Environment, Strategy, Structure, Operations (ESSO)
Use this framework of four building blocks to develop a business model
The ESSO business model by Michael Lim of Bangor University has four building blocks – Environment, Strategy, Structure and Operations.
Environment: the starting point for all business models is to build a picture of the market - a situation analysis. There are various tools and frameworks that can help such as PESTEL and SWOT. The aim is to arrive at a a comprehensive understanding of customers, competitors and suppliers.
Strategy: against a background of the environments it is now possible to look for market opportunities and to determine where your company has a competitive advantage. In developing the strategy you should consider your customer base and decide whether you are going to aim broad or focused.
Structure: every business needs a management structure which could be hierarchical, flat or something in between.
Operations: businesses produce products and services and in so doing generate revenue and costs. The key aspects of the operations need to be fully understood in terms of their costs and quality relative to customers’ needs and pressure from competitors.
The blocks that make up the business model do not exist in isolation. A common link is knowledge management. This could range from know-how in people’s heads through to detailed documents and databases on strategy, structure and operations.