Business Models

Description of Business Models. Explanation.

Definition Business Models. Description.

Business Models are systems by which businesses can sustain themselves and can achieve their corporate purpose, mission and strategy. According to Johnson, Christensen and Kagermann (Reinventing your Business Model, HBR Dec 2008, P50-59), a business model consists out of 4 interrelated elements:

1. Customer Value Proposition. The way to create value for customers, to solve a problem for them.

2. Profit Formula. How the company creates value for itself while creating value for its customers.

3. Key Resources. The most important assets to achieve 1 and 2 and their interaction.

4. Key Processes. The most important routines and tasks to achieve 1 and 2. For example product design and development, purchasing, manufacturing, marketing, IT. But also rules and metrics, such as margin requirements, credit terms and lead times.

Typically a business model takes the form of a company or Strategic Business Unit.

Examples of business models. Types

• Advertising

• Affiliate

• Auction

• Bricks and Clicks

• Brokerage

• Community

• Customer Loyalty

• Disintermediation

• Dutch Auction

• Franchising

• Industrialization of services

• Infomediary

• Marketplace

• Merchant

• Monopoly

• Multi-level marketing

• Network effects

• Pyramid scheme

• Razor and blades

• Reverse Auction

• Subscription

• Utility

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Compare with: Value Chain  |  Strategic Alliance  |  Industry Attractiveness  |  Strategic Vision  |  Virtual Business

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End of description Business Models. An explanation.