-development-stack/

    It’s a 9 box worksheet designed to help you think through your business model.

  2. mpfriedman says:

    Thanks Bing. Interesting approach.

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