24 Nov 2009Working Paper Summaries

From Strategy to Business Models and to Tactics

by Ramon Casadesus-Masanell and Joan Enric Ricart

Drivers such as globalization, deregulation, or technological change, just to mention a few, are profoundly changing the competitive game. Scholars and practitioners agree that the fastest-growing firms in this new environment appear to have taken advantage of these structural changes to compete "differently" and innovate in their business models. However, there is not yet agreement on what are the distinctive features of superior business models. This dispute may have arisen, in part, because of a lack of a clear distinction between the notions of strategy, business model, and tactics. HBS professor Ramon Casadesus-Masanell and Joan Enric Ricart present an integrative framework to distinguish and relate the concepts of business model, strategy, and tactics. Key concepts include:

An integrative framework that cleanly separates the realm of business model, strategy, and tactics will help guide the search for novel, interesting, and profitable new ways to compete.
"Business model" refers to the logic of the firm, the way it operates, and how it creates value for its stakeholders.
"Strategy" refers to the choice of business model through which the firm will compete in the marketplace.
"Tactics" refers to the residual choices open to a firm by virtue of the business model that it employs.

Author Abstract

The notion of business model has been used by strategy scholars to refer to "the logic of the firm, the way it operates and how it creates value for its stakeholders." On the surface, this notion appears to be similar to that of strategy. We present a conceptual framework to separate and relate business model and strategy. Business model, we argue, is a reflection of the firm's realized strategy. We find that in simple competitive situations there is a one-to-one mapping between strategy and business model, which makes it difficult to separate the two notions. We show that the concepts of strategy and business model differ when there are important contingencies upon which a well-designed strategy must be based. Our framework also delivers a clear separation between tactics and strategy. This distinction is possible because strategy and business model are different constructs. 45 pages.