In my last semester of business school, I completed an independent study research project under the direction of Professor Allan Afuah. Professor Afuah's research focuses on business modeling and business model innovation.
What I found is that business model frameworks are useful for private-sector executives, but have never been translated in a way that is useful for public-sector executives. The paper I wrote, translates Professor Afuah's framework for dissecting business models so that it's useful to leaders of "civic enterprises" in the public sector.
I hope you'll read the whole paper, but here's a very brief summary. Please let me know what you think, privately or in the comments.
The Business of Urban Growth - Executive Summary
Just like private enterprises, governments must create value for their customers (i.e., residents and taxpayers) to survive. Businesses have great tools, like business model frameworks, to help them think through their strategies for creating and capturing value. Civic enterprises, however, do not have a business model framework that is tailored to their executives' needs - until today.
Professor Allan Afuah has a great framework for articulating the business models for private enterprises, which I've translated to the civic context. Afuah's components of a business model are capabilities, value proposition, customer segments, revenue model, and growth model.
Here are the key takeaways from translating the business model framework for use by civic enterprises:
- Revenue Model - Revenues models are fixed by law, and therefore relatively simple. Crowdfunding could be a supplemental revenue model worth exploring.
- Growth Model - A good proxy for "growth" could be revenues and costs of a civic enterprise's budget. There are generally only four ways for civic enterprises to increase revenues: add population, add businesses, increase individuals' wages, and increase businesses' revenues. Therefore, all growth initiatives should directly impact at least one of those four growth levers.
- Market Segments - A civic enterprise's main segments are individuals and businesses, but additional segmentation would be useful so that cities could target their growth efforts on a limited number of segments.
- Value Proposition - There's clear research on what individuals (and businesses value), but it's not as simple as jobs and/or amenities. Perception of weather and social capital are a big determinant in what people value when they move.
- Capabilities - Civic enterprises need capabilities which fall into four categories: tangible assets, intangible assets, stakeholder networks, and management systems. There is no silver bullet, all types of capabilities are needed simultaneously.
I believe that the leaders of civic enterprises will have better results by using this translated business model framework when crafting their growth strategies.
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