ADefinitionofBusinessModels

From a Wikipedia discussion about Osterwalder, Pigneur and Tucci's definition of the term business model (sightly reformatted to make the nine "building blocks" more visible ):

A definition from Osterwalder, Pigneur and Tucci (2005) is that a business model is:

... a conceptual tool that contains a 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.

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:

Value Propositions: The company's offers which bundle products and services into value for the customer. A value proposition creates utility for the customer.

Target Customer Segments: The customer segments a company wants to offer value to. This describes the groups of people with common characteristics for which the company creates value. The process of defining customer segments is referred to as market segmentation.

Distribution Channels: The various means of the company to get in touch with its customers. This describes how a company goes to market. It refers to the company's marketing and distribution strategy.

Customer Relationships: 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.

Value Configurations: The configuration of activities and resources.

Core Capabilities: The capabilities and competencies necessary to execute the company's business model.

Partner Network: The network of cooperative agreements with other companies necessary to efficiently offer and commercialize value. This describes the company's range of business alliances.

Cost Structure: The monetary consequences of the means employed in the business model.

Revenue Model: The way a company makes money through a variety of revenue flows.

Note that the use of the nine building blocks of a business model is not limited to models of commerical businesses - the model would be equally applicable to non-profit and community enterprises as well, perhaps with different set of priorities than a commerical business.

Tags:   BR   -   Definitions