Business Model

A business model performs two important functions:

• It creates value
  • This requires the definition of a set of activities: from raw materials to the end customer, that will yield a certain product or service
• It captures a portion of that value
  • This requires the establishing of a unique resource, asset or position in which the firm enjoys a Sustainable Competitive Advantage.

When Selecting an appropriate business model there are six question to ask. There is a wide variety of definitions for a business model:

• A business model is the organization's core logic for creating value
• A business model is the description of the key components defining a business idea, including products and services, actors, roles, information, revenues, and benefits
• A business model is a unique configuration of elements comprising the organizations goals, strategies, processes, technologies and structure conceived to create value for customers and thus compete successfully in a particular market
• A business model is the configuration of resources that enable a company to create and deliver a Customer Value Proposition for a Market Segment. (from Marketing Strategy and Organization: Building Sustainable Business)

The consensus among resources to common elements of a business model are:

• Mission (strategic objectives)
• Target market (scope and market segment)
• Value proposition (product / service offering)
• Resources (Capabilities and assets)
• Key activities (organisational processes)
• Cost and revenue model (pricing policy)
• Value chain / Value network (alliances and partnerships)

See also: Business Model Canvas, Summary book 'free' - 50 business models for 'free' Part of: M8-S2 - Reading - Mark W. Johnson, Clayton Christensen, and Henning Kagermann, Reinventing your business model Part of: M8-S3 - Reading - Chesbrough, Why companies should have open business models