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Mechanism of Action [Business Models
Posted on May 21, 2021 @ 07:43:00 AM by Paul Meagher

Nature Magazine defines "Mechanism of Action" as "the process by which a molecule, such as a drug, functions to produce a pharmacological effect." We might wonder, for example, what mechanism of action a particular vaccine uses to block covid or reduce the likelihood of dying from covid. Research is still ongoing on exactly how the newer mRNA vaccines instruct our immune systems to identify and deal with covid and its variants. It is possible to know that something works, and in general why it works, without having a detailed understanding of its mechanism of action. Knowing its mechanism of action allows us to better understand how the drug works, what its limitations are, and how we might improve it.

The reason for discussing the mechanism of action concept is to suggest that it might be useful to apply this concept to business ideas. Sometimes the uneasy feeling we might have over a business idea arises because we don't understand the mechanism of action that will cause that idea to be successful. The idea itself may be a good one, but to get to the stage where the idea might generate a return for an investor a number of additional steps need to take place which may or may not be likely.

Some might argue that in business we have the concept of a "business model" that covers the same or similar ground to the "mechanism of action" concept.

Wikipedia defines a business model as:

... the rationale of how an organization creates, delivers, and captures value, in economic, social, cultural or other contexts. The process of business model construction and modification is also called business model innovation and forms a part of business strategy.

In theory and practice, the term business model is used for a broad range of informal and formal descriptions to represent core aspects of a business, including purpose, business process, target customers, offerings, strategies, infrastructure, organizational structures, sourcing, trading practices, and operational processes and policies including culture.

While the concept of a business model may overlap with the concept of mechanism of action, the overlap is not guaranteed because the term business model is used to refer to so many different core aspects of a business such as the "purpose, business process, target customers, [etc...]". In other words, the concept of a "business model" can be pretty vague and refer to many different aspects of a business depending on who is using the term. Maybe we would do better to come up with a different term than business model to account for business success or failure?

The mechanism of action concept focuses our mind on identifying causal mechanisms responsible for the success or failure of a business idea. It makes us look more deeply into how the business idea might lead to success and may involve a level of modelling that is more detailed than verbal descriptions of the idea or projections of ever increasing sales. How, exactly, are these sales going to happen?

In the context of business, we might say that the "mechanism of action" is "the process by which a business idea produces a successful outcome". Identifying the mechanism of action involves reasoning of the form A leads to B which leads to C. When starting a new business the full causal chain may not be clear or confirmed because we lack alot of information that can only be provided through marketplace testing, however, we should be able to point to similar businesses and what appears to be the mechanism of action leading to their success. We may not be able to replicate that success if that success depended upon limited competition and there is already alot of competition, unless we have some way to outcompete them by offering, say, a mobile version (i.e., bring it to you) or online version of the business.

The reason why a drug produces a particular outcome may not be due to a single mechanism of action. If a drug is particularly effective, it may be because it has several different mechanisms of action that all contribute to achieving the outcome. The success of a platform like facebook is not attributable to one mechanism of action. Through R&D and acquisitions facebook is developing new mechanisms of action that collectively contributes to its social media dominance. In an evolving marketplace, this is necessary because other platforms are striving to dethrone facebook and would do so if it didn't keep evolving. The vaccines we are developing today may not work against future variants so we need to keep researching new vaccines and antivirals that have different mechanisms of action.

In conclusion, this blog proposes that the term "mechanism of action" as used in drug research, might also be useful when evaluating a business idea or implementing a business idea. Often there is more than one "mechanism of action" that causes a business idea to succeed or remain successful. Sometimes when people use the term "business model" to explain why a business idea will succeed, we might need to ask what the proposed mechanism(s) of action are for that business model in order to focus on the additional details that need to be specified in order to properly evaluate exactly how it could succeed.

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