A business model is a sustainable way of doing business, the unique combination of attributes that deliver a certain value proposition, and a platform that enables the strategic choices to become profitable. It must be developed and optimized continuously to meet changing competitive demands.
The core of the business model description should be the connections between the six different elements:
i. The value proposition, the value created for users by the offering based on the technology.
ii. The market segment, to whom the technology is useful and for what purpose.
iii. The structure of the value chain within the firm required to create and distribute the offering.
iv. The cost structure and profit potential.
v. The position of the firm within the value network linking suppliers and customers.
vi. The competitive strategy holds advantages over rivals.
A business model describes the coherence in the strategic choices which facilitates the handling of the processes and relations which create value on both the operational, tactical, and strategic levels in the organization.
Driving out the business model:
Which value creation are we trying to sell?
Which connections are we trying to optimize through the value creation?
The product or service is unique or not?
Which resources do we need to mobilize strategies?
Where are the risks? How to control them?
Archetypes of business models: The e-business models.
- e-shop, e-mall, e-auction, and e-procurement
- 3rd party marketplace
- Virtual communities
- Value chain integrator
- Value chain service provider
- Collaboration platforms
The Four profit-formulas for e-businesses:
i. Commission
ii. Advertising
iii. Mark-up
iv. Production
If firms within the same industry operate on different business models, different competences and knowledge resources are key parts of the value creation.
Organigraphs consists of four basic components: the set, the chain, the hub, and the web.
The set, a collection of separate parts. A set of independent activities.
The chain, describes sequential connectivity of activities such as in Ford’s automobile factory.
The hub, serves as a coordination center. Both physical form or a conceptual point. The movements to and from one focal point.
The web, organizational connection, or the notion of interactive networks.
Strategy, the determination of the basic long-term goals and objectives of an enterprise. The actions, the allocation of resources necessary for carrying out the goals.
The role of technology in the business model is a key element in determining which organizational structures become feasible.
Reference
Nielson, C. & Lund, M. (2013). The Basics of Business Models. Bookboon.
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