The value of such shorthand is that it allows business leaders to articulate quickly and clearly how they will succeed in the marketplace, and it allows investors to quiz executives more easily about how they intend to make money.
Similarly, stating that a company is using “the razor and the razor blade” model describes a type of ongoing customer relationship that applies far beyond shaving products.
When a person says that a company is a “low-cost provider” or a “fast follower,” the main outlines of how that company operates are pretty clear. Although there is no definitive list of corporate business models, 2 there is enough agreement about what they mean that investors and executives alike can engage in sophisticated conversations about any given company’s strategy. This is particularly true when it comes to understanding how different businesses operate, which can be encapsulated in a set of principles known as business models. In the for-profit world, by contrast, there is a much higher degree of clarity on financial issues. And when dollars become tight, a chaotic fundraising scramble is all the more likely to ensue. Too often, the result is that promising programs are cut, curtailed, or never launched. When nonprofits and funding sources are not well matched, money doesn’t flow to the areas where it will do the greatest good. There are consequences to this financial fuzziness.
That’s because nonprofit leaders are much more sophisticated about creating programs than they are about funding their organizations, and philanthropists often struggle to understand the impact (and limitations) of their donations. Unfortunately, the answers are not readily available. Money is a constant topic of conversation among nonprofit leaders: How much do we need? Where can we find it? Why isn’t there more of it? In tough economic times, these types of questions become more frequent and pressing.
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