Business Model Design and Innovation
Added on 2020-03-04
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Business ModelsContentsIntroduction...........................................................................................................................................1Business Models....................................................................................................................................1E-business model archetypes.................................................................................................................1Business model Design Concepts..........................................................................................................2Business Model as activity system....................................................................................................2Business model as cost/revenue architecture.....................................................................................3Business Model problems......................................................................................................................5Business context Model.........................................................................................................................5Value creation and appropriation...........................................................................................................5Conclusions...........................................................................................................................................6References.............................................................................................................................................6IntroductionThe term business model was popularized during late 1990s after the advent of internet, a phase whenglobalization occurred and the competition between companies and brands increased across globe.New, innovative and competing business models came with different design possibilities that did notexisted earlier. Some of the examples of new business models that emerged in the information erainclude internet search feature of Yahoo!, web based distribution channel of Dell, innovativecomputer design by Apple, innovative supply chains by Cisco, innovative revenue streams by Google,and cost effective retail model of Wal-mart. With these variations came both opportunities andchallenges and companies to keep themselves exploring and updating business models. This paperwould explore the concept of business model and discuss how its conceptualization affects businessproblems, value creation and decision making.Business ModelsResearchers have come up with several different definitions of business models over the years.Timmers (1998) first defined it as an architecture used for product, service and information flows.Mahadevan (2000) sees it as a blend of three value streams in business including business partnersand buyer’s value stream, logistics steam and revenue stream. Amit and Zott (2001) spoke of creatingcompetitive advantages for a firm through business model differences. Moris (2005) identifiedstrategy, architecture and economics as decision variables for model designing. Shafer (2005) saidthat business model represents logical and strategic value creation[ CITATION Erw13 \l 16393 ].
Based on the different definitions given by different researchers, some themes could be identified thatwere used for defining business model that included strategic, operational and economic levels,activity approach and value creation approach, resource based view of an organization, strategic,organizational and technology orientation, and innovation management. A business is a textual, graphical or conceptual representation of the core financial, operational, andarchitectural arrangements of an organization. E-business model archetypesThere are many usiness models available in the market and they are so many that no single frameworkcan describe them all. However, some archetypes of business models can be identified forcategorization based on the fundamental personalities of a business as per Carl Jung. These includeproduct based business, service based business, trader, marketplace, broker, subscription based andcomplete ecosystem provider. Product, service and trade are primary business model archetypes thatprovide tangible products, customised solutions and a place to connect buyers with sellersrespectively. Product model needs up-front investment and is highly scalable. In the E-business space,product archetype includes software and content products such as Microsoft. Services createintangible values and in the ecommerce space, this can include service agencies or platforms asservice such as LinkedIn. Ecommerce and lead generation applications from the trade archetype as itconnect buyers with sellers and get profited from arbitrage such as eBay[ CITATION Chr133 \l 16393 ].Brokerage, marketplace, subscription and ecosystem are secondary business model archetypes. Thesearchetypes are created from different combinations of primary archetypes. Brokerage is a combinationof service and trade as it allows trading for clients but the business is paid by retainer and not byarbitrage. An Ad networker in the online space is an example of a broker. Marketplace archetypesform from product trades such that a product or service marketplace is provided online. Amazon andFlipkart are the examples of such marketplaces. Subscription combines products with services suchthat consumers subscribing for a product is billed monthly and updates and provided to them.Software as a service and content as a service make the prototypes of such business models. Hentrade, product and service combine, they form a complete ecosystem that has complete community ofconsumers connected on technology or media platform[ CITATION DSo15 \l 16393 ].Business model Design ConceptsWhen designing a business model, the business can be seen either as a system of multiple activities oran architecture for cost/revenue outcomes of the business.Business Model as activity systemWhen a business model is viewed as an activity system, there are two sets of design paramters thatcan be used for creating business models that include design elements and design themes. Designelements include content, structure, and governance. Content refers to selected set of activities,structure reflects on how these activities are sequenced or linked and governance deals withidentification of who would perform the identified activities. For instance, in a trading market forunsecured loans, the content issue would determine if load trading has to be included in the activity.Structure would define how borrowing and lending activities can be connected. Governance would
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