PwC’s guide to better business models
12 January 2017
Hello, and a Happy New Year to you!
This is our first blog of 2017, and completes our series of three blogs exploring the reporting of business models which has followed the publication of our report Reporting your business model: Emerging practices and future trends.
We recognise and understand the challenges companies face when articulating their business model. They increasingly need to paint a broader picture of the business, reflect interactions with a wider set of stakeholders and, in our rapidly changing world, present a more dynamic picture of the business.
To respond to these challenges and help those charged with articulating their company’s business model, we’ve identified four building blocks that will create better business models.
- Keep business models specific, focusing on what makes you distinctive.
- Provide an understandable overview of what the business does, how it is structured, and the market in which it operates.
- Identify the key resources and relationships that are necessary for the success of the business.
- Explain how value is created and which of the key stakeholders benefit.
- Don’t be afraid to change the business model to reflect the dynamics of the business and an evolving business environment.
- Consider and explain how the business model links to strategic objectives, the risk to the success of the business model, how the performance of the business model will be measured, and how that will be reflected in the annual report.
Serving your stakeholders
With the publication of the Government’s Green Paper on Corporate Governance Reform late last year and similar noise from the FRC, it’s clear that there’s growing pressure on companies to be able to demonstrate how they’ve considered the interests of their wider stakeholders. The presentation of the business model provides just such an opportunity for companies to identify their wider stakeholders, explain how they’re relevant to the way they do business and provide a springboard to where more information may be provided.
It’s clear from our research that a growing number of companies are at least using their business model disclosures to identify their stakeholders and, whilst a greater number still need to, bigger challenges remain for most companies in how they bring to life these relationships and integrate them into the other key components of reporting. For example, in our analysis we found that only 17% of companies showed a clear link between their business model and strategic objectives. Whilst even fewer (3%) illustrated a clear link between their business model and market trends.
Companies should give more consideration to explaining how their business model is resilient in light of current market dynamics, how it might evolve in light of future market trends and what impact that might have on their stakeholders.
As business model disclosures become ever more comprehensive and outward-facing we see the way companies link their business model to their strategy, risks, KPIs – much of which remain grounded in the traditional financial model – as representing one of the most important and challenging aspects of reporting facing companies. One that arguably goes to the heart of how companies think, act and measure success and the quality and availability of information internally.
Our report can be found here, and you can join in the discussion on social media using the hashtag #beyondboilerplate.