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Chapter 4: What Business Are They Really In?

Chapter 4: What Business Are They Really In?

Video: Where Do We Even Start: The Steps to Solve a Case

Resource:  Where Do We Even Start Worksheet (Available for purchase)

Central Question

What does this organisation actually do and where does its value really come from?

Before you analyse an organisation, understand its business model. One of the most useful questions is: What business is this organisation really in? The obvious answer may not be the strategic answer. An organisation may appear to sell a particular product, but the real source of value may be:

  • Convenience

  • Access

  • Relationships

  • Data

  • Distribution

  • Trust

  • Experience

  • Infrastructure

  • Expertise

  • Another distinctive capability

Understanding this distinction can completely change how you analyse the case.

Why This Matters

Consider an organisation that sells coffee. You could describe its business as: "Selling coffee", but perhaps customers are really paying for:

  • Convenience

  • A place to meet

  • A premium experience

  • Speed

  • Community

  • Consistency

  • Access to a particular location

Those different interpretations lead to different strategic questions. If the organisation is really competing on convenience, location and speed may matter more than product variety. 

  • If it is competing on experience, customer service and atmosphere may matter more.
  • If it is competing on price, cost structure and operational efficiency may become more important.

The way you define the business determines what you look for.

The Business Decode

Start by completing this sentence: This organisation is really in the business of __________ because __________. Then answer four additional questions:

  • The organisation creates value by:
  • The organisation captures value by:
  • Its most important customers or stakeholders are:
  • Its biggest current challenge is:

These questions force teams to think beyond the organisation's product or service.

Creating Value

Every organisation needs to create value for someone. Ask why someone chooses this organisation.The answer might be:

  • Lower price

  • Better quality

  • Greater convenience

  • Faster service

  • Greater selection

  • Trust

  • Brand

  • Personalisation

  • Access

  • Expertise

  • Experience

The answer helps you understand the organisation's value proposition.

Capturing Value

Creating value is only part of the business model. The organisation must also capture enough value to sustain itself. Ask how the organisation turns the value it creates into revenue, profit, funding, or impact. Depending on the organisation, value may be captured through:

  • Product sales

  • Service fees

  • Subscriptions

  • Advertising

  • Licensing

  • Memberships

  • Transaction fees

  • Donations

  • Government funding

  • Partnerships

  • Other mechanisms

This distinction becomes particularly important in cases involving profitability, growth, or changing business models.

Customers and Stakeholders

Not every organisation has a single customer. You may need to consider:

  • Customers

  • Employees

  • Owners

  • Investors

  • Suppliers

  • Regulators

  • Partners

  • Communities

  • Governments

  • Other stakeholders

Ask: 

  • Who receives value?
  • Then ask: Who pays for it?
  • And finally: Who has the power to influence the organisation?

These may be three different groups. Understanding that distinction can reveal important strategic tensions.

The Business Model as a Diagnostic Tool

Once you understand the business, you can begin asking where the problem exists. For example:

  • Customers: Are customer needs changing?
  • Value Proposition: Is the organisation still offering something customers value?
  • Revenue: Is the organisation capturing enough value?
  • Costs: Is the organisation spending too much to create that value?
  • Capabilities: Does it have what it needs to compete?
  • Channels: Can it reach customers effectively?
  • Relationships: Can it attract and retain customers?
  • Partners: Does it depend on external organisations?
  • Resources: Does it have sufficient financial, human, technological, or physical resources?

This begins to connect your understanding of the organisation to the analysis that follows.

The "Really In The Business Of" Test

When your team thinks it understands the organisation, challenge the answer.

  • Ask: What does the organisation sell?
  • Then ask, "What does the customer actually buy?"
  • Then ask: Why do they buy it?
  • And finally: What would make them choose someone else?

These questions can expose the real competitive dynamics of the case.

A Simple Example

Imagine a company that sells software to small businesses. At first glance: Business = Software. A deeper analysis might reveal: Business = Helping small businesses manage their operations efficiently. That changes the strategic possibilities. The organisation might compete through:

  • Software features

  • Ease of use

  • Integration

  • Customer support

  • Data insights

  • Automation

  • Price

  • Ecosystem partnerships

The product is software. The underlying customer need is much broader.

Discover Your MAD Skills Principle

Understand the value before you analyse the business.

  • The product or service is what the organisation sells. 
  • The value proposition explains why customers care.
  • The business model explains how the organisation creates and captures that value.

The strategy needs to connect the three.

From Business Decode to Case Analysis

Once you understand what business the organisation is really in, you can begin asking more useful questions. For example: What is changing? → How does that change affect the organisation's ability to create value? → How does it affect its ability to capture value? → What capabilities are required to respond? → What strategic choices are available?  → Which choice creates the greatest value? This creates a natural bridge from deciphering into analysis.

Practical Exercise

Before beginning your next case, give your team five minutes to complete:

The Business Decode
  • We are advising:
  • They are really in the business of:
  • Because customers/stakeholders value:
  • They create value by:
  • They capture value by:
  • Their most important customers/stakeholders are:
  • Their most important capabilities are:
  • Their biggest current challenge is:
  • The decision they need to make is:

If your answers are vague, keep investigating. You are still deciphering.

The Bottom Line

What Business Are They Really In?
  • Before analysing an organisation, understand how it creates and captures value.
    • The product or service an organisation sells does not necessarily define the business it is strategically in.
    • The real source of value might be:
      • convenience;
      • access;
      • relationships;
      • data;
      • distribution;
      • trust;
      • experience;
      • infrastructure;
      • or another capability.
  • Understanding the business model changes the questions you ask and the analysis you perform.
    • Identify:
      • how the organisation creates value;
      • how it captures value;
      • who its most important customers and stakeholders are;
      • what capabilities make the model work;
      • and what currently threatens that model.
  • Complete the Business Decode: "This organisation is really in the business of __________ because __________."
    • Then ask:
      • "The organisation creates value by __________."
      • "The organisation captures value by __________."
      • "Its most important customers/stakeholders are __________."
      • "Its biggest current challenge is __________."

If you misunderstand the business, you risk conducting excellent analysis of the wrong problem.

MAD Skills Drill

Take a new case. Give the team five minutes to read only enough information to form an initial understanding.

  • Don't use a framework.
  • Don't begin solving.
  • Don't brainstorm recommendations.

Instead, complete:

  • The Organisation: This organisation creates value by __________.
  • The Situation: What has changed is __________.
  • The Symptom: The visible problem is __________.
  • Thr Possible Root Cause: We need to investigate whether __________.
  • The Decision: Management needs to decide __________.
  • The Comstraint: The most important constraint appears to be __________.
  • Success: A successful solution would __________.

Then complete the Business Decode: "This organisation is really in the business of __________ because __________."

Compare Answers

Have each team member complete the exercise independently before discussing it. Then collide ideas. Where did your interpretations differ? Those differences identify the questions requiring further analysis. Before moving forward, can your team answer: What kind of case is this, what decision are we actually being asked to make, and what do we still need to understand? If not, don't solve it yet. Decipher first.

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