How to Define Your Business Purpose, Models, and Strategies

Understanding your business is key to building a digital presence. Here's how to define its purpose, model, and strategy.

“Where the needs of the world and your talents cross, there lies your vocation.”

Aristotle

Luckily for you, we’re not here to delve into that contentious philosophical wormhole. We’re here to set the stage for a much easier, but still important topic - the topic of knowing thy business.

So you considered the benefits of going online and decided to capitalize on this opportunity. But how? First, for both prospective and established business owners, it’s vital to completely understand and define your business before creating a digital presence.

"Defining my business? I know my business well! My business does X", you may be thinking right now, as you’re scratching your head. "X" is great. But why?

Why do you do X? How do you do X? Why do you do X this way? Who does X serve? You think you’re in the X business, but are you sure your clients don’t use your offer to solve problem Y? How do you stay ahead of other businesses that do X? In 5 years will you also be doing X? Where are you headed?

Don’t be intimidated by this barrage of questions. It is only to illustrate how multi-dimensional your business is. Although not an exhaustive list, the questions above all matter to achieve a quality online presence.

Now we are aware such questions can be approached in several ways. Don’t fret, however. You don’t have to reinvent the wheel. Below, we discuss the importance of developing a comprehensive understanding of your business and offer a few templates and strategies that help the cause. Approaching this endeavor methodically is bound to yield you great results.

As such, we provide methods to understand the value you deliver to people, write vision and mission statements, and come up with an innovative business model and strategy. Most importantly, we help you articulate the great "why" question that is the motor force behind every action at your business.

What’s The Purpose Of Being Online? What Do You Want To Achieve? 🔗

First things first: before launching into the online wilderness with guns blazing, you must define your purpose for going online.

What do you want to achieve by starting an online business or taking your existing business to the web?

Perhaps, for those starting a brand new business, the point of starting online is to grow your business faster than if it were offline. Maybe it’s to tap into more diverse markets and attract customers from around the world.

These reasons also apply for those with existing businesses making the jump to the online world. You may want to improve your growth, reach new markets, improve your marketing efforts, or add new features to your business.

Whatever the reason, it’s crucial to nail it down before delving into important elements - such as what online platforms you want to be present on and what kind of website you will have.

But why is taking the time to define your business and your purpose so important before creating an online presence?

Taking a business online is a step in the direction of growth. But business growth begins with understanding your business’s purpose.

Generally speaking, the ideal business revolves around three primary elements.

One: the business provides value for people.

Two: the business involves doing something you enjoy and excel at.

Three: the business is something that earns you money.

The optimal business blends all three of these factors. But no matter what, for a legitimate business to exist and be successful, it must provide value for its customers. This element, providing value for people, is the core around which everything about your business revolves.

To define their core focus, companies often resort to creating a vision statement and a mission statement.

A mission statement is a concise explanation of the organization’s reason for existence. It describes the organization’s purpose and its overall intention. Meanwhile, a vision statement is inspirational and aspirational - it looks forward and conjures the ideal state that the organization wishes to achieve.

As far as mission statements go, Tesla keeps it short and to the point, without being boring:

"Tesla’s mission is to accelerate the world’s transition to sustainable energy."

While expressing the obvious concern for the global energy challenge, the phrase also subtly captures the focus on the automotive industry as a means of tackling it.

IKEA is a good example of a business with a well-constructed vision statement:

"Our vision is to create a better everyday life for many people."

It is concise without losing the aspirational value. It does a great job of setting the company’s tone, as well as making it clear that they offer low-priced but high-quality furnishings that can match everybody’s lifestyle.

While the line between the two can get blurry in practice, the important thing to recognize is that a business will benefit greatly from a statement that defines what the company is, what it stands for, and what everyone can expect from it - employees and customers alike.

To be fair, pausing to create a "vision statement" and "mission statement" may sound somewhat abstract or cliche - like something that is destined to end with a few buzzwords on a whiteboard labeled "company values."

Indeed, any exercise performed to gain a more profound understanding of your business must involve the underlining of company values. It must also involve a deep dive into the details of your product or service, as well as the delivery process of said product or service.

However, the key area to hone in on when pausing to "know your business" has to do with your customers. In taking the time to comprehensively understand or reassess your business before moving forward with an online presence, your aim should be to look beyond your customers’ outward wants and focus on understanding their needs.

Consider a bike company. A customer of the company wants a new bike. But buying a bike is just the surface level expression - it’s the means to solve a deeper need. The customer may need a way to get to and from work, a way to exercise daily, or a mode of transportation that complies with his or her environmental stance. There is far more driving a customer’s behavior and decision-making process than their expression of want for a certain product.

Furthermore, an important thing to keep in mind is that people don’t always recognize their needs when it comes to making purchases. Consumers can be so preoccupied with a particular desire or a long-standing technology that they don’t realize what they need. Going back to the bicycle example, consumers way back in the late-1800s wanted a personal mode of transport like a horse-drawn carriage but didn’t necessarily realize they needed something cheaper, safer, and more convenient than anything dependent on horses. Indeed, sometimes even the most brilliant and elegant solutions face the adversity of method evangelism.

As illustrated by these examples, you can better understand the value your business provides and its purpose by taking the time to ask more questions about your customers’ motivations. What do my customers hope to accomplish with my product or service? Why do customers choose my business over my competitors?

Another important item to note is that taking the time to examine the purpose of your business before creating an online presence has absolutely nothing to do with how long your business has been around or how much success it has had in attracting customers.

If you have little more than an idea for an online business and are serious about making it a reality, devoting time to fully understand how your business will provide value to customers is a crucial step in the development process.

If you’re in the early stages of building an online business and already have some interest from possible customers, it’s a good idea to think about why those people are interested in becoming customers.

Even if your business has existed offline for some time and already has customers, it’s still crucial to revisit its purpose and reevaluate why you’ve had success or lacked success in attracting customers before going online.

This is particularly beneficial before going online, as the insight into your business’s purpose and how to connect with your customers will play a huge role in shaping your digital presence and organizing your business moving forward. Otherwise, you run the risk of investing in a sub-optimal online presence, which might even hinder your efforts to build a strong connection with your prospects and clients.

The Golden Circle 🔗

There are many ways to go about gaining a comprehensive understanding of your business, but one of the best methods for defining the purpose of your business is using an approach known as the “Golden Circle.”

The Golden Circle originates from a book by motivational speaker Simon Sinek, as he sought to explain the essential element of companies that exceed expectations and find overwhelming success. For Sinek, it all stems from the concept he calls “Start With Why.”

The concept boils down to the assertion that a business doesn’t attract customers based on what it does, but rather, why it does what it does. While it’s true that the product a business makes or service it provides must be valuable for the business to succeed, the pure functionality of what a business does is not the main reason customers are drawn to it.

Much more than a good product or service, customers are attracted to a company that shares their core values and beliefs. This is where an emotional or personal connection is created between company and customer, as nothing builds a stronger bond between a business and consumers than a shared purpose.

In most areas of business, consumers looking to fulfill a want or solve a problem have an abundance of options to select from. There are very few businesses out there that are so novel that consumers are all but forced to go to them. Be it cars, computers, consulting, or pretty much any product or service you can come up with, multiple companies are competing for the same customers.

In many, if not most industries, the difference in quality or functionality between the products offered by top businesses is marginal. The most important element of attracting customers, therefore, isn’t emphasizing the subtle differences in your product, but emphasizing the purpose and values your business stands for that underlie the creation of your product.

For example, Apple sells neither for its hardware, nor its price point. What distinguishes the iPhones and Macs from their competitors is the customers’ emotional bond to the brand. Apple doesn’t sell consumer electronics. They sell the genuine passion for premium design blending art with technology. They sell a member pass to a community “for creators, by creators”, as Steve Jobs’ originally positioned the product line. To some, they sell the social status that comes from belonging to that community. And the unrivaled, seamless user experience in their ecosystem truthfully makes their clients fall in love with the brand and become loyal evangelists.

Their continued success owes to the fact that they are the past two decades’ masters of the underlying “why”. Apple will successfully maintain premium prices until one of their competitors will succeed at achieving the same level of depth when answering this question (although Google has been notably becoming better at it in the past decade).

Built out of the 'Start With Why' concept, the 'Golden Circle' is a simple visual tool that serves as a practical guide to help define your company’s purpose.
Built out of the 'Start With Why' concept, the 'Golden Circle' is a simple visual tool that serves as a practical guide to help define your company’s purpose.

At the center of the diagram lies the “Why” circle. The “Why” circle is filled out by answering the following questions:

Answering these questions as thoroughly as possible allows you to define the fundamental purpose and core beliefs of your business. What ends up in your “Why” circle is key because it’s what will resonate with customers and create strong connections with those that share such values.

Roughly everything about your business should stem from what you decide fits in your “Why” circle. From the build of your product to your branding and marketing efforts, to your entire company culture, everything starts with “Why.”

After grappling with the “Why,” the next step is “How” - how will your business accomplish its purpose? To complete the “How” circle, you need to ask the following questions:

Although some of these questions may seem easy to answer, it’s important to define exactly how your business operates on all levels to maximize your chances of success.

The outer ring of the circle is the “What” - what is it your business does? What does your business offer to customers?

This circle should be fairly straightforward to complete. What your company makes or what service it provides is the most basic component of the operation and is generally the most visible component of any business. It’s often a fairly straightforward task for businesses to communicate what they do. But even when done with skill, communicating what your business does is not the ticket to lasting success as a business.

This brings us to the big benefit of the Golden Circle: organizational harmony through better communication.

By using the Golden Circle model to better understand your own company, you gain a leg up in understanding how to better communicate the value of your business to employees, investors, and the public. Whereas most companies can communicate what they do, the most successful brands are those that master the art of communicating why they exist, and why they do what they do in the particular manner they do it.

Being able to communicate these facets of your business is hugely beneficial to building emotional connections and lasting loyalty with both customers as well as collaborators. Thus, by taking the time to understand and define the underlying purpose of your business, you also uncover better ways to communicate and connect with customers.

It’s useful to remember that this type of process requires all sorts of input. A board of executives far removed from the back offices or client-facing employees might lack a deep understanding of qualia surrounding their products or services. By qualia, we understand individual subjective, conscious experiences. For example, Alice Walton, the richest woman in the world, owning US$26 billion in her family’s business, Walmart, lives in New York City. There are no Walmart stores in NYC.

Therefore, it is unlikely that Mrs. Walton truly understands how working and shopping at Walmart feels. Surely, she can guess by glossing over data-driven reports. But those, as useful as they may be, are mere numbers. And numbers can hardly ever help you answer the question of “why”, beyond the simple “because it nets more money”.

To obtain genuine results, you must ensure you integrate the subjective experiences of your customers and employees through qualitative research. Remember, you need a diversity of voice to nail down your Golden Circle. A grounded process with diverse inputs reveals how it feels to bring about the company’s offer, personal insights over how the customers perceive it in reality, how they actually use the product, and what their motivations are.

One of the most telling examples is the case of Campbell Soup’s vegetable juice V8. In his book “Competing Against Luck”, Clayton M. Christensen of Harvard Business School shows how such varied input helped V8’s marketers to discover that their product wasn’t perceived as a regular drink, consumed to quench one’s thirst. Instead, they found that people bought the drink because it was an easier alternative to eating vegetables. They were interested in being healthy on the go, being able to get all the vitamins and nutrients from veggies without the efforts of carrying and cooking fresh produce.

You may end up with a surplus of information from your teams that might not directly help you answer the questions of "why", "how", and "what". Fear not, for one man’s trash is another man’s treasure. This information can help you better understand and review your company’s culture. If you succeed at aligning your company’s culture with your golden circle, your staff will feel energized and proud of the work they are accomplishing.

Business Model 🔗

Once you have a clear understanding of your company’s core purpose, it’s important to define a foundation upon which business decisions are made. Choosing a business model will not only act as a framework for decision-making. It will also work as an effective description of the values employees are expected to uphold.

A business model is a conceptual structure that describes the way an organization creates and delivers value.

The most prominent model for online businesses is e-commerce: the selling of products or services online. E-commerce can be further split into several categories.

B2C: businesses that sell directly to consumers.

B2B: businesses selling to other businesses.

B2G: businesses delivering their products to governments.

A more recent class of e-commerce that’s gained immense success is C2C: where a business platform helps consumers sell their goods or services directly to other consumers. Examples of C2C include eBay, Airbnb, Uber, and Etsy.

Within these sub-categories of e-commerce, entrepreneurs have successfully transferred offline business models to the online environment, creating a variety of new models.

Freemium: Giving away a part of your product for free and charging customers money for additional features once they recognize the value that you offer. Examples include Slack, Skype, and Spotify.

Marketplace: A platform where you charge a fee or percentage whenever a sale is made. Examples include eBay, Amazon, and Airbnb.

Subscription: Offering customers ongoing access to a product or service in exchange for a regular fee. Examples include Netflix, Spotify, and Audible.

Disintermediation: Selling directly to consumers allows manufacturers to cut costs and build a stronger relationship with their customers. Examples include Dell, Uber, and Apple.

Franchising: Licensing the use of your brand and the rights to sell your products or services. Examples include McDonald’s, Coca-Cola, and 7 Eleven.

Low touch: Selling products or services with minimal interaction between customers and your company. Examples include IKEA, SurveyMonkey, and Mailchimp.

Razorblade: Selling a low-profit margin product that requires expensive or frequent companion products. Examples include razorblades, ink-jet printers, and coffee capsules.

Advertising: Rather than selling to consumers, businesses sell access to an audience to promote or sell products, services, or ideas. Examples include Google, podcasts, and television.

While this list isn’t exhaustive, it briefly covers the most widely adopted models up to this day.

To be clear, it isn’t necessary to decide on a single model to run with. Many, many companies find great success in implementing multiple business models simultaneously. In fact, it is difficult to find companies conforming to only one of these abstractions. In practice, most successful businesses find ways of blending these models in innovative, synergic ways.

To do this, you can use one of most popular tools for developing and documenting business models - the Business Model Canvas.

Business Model Canvas is a visual template with elements describing a firm’s value proposition, customers, finances, and infrastructure.
Business Model Canvas is a visual template with elements describing a firm’s value proposition, customers, finances, and infrastructure.

However, now that you came up with a unique business model, you must figure out how it fares in practice. Concretely, how do you plan to thrive considering the competition?

Business Strategy 🔗

As a concept, your business strategy is simply how your business plans to create value and achieve financial success better than your competitors. Naturally, it’s likely that you won’t be the only one operating in a market using a certain model. In other words, your business strategy is how you plan on “winning” in the business world.

In his 1985 classic “Competitive Advantage: Creating and Sustaining Superior Performance”, Michael Porter outlines the three main business strategies which continue to guide entrepreneurs everywhere today. These are:

Cost Leader: sell your products or services at a lower price than the competition.

Create Differentiation: in other words, be unique. Sell a specialized product or service.

Target a Niche Customer Group: make an effort to be the only provider of a very specific need.

Consider the marketplace model. American tech giant Amazon is going head to head against its Chinese competitor Alibaba. But there are some key differences in the specifics of their models as well as strategies.

Unlike Alibaba, which is a true marketplace, Amazon is actually a reseller. Amazon owns the inventory and supply chain, selling directly to its customers (B2C), whereas Alibaba simply connects buyers and sellers (C2C).

The relatively small overhead of Alibaba’s model enables it to pursue the cost leader strategy. By minimizing the costs associated with infrastructure such as Amazon’s warehouses, the company can charge a smaller commission on transactions.

Amazon, on the other hand, is creating differentiation by ensuring consistency across all online shopping experiences and multiple convenient delivery options. Owning their stock, Amazon is also able to vouch for it more credibly than Alibaba. The latter’s offer, although more financially attractive, puts customers through a lot of trouble when they aren’t satisfied with their purchase.

Conclusion 🔗

People don’t buy stuff. They buy brands. If you can’t articulate why your company exists, I have some bad news for you. Conventional strategy and tactics alone are great, but if your competition can sell their why, convincing your mutual prospects that their story gives them more reason to take their offer, you can be sure they won’t think twice. It will hardly ever matter how cheap, unique, or well-targeted your product is.

You might say that this isn’t universally true. Strategies also depend on a market’s maturity and region’s level of wealth, and the why is just first world millennial confetti. Well, chances are you are selling to millennials in the first place, due to demographic changes.

But the really important thing is that these things are not mutually exclusive. You enter a market with a purpose. There’s nothing about this idea that makes it incompatible with offering an affordable service or product.

In fact, if you conclude that affordability is why your business does what it does, and that’s the story you want to tell, you’re all set. You will 100% fare better than those who completely disregard this, and your sales funnel will be significantly larger than theirs. You will be better suited to accomplish your goals.

When clevver.design was born, we decided we don’t want to compromise on our boldness in favor of convenience. As such, we advise you to follow suit and reject the outdated funnel model. We promise this is the last time we’ll mention it. But what did we replace it with? Our next article revolves around that exact question. We also teach you to set goals and measurable objectives for your business that enable that sweet sustainable growth you’re probably after.

In the meantime, we’d be happy to hear about the conceptual aspects of your business or help you nail them down. Your customers deserve the same level of satisfaction even when online. Get in touch with us to let us know why your offer makes your clients smile. We’ll take it from there and ensure those smiles aren’t lost through screens.

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