The business model explains the rationale for how organizations create, deliver, and capture value, in an economic, social, cultural, or other context. The construction process and modification of the business model are also called business model innovation and form part of the business strategy.
In theory and practice, the term business model is used for informal and formal descriptions to represent core aspects of a business, including goals, business processes, customer targets, offers, strategies, infrastructure, organizational structure, trade practices, and operational policies and processes including culture.
Video Business model
Context
Literature has provided a very diverse interpretation and definition of business model. Systematic reviews and analysis of managers' responses to surveys define business models as the design of organizational structures to enact commercial opportunities. Further extensions to this design logic emphasize the use of narrative or coherence in the description of a business model as a mechanism by which entrepreneurs create exceptionally successful growth companies.
Business models are used to describe and classify businesses, especially in entrepreneurial settings, but they are also used by managers within the company to explore possibilities for future development. Famous business models can operate as "recipes" for creative managers. The business model is also mentioned in some examples in the context of accounting for public reporting purposes.
Maps Business model
Definitions
The business model is "the abstract representation of the business, be it conceptual, textual, and/or graphical, of all the interrelated architectural, cooperative, and core financial arrangements that are designed and developed by the organization today, and in the future, all core products and/or services offered by the organization, or to be offered, are based on the arrangements necessary to achieve its strategic objectives and objectives. "This definition by the authors of Al-Debei, El-Haddadeh and Avison (2008) suggests that value proposition, value (organizational infrastructure and technology architecture enabling the movement of products, services, and information), financial value (modeling information related to total cost of ownership, pricing method, and revenue structure), and value networks articulate major constructs or business model dimensions.
History
Over the years, business models have become much more sophisticated. The business model feed and hook (also referred to as "business models of razors and knives" or "braided product business models") was introduced in the early 20th century. This involves offering basic products at very low cost, often losing ("bait"), then charging recurring amounts of compensation for refills or related products or services ("hook"). Examples include: razor (feed) and knife (hook); cell phones (bait) and air time (hook); computer printer (feed) and refill ink cartridge (hook); and camera (feed) and mold (hook). The variant of this model is Adobe, the software developer who delimits the document for free but charges a few hundred dollars for the document writer.
In the 1950s, new business models came from McDonald's and Toyota's Restaurants. In the 1960s, the innovators were Wal-Mart and Hypermarket. The 1970s saw new business models from FedEx and Toys R Us; 1980s from Blockbuster, Home Depot, Intel, and Dell Computer; 1990s from Southwest Airlines, Netflix, eBay, Amazon.com, and Starbucks.
At present, this type of business model may depend on how the technology is used. For example, entrepreneurs on the internet have also created new models that are completely dependent on existing or emerging technologies. Using technology, businesses can reach a large number of customers for a minimal cost. In addition, the emergence of outsourcing and globalization means that the business model must also take into account strategic resources, complex supply chains and move to a collaborative relational contract structure.
Theoretical and empirical insights
Design logic and narrative coherence
Design logic views business models as a result of creating new organizational structures or changing existing structures to pursue new opportunities. Gerry George and Adam Bock (2011) conducted a comprehensive literature review and surveyed managers to understand how they perceived the components of the business model. In the analysis, these authors point out that there is a design logic behind how entrepreneurs and managers understand and explain their business model. In a further extension to design logic, George and Bock (2012) use case studies and IBM survey data on business models in large enterprises, to illustrate how CEOs and entrepreneurs create narratives or stories in a coherent way to move businesses from one opportunity to another other. They also point out that when the narrative is not coherent or the story components are out of sync, that these businesses tend to fail. They recommend ways in which employers or CEOs can create powerful narratives for change.
Companion between partner companies
Berglund and SandstrÃÆ'¶m (2013) argue that the business model should be understood from the perspective of open systems as opposed to the internal concern of the company. Because the innovating company does not have executive control over the surrounding network, business model innovation tends to require soft power tactics with the aim of harmonizing multiple heterogeneous interests. In a collaborative research study and an external source of technology, Hummel et al. (2010) also found that in deciding business partners, it is important to ensure that both business models complement each other. For example, they found that it is important to identify the value drivers of potential partners by analyzing their business model, and it is useful to find partner companies that understand key aspects of our own business model.
The University of Tennessee conducts research on highly collaborative business relationships. Researchers codified their research into a source business model known as Vested (also referred to as Vested Outsourcing). Vested is a source hybrid business model where buyers and suppliers in business or outsourcing relationships focus on shared values ​​and goals to create highly collaborative and mutually beneficial settings for each.
Categorization
From around 2012, several studies and experiments have theorized about the so-called "liquid business model".
Switch from pipeline to platform
Sangeet Paul Choudary (2013) distinguishes between two large family business models in an article in Wired magazine. Choudary compares the pipeline (linear business model) with the platform (networked business model). In the case of pipes, companies create goods and services, pushing them out and selling them to customers. Value is produced upstream and consumed downstream. There is a linear flow, like water flowing through a pipe. Unlike pipes, platforms not only create and push stuff out. They allow users to create and consume value.
Alex Moazed, founder and CEO of Applico, defines the platform as a business model that creates value by facilitating the exchange between two or more interdependent groups that are typically consumers and producers of the given value. As a result of this digital transformation, this is the main business model of the 21st century.
In op-ed at MarketWatch, Choudary, Van Alstyne and Parker further explain how business models move from the pipeline to the platform, leading to an entire industry disruption.
Platform
There are three elements to a successful business platform model. The Toolbox creates a connection by making it easy for others to plug into the platform. This infrastructure allows interaction between participants. The Magnet creates a pull that draws participants to the platform. For transaction platforms, both producers and consumers must be present to reach critical mass. The Matchmaker grew the flow of value by making connections between producers and consumers. Data is the heart of successful matchmaking, and distinguishes the platform from other business models.
Chen (2009) states that the business model must take into account the capabilities of Web 2.0, such as collective intelligence, network effects, user-generated content, and possibly self-repairing systems. He suggested that service industries such as airlines, traffic, transportation, hotels, restaurants, information and communication technology and online game industry would be able to benefit in adopting business models that take into account the characteristics of Web 2.0. He also stressed that the 2.0 Business Model should take into account not only the effects of Web 2.0 technology but also network effects. He gave an example of Amazon's success story in generating huge revenues every year by developing an open platform that supports a corporate community that reuses Amazon's on-demand trading services.
Apps
Malone et al. found that some business models, as determined by them, did perform better than others in the data set composed of the largest US companies, in the period 1998 to 2002, while they did not prove whether the existence of the business model was important.
In the Software-Cluster context, funded by the German Federal Ministry of Education and Research, business model wizards for software companies have been developed. Support the design and analysis of business software model. The concepts and data underlying the tool were published in various scientific publications.
The concept of a business model has been incorporated into certain accounting standards. For example, the International Accounting Standards Board (IASB) uses an "entity business model to manage financial assets" as a criterion to determine whether the asset should be measured at amortized cost or at fair value in the accounting standards of its financial instrument, IFRS 9 In their 2013 proposal for accounting for financial instruments, the Financial Accounting Standards Board also proposes the use of similar business models to classify financial instruments. The concept of business model has also been incorporated into deferred tax accounting under International Financial Reporting Standards with amendments to 2010 for IAS 12 dealing with deferred taxes related to investment properties.
Both the IASB and the FASB have proposed using the concept of a business model in the context of reporting lessor rent and rental fees in their joint project in accounting for rent. In the 2016 lease accounting model, IFRS 16, the IASB chose not to include "self-service" criteria in the definition of rent because "entities may reach different conclusions for contracts containing the same use rights, depending on the difference between customers." or suppliers. "This concept has also been proposed as an approach to determine the measurement and classification when accounting for insurance contracts. As a result of the increasing advantage of the concept of business models has been received in the context of financial reporting, the European Financial Reporting Advisory Group (EFRAG), which advises the EU on the adoption of financial reporting standards, initiated a project on "The Role of Business Models in Financial Reporting" 2011.
Design
Business model design generally refers to the activity of designing a company's business model. It is part of the business development and business process process and involves design methods. Massa and Tucci (2014) highlighted the distinction between putting together new business models when not in place, as is often the case with academic spin-offs and high-tech entrepreneurship, and changing existing business models, such as when Hilti's tooling company shifted from selling tool- the tool to the leasing model. They suggest that the differences are very deep (eg, lack of resources in previous cases and inertia and conflicts with the configuration and organizational structure that existed in the latter) which may be useful for adopting different terms for both. They suggest the design of a business model to refer to the process of crafting a business model when it is not in place and reconfiguration of a business model for the process of changing the existing business model, also highlighting that two processes are not mutually exclusive, meaning reconfiguration can involve steps parallel to designing business model.
Definition
Al-Debei and Avison (2010) define the business model as an abstract representation of an organization. It may be conceptual, textual, and/or graphical, of all the interrelated architectural, cooperative, and financial arrangements that are designed and developed by organizations today and in the future, as well as all core products and/or services offered by organizations, or will offer, based on the arrangements required to achieve its strategic objectives and objectives. This definition shows that value propositions, value architecture, value financing, and value networks articulate the main constructs or business model dimensions.
Economic Considerations
Al-Debei and Avison (2010) consider value financing as one of the key dimensions of BM that describes information related to costing, pricing methods, and revenue structure. Stewart and Zhao (2000) define the business model as a statement of how the company will make money and maintain its profit stream over time.
Consideration of components
Osterwalder et al. (2005) considers the Business Model as a blueprint of how companies do business. Slywotzky (1996) considers the business model as a totality of how a company selects its customers, defines and differentiates its offerings, defines the tasks it will do itself and outsourced, configures its resources, goes to market, creates utilities for customers and captures profit.
Strategic results
Mayo and Brown (1999) regard the business model as a key interdependent system design that creates and maintains a competitive business. Casadesus-Masanell and Ricart (2011) describe the business model as a set of options (policies, assets and government) and consequences (flexible and rigid) and underline the importance of considering how it interacts with other players in the industry model rather than thinking about it separately.
Design definition or development
Zott and Amit (2009) consider the design of business models from the perspective of design themes and design content. The design theme refers to the dominant value-creation driver and design content to examine in more detail the activities to be performed, linking and the sequence of activities and who will perform the activities.
Emphasis of design theme
Developing a Framework for Developing a Business Model with an emphasis on Design Themes, Lim (2010) proposes the Development of a Business-Strategy-Operations Model (ESSO) that takes into account organizational structure alignment with organizational structure, operations and environmental factors in achieving competitive advantage in various combinations cost, quality, time, flexibility, innovation and affective.
Emphasis of design content
Business model design including modeling and company description:
- value proposition
- targeting customer segments
- distribution channels
- customer relationship
- value configuration
- core capabilities
- commercial networks
- partner network
- cost structure
- revenue model
Business model templates can facilitate the process of designing and describing the company's business model.
Daas et al. (2012) develops decision support systems (DSS) for business model design. In their study, decision support systems (DSS) were developed to assist SaaS in this process, based on a design approach consisting of a design process guided by various design methods.
Example
In the early history of the business model, it is very common to define the type of business model such as brick and mortar or e-broker. However, these types usually represent only one aspect of the business (most often the revenue model). Therefore, the latest literature on business models concentrates on describing the overall business model, not just the most visible aspect.
Other examples of business models are:
- Auction business model
- All-in-one business model
- Rental chemicals
- The low-cost carrier business model
- Loyalty business model
- Monopoly business model
- Multi-level marketing business model
- Network effect business model
- An online auction business model
- The online content business model
- Online media cooperative
- Premium business model
- Professional open source model
- Business model pyramid scheme
- Razor and blade model
- Uniform product business modeling
- Subscribed business model
Templates
The technology-centric community has defined a "framework" for business modeling. This framework attempts to define a rigorous approach to defining the flow of business value. It is not clear, however, to what extent such a framework is really important for business planning. Business model frameworks represent a core aspect of each company; they involve "the totality of how a company chooses customers to define and differentiate its offerings, define the tasks it will do on its own and they will outsource it, configure its resources, go to market, create utilities for customers, and capture profits." The business framework involves internal factors (market analysis, product/service promotion, trust development, social influence and knowledge sharing) and external factors (competitors and technological aspects).
An overview of the business model framework can be found at Krumeich et al. (2012). In the following frameworks are introduced.
- Business reference model
- The business reference model is a reference model, concentrating on the architectural aspects of a company's core business, service organization or government agency.
- The component business model
- A technique developed by IBM to model and analyze a company. This is a logical representation or business component map or "building block" and can be represented on a single page. It can be used to analyze the alignment of corporate strategy with organizational capabilities and investments, identify excessive or overlapping business capabilities, etc.
- Industrialization of service business model
- Business models used in strategic management and marketing services that treat service provision as an industrial process, subject to industry optimization procedures
- Business Model Canvas
- Developed by A. Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, the business model canvas is one of the most widely used frameworks for describing elements of the business model.
- OGSM
- OGSM was developed by Marc van Eck and Ellen van Zanten from Business Openers into 'Business plan on 1 page'. Translated in several languages ​​around the world. # 1 Book of management in the Netherlands by 2015. The business plan platform on 1 page is OGSM. Goals, Goals, Strategies, and Sizes (dashboards and actions).
Related concepts
The business model design process is part of the business strategy. The design and innovation of a business model refers to the way a company (or its network) defines its business logic at the strategic level.
Instead, companies apply their business model at the operational level, through their business operations. This refers to their process-level activities, abilities, functions and infrastructure (eg, business processes and modeling of their business processes), their organizational structure (eg organigram, workflow, human resources) and systems (eg information technology architecture, production).
As a result, an operationally feasible and viable business model requires lateral smoothing with underlying business operations.
The brand is a consequence of the business model and has a symbiotic relationship with it, because the business model determines the brand promise, and the brand equity becomes a model feature. Managing this is an integrated marketing task.
Standardized terminologies and examples of business models do not apply to most nonprofit organizations, since their sources of income are generally not the same as beneficiaries. The term 'funding model' is generally used instead.
Source of the article : Wikipedia
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