The theory of Business
Business and theory are considered oxymoron. Business is always a practical thing. I agree totally with this view, but to have a clarity on our business and to put that clarity to our clients and associates, the theory of business is very important. Please note it is different from a mission statement or a business plan. In business any written piece has audience and the different piece has a different audience. This theory of business has a primary audience that is us. This theory gives us a clarity on what our business is all about? The famous SRMSOS can be based on this theory of Business.
SRMSOS Stands for Strategy, Research, Marketing, Sales, Operations and Service after sales. All these can be drafted efficiently if we can have the theory of our business. Basically a theory has a form. That is X happened because of Y. this is a simple theory, but incomplete. Theory basically should be like if X has happened then Y will happen because of the reason Z. This forms a complete theory. This theory has a history and many had used it. Though it was made very popular by a serial entrepreneur who invented a business called BLOCKBUSTER. His name was Wayne Huizenga. This is a business model that rented videos and serials to American adults to watch them on their free time. Mind you it was started on 1989 and it had an employee count of 83,400 by April 2004. It had 9094 stores across United States of America and other continents.
When Huizenga went into a video rental shop where he wanted to rent a movie. He noticed the following things.
- There was a limited collection of movies
- There were a very few copies of recently released movies which were on high demand
- The shop is tiny and congested and hence people can’t spend more time to browse and select their favorite movies
Now Mr. Huizenga has a reputation for getting onto the sectors which are deregulated and make them a professional market. He did that in the business of waste clearance in America and he did do that to many business he undertook. Because of this change over, he made a lot of money because anyone can see he is the pioneer of regulated company in the deregulated industry. He did that with the theory of business which has if…..then……..because. In the case of Blockbuster, he came up with this theory
“If I provided in my store a large collection of latest movies and it is clean and spacious enough for the customers to move around comfortably, then people will choose my store over others because people will know for sure that they will get the movie they want here and also with a great experience”
The purpose of if….then…..because
Now this is what a theory of business is. I hope by reading the above statement anyone can figure out what this business is about? Why is the business existing? Who are the potential clients? How is it going to make money? How sustainable is this business? All these questions can be answered by a single line if….then……because theory of one’s business. Obviously Blockbuster is no more. It shut its operations by 2013 as the new surge of technology took place. Netflix happened and hence Blockbuster went into oblivion. But here too if the if…..then……because can save you. This should be revisited several times because of its implication. Hope Blockbuster has formed it’s theory again like
“ If some technology is being developed to provide movies on demand, then our business will cease to grow because people now not necessarily should move out of their houses to purchase/rent movies to watch”
If you are into a business, then please try this if…..then…… because…… statement to have the utmost clarity of your business.