Business model internet business coach 

The term business model describes a broad range of informal and formal models that are used by enterprises to represent various aspects of business, including its purpose, offerings, strategies, infrastructure, organizational structures, trading practices and operational processes and policies. Although the term can be traced to the 1950s, it achieved mainstream usage only in the 1990s. Many informal definitions of the term can be found in popular business literature, such as the following:

“ A business model is a conceptual tool that contains a big set of elements and their relationships and allows expressing the business logic of a specific firm. It is a description of the value a company offers to one or several segments of customers and of the architecture of the firm and its network of partners for creating, marketing, and delivering this value and relationship capital, to generate profitable and sustainable revenue streams. ”
 

More recently, researchers build definitions based on economic and organizational theories and show that the definitions are econometrically sound. For example, Malone, et al. (2006) at MIT propose an operational definition of business model, based on theories such as those from transaction cost economics. Zott and Amit (2002) from INSEAD and Wharton based their definition on boundary-spanning transactions.

Simply put: What problem does this business solve, and how does it do so profitably?


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Basing concept

A business model is a representation of a selected view on reality. This chosen view is a specialization compared to copying the real system or the modeled business process with the following restrictions:

  • Model is no copy of reality
  • Model requires validation
  • Other models are possible and may have validity
  • Model serves testing of hypotheses at low risk and low cost
  • Model serves ease of intelligibility
  • View specializes to certain purpose
  • Other views are not represented as well

 Components of a business model

Many different conceptualizations of business models exist (Chesbrough and Rosenbloom 2000; Hamell 2000; Linder and Cantrell 2000; Petrovic, Kittl et al.; Weill and Vitale 2001; Gordijn 2002; Afuah and Tucci 2003; Osterwalder 2004; Fetscherin & Knolmayer 2005). They all have various degrees of resemblance or difference. The model proposed by Osterwalder (2004) synthesises the different conceptualizations into a single reference model based on the similarities of a large range of models. The author's conceptualization describes a business model as consisting of nine related business model building blocks. Thus, a business model describes a company's business:

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Infrastructure

  • core capabilities: The capabilities and competencies necessary to execute a company's business model.
  • partner network: The business alliances which complement other aspects of the business model.
  • value configuration: The rationale which makes a business mutually beneficial for a business and its customers.

Offering

  • value proposition: The products and services a business offers.

Customers

  • target customer: The target audience for a business' products and services.
  • distribution channel: The means by which a company delivers products and services to customers. This includes the company's marketing and distribution strategy.
  • customer relationship: The links a company establishes between itself and its different customer segments. The process of managing customer relationships is referred to as customer relationship management.

Finances

  • cost structure: The monetary consequences of the means employed in the business model. A company's DOC.
  • revenue: The way a company makes money through a variety of revenue flows. A company's income.

These 9 business model building blocks constitute a business model design template which allows companies to describe their business model.

 Evolution

A brief history of the development of business models might run as follows. The oldest and most basic business model is the shop keeper model. This involves setting up a store in a location where potential customers are likely to be and displaying a product or service.

Over the years, business models have become much more sophisticated. The bait and hook business model (also referred to as the "razor and blades business model" or the "tied products business model") was introduced in the early 20th century. This involves offering a basic product at a very low cost, often at a loss (the "bait"), then charging compensatory recurring amounts for refills or associated products or services (the "hook"). Examples include: razor (bait) and blades (hook); cell phones (bait) and air time (hook); computer printers (bait) and ink cartridge refills (hook); and cameras (bait) and prints (hook). An interesting variant of this model is a software developer that gives away its word processor reader for free but charges several hundred dollars for its word processor writer.

In the new business models came from McDonald's Restaurants and Toyota. In the 1960s, the innovators were Wal-Mart and Hypermarkets. The 1970s saw new business models from FedEx and Toys R Us; the 1980s from Blockbuster, Home Depot, Intel, and Dell Computer; the 1990s from Southwest Airlines, Netflix, eBay, Amazon.com, and Starbucks. Poorly thought out business models were a problem with many dot-coms.