Early 'business model' models: Drucker's Theory of Business

In an earlier post, I described Humphrey's 'team action management' (TAM) business performance model as an early 'business model' model. Another model in this series is Drucker's 'Theory of the Business', which is described in his thirty-first HBR article (Sep 1994).

Drucker's theory of business consists of three parts: (1) assumptions about the environment of the organization, (2) assumptions about the specific mission of the organization, and (3) assumptions about the core competencies needed to accomplish the organization's mission.

Moreover, Drucker addresses four specifications of a valid theory of business:

1. The assumptions about environment, mission, and core competencies must fit reality.
2. The assumptions in all three areas have to fit one another.
3. The theory of business must be known and understood throughout the organization.
4. The theory of business has to be tested constantly.
   

IBM study: Three ways to innovate your business model

An IBM study into business model innovation (Mar 2009) reveals three primary types of business model innovation: (1) industry model innovation, (2) revenue model innovation and (3) enterprise model innovation.

The study is based based upon an examination of 35 cases. It also which models generate success and which seem easier to implement. It concludes that with a sound strategy and strong execution, any of the paths can lead to success.

Early 'business model' models: Humphrey's TAM

Most of us will know different frameworks or models for business models, like Osterwalder's business model canvas, Weill & Vitale's e-business models, Bouwman et al.'s STOF model, Gordijn's e3-value, etc. Most of these frameworks and models are relatively recent. Are there similar frameworks and frameworks from the past?

During a search for SWOT analysis, I came across a framework from Humphrey (see here). A further search on Humphrey brought me to his 'team action management' (TAM) business performance model (see here).

TAM describes six inter-related areas which have to be developed simultaneously for a business to be successful:

1. Products & services: what are we selling?
2. Process: how are we selling it?
3. Customer: to whom are we selling it?
4. Distribution: how does it reach them?
5. Finance: what are the prices, costs and investments?
6. Administration: how do we manage all this?

Another interesting fact about Humphrey is that he was a strong advocate of involving all employees in business planning and, therefore, promoted a systematic approach to produce and achieve a plan to accomplish a specific result, in a specific time, to a specific budget while working with a group of people.