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Audit business model to optimize

audit business model

Audit business model, photo credit http://www.flickr.com/photos/calcuttastory/3523707279/

Looking to boost your business?
Take a cue from Amazon.
Complete that “audit business model” task.

First, let’s ask the question: What is a business model audit?

It’s simply the process of looking at your business model (maybe using the business model canvas?), and checking whether everything on there is still valid.

Business changes. Markets change. The world changes. But very few businesses take the time to look at what they’ve been doing up to now, what they are doing right now, and what they plan to do in the future; and then compare that to how the business environment may have changed.

We’ve seen companies where CEOs have a task on their desk, usually on a sticky note, that says simply:

Audit business model

But often this task remains undone, because it doesn’t deliver short-term revenue. And yet, the largest, most strategically thinking companies are making sure to get that “audit business model” note checked off and done.

The Harvard Business Review has a good piece on how Amazon embraces auditing what it does on a regular basis, and how it’s helped to develop Amazon’s business over time. For instance:

since its inception in 1995, Amazon has fundamentally changed its business model several times.  Back then, Amazon’s operation was organized around a “sell all, carry few” business model: while offering more than a million books it actually stocked only about 2,000.

This changed, however, as Amazon continued to grow, and picked up more economies of scale in its logistics operations with the priority shipping in Canada and a number of other countries.

these advances led to a reversal of the “sell all, carry few” business model, which morphed into “sell all, carry more.”

The closing thought of the article summarizes the situation nicely.

The moral that we draw from this tale is that smart businesses like Amazon.com develop ways of constantly questioning what they do. Business models and the advantages that flow from them are transient. What is a competitive strength today might be a burden tomorrow.

Remember – what’s valid today may not be valid tomorrow. And it’s impossible to know what changes will be the ones that trigger a need for change. So you need to be open-minded, and consider all aspects of your business.

AuditBucket can be used to help you understand the relationships between different elements in your business model. For instance, load your customer data, revenues, and external market conditions (available from places like data.gov).

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