Business Models

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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. It is a description at a strategic level of the way an organization creates, delivers, and captures economic, social, or other forms of value. They apply to commercial, not-for-profit and government organisations.


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 a Strategic Business Unit.


Examples of business models. Types

Advertising, Affiliate, Auction, Bait and Switch, Bricks and Clicks, Brokerage, Community, Customer Loyalty, Disintermediation, Dutch Auction, Franchising, Industrialization of services, Infomediary, Marketplace, Microfinance, Monopoly, Multi Channel Marketing, Network Effects, Pyramid scheme, various Retail Types, Reverse Auction, Subscription, Utility, Freemium, etc.


Usage of Business Models. Applications

  • Describe and classify an entrepreneurial business
  • Explore possibilities for future development in a mature business
  • Determine where to make strategic investments and pathways for change
  • As part of a lean start up development methodology
  • Identify risks, compare sensitivities
  • Because the name of a business model is associated with an entire way of doing business, it can be used to refer to a complex organizational setup in a simple way.
  • As recipes for creative managers

Business Model CanvasGeneric Business Model Template

In their handbook Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers, Alexander Osterwalder and Yves Pigneur describe the Business Model Canvas, a generic business model template (picture), which can be used by "visionaries, game changers, and challengers striving to defy outmoded business models and design tomorrow's enterprises" to describe virtually any business model.


This 'Business Model Canvas' has 9 building blocks:

  1. Customer Segments
  2. Value Propositions
  3. Channels (communication, distribution and sales)
  4. Customer Relationships
  5. Revenue Streams (the results from the value propositions to the customer segments)
  6. Key Resources (the assets required to offer and deliver the products / services)
  7. Key Activities
  8. Key Partnerships (Strategic Alliances, Outsourcing)
  9. Cost Structure

Value proposition Canvas

Alexander has added to this work with a sub-canvas which is used to ensure alignment between the customers “jobs to be done” and the organization's value propositions. He originally referred to this as the Customer Value Canvas. The Value Proposition Canvas is used to test the known and anticipated customer needs against the organization's offerings by looking at how the organization creates “gains” and eliminates “pains” for the customer.

 

Special Interest Group - Business Models


Special Interest Group (1196 members)


Forum - Business Models  

Discussions about Business Models.


  The Startup Business Strategy Frame
Startup success is greatly attributed to pre-startup phase planning. develop business plans to pitch their ideas to sec (...)
 
 
 
 
  Business Models in Developing Countries
In many developing countries, particularly in Africa, there are lots of idle resources. In these parts of the world, bus (...)
 
 
 
 
  Business Model Innovation
Hi, it would be great if we could start discussions on business model innovation and changes. The past decade has just s (...)
 
 
 
 
  The Strategy Sketch (Kraaijenbrink)
DESCRIPTION STRATEGY SKETCH. SUMMARY The Strategy Sketch is a structured visual template by Jeroen Kraaijenbrink contai (...)
 
 
 
 
  Key Elements of a Business Model
In my view, a business model has six key elements: 1. Growth strategies 2. Value proposition 3. Market segments 4. V (...)
 
 
 
 
  Operating Model versus Business Model
How exactly does an operating model differ from a business model? What are the commonalities and differences? What are t (...)
 
 
 
 
  Definition of a Business Model is Ambiguous
In studying or analyzing something, a clear-cut definition of the concept or term is required. As far as 'Business Mode (...)
 
 
 
 
  Why does Innovation often Requires Changes in the Business Model?
In cases of major product/technical/process innovation, it is often necessary for organizations to also adapt or reinven (...)
 
 
 
 
Hot Partners in the Business Model Canvas and SWOT
Dear all, I am new here and I really need help. I have recently started my company and I drew and prepared my Business (...)
 
 
 
 
  What Exactly is a Management Model?
Hello! I am a student and I am writing a work about the Scandinavian management model. After looking through a huge amou (...)
 
 
 
 
  Business Model Examples for Online Shop
Hello, I have the requirement to insert a business model for a case study I'm are working on. My case study is an online (...)
 
 
 
 
  Mastercard and Business Model Innovation
Strategyzer are reporting that Mastercard has rolled out business modeling across their organisation with a 1000 people (...)
 
 
 
 
  Barriers to Business Model Innovation
Due to fast technological developments and innovations, firms need to be able to quickly adapt to changes in the competi (...)
 
 
 
 
  Using the Business Model Canvas for Markets with Many Customers
The business model canvas is useful also in multi sided markets, that is one where there are more than a single customer (...)
 
 
 
 
  Business Models Used in Schools
The Business Model Canvas can certainly help entrepreneurs to come out with a clear vision on how their business plan wi (...)
 
 
 
 

Best Practices - Business Models

Here you find the most valuable discussions from the past.



Expert Tips - Business Models

Here you will find advices by experts.


 

Innovating by Reconsidering Value Delivery

Fundamental Innovation (...)
 
 

Resources - Business Models

Here you find powerpoint presentations, micro-learning videos and further information sources.


From Product And Process Innovation to Business Model Innovation

Business Model Innovation, Performance Management (...)
 

Innovation and Business Models

Business Models, Business Model Innovation (...)
 

Reinventing your Business Model

Business Model Change, Strategic Innovation (...)
 

Creating Inclusive Business Models

Business Models, Corporate Sustainability, International Development, Investing in Africa (...)
 

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

Special Interest Group Leader
Derek Lark
CEO

 
 

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This ends our Business Models summary and forum.



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