Analyzing Business Models: Concepts and Archetypes

This report provides a comprehensive analysis of business models, beginning with an introduction to the concept and its evolution, particularly in the context of globalization and the internet era. It explores various definitions of business models from different researchers, highlighting key themes such as strategic, operational, and economic levels, activity and value creation approaches, and resource-based views. The report then categorizes e-business model archetypes, including product, service, trade, brokerage, marketplace, subscription, and ecosystem models, offering examples for each. Furthermore, it delves into business model design concepts, presenting the business model as an activity system and as a cost/revenue architecture, using the Business Model Canvas as a framework. It also discusses business model problems and introduces the business context model and value creation and appropriation. The report concludes by summarizing the key findings and providing references for further study.

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Business Models
Contents
Introduction..............................................................................................................................................1
Business Models......................................................................................................................................1
E-business model archetypes...................................................................................................................1
Business model Design Concepts............................................................................................................2
Business Model as activity system......................................................................................................2
Business model as cost/revenue architecture.......................................................................................3
Business Model problems........................................................................................................................5
Business context Model...........................................................................................................................5
Value creation and appropriation.............................................................................................................5
Conclusions..............................................................................................................................................6
References................................................................................................................................................6
Introduction
The term business model was popularized during late 1990s after the advent of internet, a phase when
globalization occurred and the competition between companies and brands increased across globe.
New, innovative and competing business models came with different design possibilities that did not
existed earlier. Some of the examples of new business models that emerged in the information era
include internet search feature of Yahoo!, web based distribution channel of Dell, innovative
computer 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 and
challenges and companies to keep themselves exploring and updating business models. This paper
would explore the concept of business model and discuss how its conceptualization affects business
problems, value creation and decision making.
Business Models
Researchers 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 partners
and buyer’s value stream, logistics steam and revenue stream. Amit and Zott (2001) spoke of creating
competitive advantages for a firm through business model differences. Moris (2005) identified
strategy, architecture and economics as decision variables for model designing. Shafer (2005) said
that business model represents logical and strategic value creation(Fielt, 2013).

Based on the different definitions given by different researchers, some themes could be identified that
were 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, and
architectural arrangements of an organization.
E-business model archetypes
There are many usiness models available in the market and they are so many that no single framework
can describe them all. However, some archetypes of business models can be identified for
categorization based on the fundamental personalities of a business as per Carl Jung. These include
product based business, service based business, trader, marketplace, broker, subscription based and
complete ecosystem provider. Product, service and trade are primary business model archetypes that
provide tangible products, customised solutions and a place to connect buyers with sellers
respectively. 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 create
intangible values and in the ecommerce space, this can include service agencies or platforms as
service such as LinkedIn. Ecommerce and lead generation applications from the trade archetype as it
connect buyers with sellers and get profited from arbitrage such as eBay(Nielsen & Lund, 2013).
Brokerage, marketplace, subscription and ecosystem are secondary business model archetypes. These
archetypes are created from different combinations of primary archetypes. Brokerage is a combination
of service and trade as it allows trading for clients but the business is paid by retainer and not by
arbitrage. An Ad networker in the online space is an example of a broker. Marketplace archetypes
form from product trades such that a product or service marketplace is provided online. Amazon and
Flipkart are the examples of such marketplaces. Subscription combines products with services such
that 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. Hen
trade, product and service combine, they form a complete ecosystem that has complete community of
consumers connected on technology or media platform (D’Souza, Wortmann, Huitema, &
Velthuijsen, 2015).
Business model Design Concepts
When designing a business model, the business can be seen either as a system of multiple activities or
an architecture for cost/revenue outcomes of the business.
Business Model as activity system
When a business model is viewed as an activity system, there are two sets of design paramters that
can be used for creating business models that include design elements and design themes. Design
elements 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 with
identification of who would perform the identified activities. For instance, in a trading market for
unsecured 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

include identification of a person who would do the credit risk assessment of the loan borrower (Zott
& Amit, Designnig your Future Business Model: An activity System Perspective, 2009).
The design themes that can be used in this approach can be novelty, efficiency, complimentary, and
lock-in. In each of the theme, the design content, structure and governance would have different
approaches. A novelty theme would involve adoption of new activities in the content, explore new
ways of linking them and use new ways of governance such as done by Apple which provides
innovative products as content, develop them using innovative software and hardware that form the
link or structure and push sub activities that only allow legal music download as a part of governance.
Lock-in involves third parties as model participants Complimentary themes create bundles of products
and services such as a drug pipeline of a pharmaceutical company includes R&D, marketing and
distribution is itsmodel. Efficiency cantered designs use system design to achieve greater efficiencies
and reduce transactional costs such as business process outsourcing companies that standardize
activity interfaces to gain efficiency in systems and outsource some of their activities to reduce
transaction cost(Zott & Amit, Business Model Design: An Activity System Perspective, 2010).
Business model as cost/revenue architecture
When a business model is seen as architecture of cost and revenue activities, The Open Group
Architecture Framework can be used for explaining business models. TOGAF is actually an
architecture development model for technology but can be used for defining business models by
integrating business inputs, business steps, and business objectives in the architecture.
An adapted architectural model that can be used for designing the architecture of business models
based on cost and revenue streams is business model canvas. Business model canvas defined by
Alexander Osterwalder identifies 9 building blocks that form a business model in the representation
that can be used for creating a business model canvas (CHANAL & Caron-Fasan, 2010).

The business model canvas gives the big picture of a business covering all the essentials including key
partners, activities, offers, customer relationships, channels, revenue streams, cost structures,
resources, and customer segments. An example of a business model canvas can be used to understand
how this may be formed for an organization. LinkedIn which is one of the largest businesses
networking platform can be used as an example for this understanding(Iacob, Meertens, D, Quartel,
Nieuwenhuis, & Sinderen, 2012)

As shown in the canvas above, major building blocks of the business model of LinkedIn are identified
as follows:
Key partners: Equinix that provides the data centre for LinkedIn and the content providers make the
key partners with LinkedIn
Key activities: development of the networking platform is the key activity of LinkedIn
Key resources: The LinkedIn portal is the key business resource for the company
Cost Structure: The Company incurs costs in web hosting, marketing, sales, product development
and administrative work
Revenue Streams: LinkedIn earns revenue by providing multiple solutions that include hiring
solutions, marketing solutions and different types of premium subscriptions.
Channels: Linked is advertised or made available through field sales executives, website, and mobile
application.
Value Preposition: The business value is generated by LinkedIn by managing professional identify
as well as network of people, helping them reach right target or talent, and access a content database
through API and widgets like learning app.
Relationships: LinkedIn as same-side and cross-side effects that build relationships with its
customers or users.
Customer segments: The customers of LinkedIn can be segmented into general internet users,
recruiters, marketers, and developers.

Business Model problems
While designing or redesigning business models, certain difficulties can be faced such as
 When designing a new business model, the audience base may not be sufficient and thus, beta
testing has to be done to gather feedbacks and identify target market which can either get
successful or can also risk a failure (Osterwalder & Pigneur., 2016).
 A newly designed business model can have a weak revenue modelling making it difficult for
the organization to sustain in the long run and thus, identification of an efficient and effective
revenue model is of great importance (Cliffe, 2011).
Business context Model
Business context model identify the actors that have significant role in executing business processes.
These actors include organizations, their systems and the people working for with the organizations.
Palo and Tahtinen (2011) developed business model frameworks by focusing on these actors and
describing interactions between them in business context.
Figure 1: contextual business model framework(Luoma, 2014)
A contextual business model framework understands business environment as a background concept
and it is presented in the condensed manner through organizational structure, culture and strategies.
Value creation and appropriation
Value creation is about economic development which happens through an exchange of resources.
Once an exchange is made such that the resource flows from those who have to those who need, a
value is created which can be either a realized utility or a monetary gain. Value appropriation is
process using which organizations compete with other organizations by protecting appropriation
streams, managers, employees, and stakeholders. Appropriation streams can include isolation
mechanisms and bargaining power(Gregorio, 2015).
Value is created by using innovation and developing new ways for performing activities such as new
methods, technologies or new raw materials while appropriation involves capturing of value by
building resources that cannot be replicated by completion easily through the use of resource
management and innovation. Value creation involves turning an innovative input into a new output

while value appropriation involves extraction of profits through innovation (Zott & Amit, Business
Model Design and the Performance of Entrepreneurial Firms, 2007).
Innovation can thus, be a source for both value creation and appropriation such that gives superior
performance through value creation and sustains this value by creating barriers for imitators through
other set of innovative activities helping an organization develop sustainable advantages.
Technological integration is one such example of value appropriation such that value creation is done
by each technology adopted while integration makes these values sustainable in the long run and
difficult to replicated thereby creating sustainability(Memili, Fang, & Welsh., 2015).
Conclusions
The paper explored the concept of business model and explored its various archetypes. There were
seven major archetypes of business models found that can be applied to the E-business models. The
research also explored some effective designing models that can be used for developing or defining
business models such as business model canvas and business context model.
References
CHANAL, V., & Caron-Fasan, M.-L. (2010). The Difficulties involved in Developing Business
Models open to Innovation Communities: the Case of a Crowdsourcing Platform. M@n@gement ,
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Cliffe, S. (2011). When Your Business Model Is in Trouble. Harvard Business Review.
D’Souza, A., Wortmann, H., Huitema, G., & Velthuijsen, H. (2015). A business model design
framework for viability; a business ecosystem approach. Journal of Business Models , 1-29.
Fielt, E. (2013). Conceptualising Business Models: Definitions, Frameworks and Classifications.
Journal of Business Models , 1 (1), 85-105.
Gregorio, D. D. (2015). Value Creation and Value Appropriation: An Integrative, Multi-Level
Framework. University of New Mexico.
Iacob, M. E., Meertens, L. O., D, H. J., Quartel, A. C., Nieuwenhuis, L. J., & Sinderen, M. J. (2012).
From enterprise architecture to business models and back. Springer-Verlag Berlin Heidelberg .
Luoma, O. (2014). A CONTEXTUAL BUSINESS MODEL FRAMEWORK. University of Tampere.
Memili, E., Fang, H. C., & Welsh., D. H. (2015). Value Creation and Value Appropriation in
Innovation Process in Publicly-Traded Family Firms. LIBRES.
Nielsen, C., & Lund, M. (2013). The Concept of Business Model Scalability. DUN.
Osterwalder, A., & Pigneur., Y. (2016). How Design Thinking Will Reshape Business Model
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