Businessmodel
A content analysis of key words in 30 definitions led the authors to identify three general categories of definitions based on their principal emphasis. These categories can be labeled economic, operational, and strategic, with each comprised of a unique set of decision variables.
At the most rudimentary level, the business model is defined solely in terms of the firm’s economic model. The concern is with the logic of profit generation. Relevant decision variables include revenue sources, pricing methodologies, cost structures, margins, and expected volumes. At the operational level, the model represents an architectural configuration. The focus is on internal processes and design of infrastructure that enables the firm to create value. Definitions at the strategic level emphasize overall direction in the firm’s market positioning, interactions across organizational boundaries, and growth opportunities. Of concern is competitive advantage and sustainability
A business modelconsists of four interlocking elements that, taken together, create and deliver value. The most important to get right, by far, is the first.
Customer value proposition (CVP). A successful company is one that has found a way to create value for customers – that is, a way to help customers get an important job done. By “job” we mean a fundamental problem in a given situation that needs a solution.
Profit formula. The profit formula is the blueprint that defines how the company creates value for itself while providing value to the customer.
Key resources. The key resources are assets such as the people, technology, products, facilities, equipment, channels, and brand required to deliver the value proposition to the targeted customer. The focus here is on the key elements that create value for the customer and the company, and the way those elements interact.
Key processes. Successful companies have operational and managerial processes that allow them to deliver value in a way they can successfully repeat and increase in scale. These may include such recurrent tasks as training, development, manufacturing, budgeting, planning, sales, and service. Key processes also include a company’s rules, metrics, and norms.
These four elements form the building blocks of any business .
⠀ Morris, M., Schindehutte, M., Allen, J. (2005). The entrepreneur’s business model: toward a unified perspective. Journal of Business Research, Vol. 58, Pp. 726-735 (P. 726-727).