Until the 1990s, companies didn’t have “business models”

Interesting article about the expanding usage in the 1990s of the term “business model”.  http://qz.com/71489/until-the-nineties-business-models-werent-a-thing/

My theory is that the phrase became popular as the availability of venture capital grew, and, those responsible for investing it sought to filter deal flow.

Through the 1980’s, “strategy” was used to describe business activity and the deployment  of assets.  However, the blossoming of all-things-electronic—computer and consumer electronics—demonstrated that conditions were ripe for brand new businesses.  “Model” is a lighter word; it can be articulated before committing to activity and assets.

As the supply of potential deals expanded, and, the fleeting nature of success in the nascent technology sector was repeatedly demonstrated, VCs needed two things.  Theories about the kinds of businesses that were likely to find success, and, a quick way to test theories as they shift through deals.

Hence, there were “elevator pitches” about how to find success in rapidly changing markets.  Untested business strategies were better described as models.

In Hollywood, studios are pitched “high concept” and, when one bites, “it’s a movie”.

In Silicon Valley, business model became the equivalent of the high concept; appealing models produced funded companies.

One thought on “Until the 1990s, companies didn’t have “business models”

  1. Lisa LaMagna

    Karl, you hit the nail on the head and made me laugh out loud. Yes, language is important. The analogy also reminds me of the old (ancient) adage that common stocks were reserved for the portion of your portfolio that you could use entirely, they were considered highly speculative. However now that entire metropolitan centers and pension funds depend on the potential returns of equity (with interest rates close to zero), we have new words.

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