Business Models: Analysis of Concepts, Changes, and Future Trends

This essay delves into the multifaceted concept of business models, defining them as essential guidelines for successful enterprises. It explores the core components of business models, including e-business models, activity systems, and cost/revenue architecture. The essay analyzes how these models serve as solutions to various business problems, considering both static and dynamic frameworks. It emphasizes the importance of adapting to change, particularly in the digital environment, and uses examples like Blockbuster and Netflix to illustrate this point. The impact of innovation and information technology on business models is discussed, highlighting how technology enhances efficiency and customer satisfaction. The essay concludes by emphasizing the evolving nature of business models and the need for businesses to adapt to future demands, especially in the digital age.

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Introduction
All successful business enterprises run on a strict and clear guideline usually developed at the
onset of the organization. In essence, this guideline whether explicitly or implicitly stated
defines the business model of the organization or enterprise. In all, this model defines the
architecture or design of business by describing the value creation mechanisms and the
delivery options of the services or products created (Teece, 2010). In a nutshell, a business
model provides the strategies that a business will use to; deliver services/products to the
customer, entice them and finally make profits out of the income earned. Therefore, business
models usually reflect the management’s hypotheses on the customers’ needs, a concept that
is the main focus of this short paper. In all, the purpose of this paper is to analyse the concept
of business model and how it affects the businesses of today as well as those of the future.
The three concepts of business model
According to Zott, Amit and Massa (2011), the concept of business model can have several
definitions based on the context in question. The variation in these definition warrants the
distinct definitional concepts of e-business models archetypes, activity system and the cost
structure/architecture. In the first instance, e-business model archetypes, the focus is usually
on e-businesses and how they create value, more so, through the design of automatic
transaction systems. These systems are usually defined by three parameters; content creation,
deliverance and capture, which again usually yields the different combinations of business
models seen today such as software as a service, e-commerce and social media among many
others (Fielt, 2013).
On the other hand, business model as an activity system is based on the fact that
organizations depend on a myriad of functionalities in order to achieve their objectives. In
this concept, an activity system is defined as a group of organizational activities or

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functionalities that link the different arms of business and that are centred on the focal
enterprise. Moreover, the arms outline the different stakeholders of business i.e. customers,
suppliers and partners. Therefore, the design of the activities associated with these branches
of business yields the definition of a business model (Zott, Amit, & Massa, 2011). Finally, we
have the concept of cost or revenue architecture which describes the methods or sources used
by a business to create revenue. In essence, an enterprise will have different sources of
revenue generation and will use a clever mix of these options to create wealth (Stefan &
Richard, 2014). Nevertheless, despite the variations in these concepts, the components of
business models remains the same as outlined in the diagram below.
Fig: Components of a business model
Business models as solutions to business problems
Despite the field involved, there are always many risks associated with a business. These
risks are usually broadly categorised into two categories based on the view of the future
where one will have an overall view of business (static framework) while the other will focus
on information arrival thus warrant a dynamic approach. In both instances, there are always
unforeseeable problems associated with a business outcome which usually necessitates the
need for innovative solutions. Nevertheless, despite the problem, both models (either static or
dynamic) can be used but with differing solutions. Therefore, in the event of a business
Industry factors
ActivitiesResources Positions
Costs
Profitability

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problem, the choice of the method used relies on the nature of the conditions available.
However, a dynamic framework is often relevant and preferred since it's usually based on
factual information. At the same time, static concepts can also be used as they define the
unique instances of the dynamic problem. This contradiction is problem assessment outlines
the problems experienced by businesses as a result of existing operational models (WLO,
2015).
Now, with this in mind, the benefits of the business models defined earlier start to emanate as
they hold unique solution regardless of the framework used (static or dynamic). Consider, a
unique problem, where a business desire's to grow its organization by opening a new branch
or office. In itself, this is a static problem that is based on the static vision of the organization.
However, at the same time, this problem will depend on the dynamic vision of the
organization i.e. the current and future information (loss or profit). This problem can be
solved by conceptualising the models outlined above where components of e-business can be
used to forecast future conditions to provide the best decision. Moreover, the same can apply
when an activity system is considered as it can predict the functionalities of the future based
on existing data. Furthermore, the same organization can adjust its model from one concept to
another as the components of its business model are generally the same as previously
highlighted, a clear solution for re-defining an existing business model (Zott & Amit,
Business Model Design: An activity system perspective, 2010).
Change in business
In the previous sections, the concept of business model has been defined as a general term
where no specific context was outlined. However, in the real world, the business context must
always be defined as it is usually used to predict the problems faced by an organization. In
essence, a business context defines the environment, setting, framework and situation facing

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an enterprise, these factors also usually include the parties involved. In light of these
components, the enterprise is always conditioned for change, an outcome that is facilitated by
the variation of these factors ( (Casadesus-Masanell & Ricart, 2010)). A good example that
illustrates this outcome is the digital environment as led by information technology.
In the past, businesses used information technology as a complementary component that
supplemented the daily activities i.e. an operational option. Today, this consideration has
changed based on the environment in question. Consider a company like Blockbuster who at
the height of its trade was a multi-million dollar company. The success of this business was
based on a physical environment that capitalised on the sale of media/entertainment products.
However, its failure was facilitated by a poor business model that failed to recognise change
i.e. the growth of the worldwide web and its affiliated systems such as big data. On the other
hand, consider the company’s greatest competitor and rival Netflix, an organization that
capitalised on the dissemination of big data through online systems. Netflix at the state of
business employed a dynamic model that continuously evolved with time to include virtual
technologies such as cloud storage solutions that have facilitated it business. These ventures
have propelled its operations through big data analytics, an outcome that has cemented its
operations in the future. A future expected to have smart cities supported by virtualization
through the digital environment ( (Christensen & Johnson, 2010)).
Impact of change on business models
Innovation and information technology are the major driving force of change seen today in
businesses. These factors have had a lot of impact on the business model used by
organizations as they present a drastic shift in the components affiliated with these systems.
Nevertheless, the impact has greatly been a positive one owing to the conveniences and
efficiencies introduced by technology (Neus & Jetter, 2008).

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To start with, change has helped organizations to remain active and current on trending
events based on the availability of information. Secondly, change has boosted business
practices because of the new opportunities introduced by the digital media, a component of
today’s business model. Thirdly, change has increased the overall efficiency of doing
business, an outcome that has also increased customer satisfaction rate. Finally, the changes
seen in business have also improved the attitude of business leaders more so, the management
who now led by managers who are more open minded so as to meet the expectations of their
markets. In light of this outcome, the future will see managers who will be inclined to
develop dynamic models that will be more accustomed to change (Joseph, 2017).
Conclusion
There exist many definitions of the term business model, most of which are based on
differing concepts seen in the industry. These concepts may have varying parameters as
exhibited before, however, they all hold a common notion that of organising business
structures in order to achieve the best results. Furthermore, the business world seems to have
completely adopted technology as highlighted by the electronic structures of business (e-
business). These structures mark the start of an innovative trend of developing business
models. In the future, the industry will experience many innovative ideas that will push the
boundaries of business fundamentals in order to meet the demands of markets. In fact, a time
will come when the foundations of business will be changed so as to accommodate the
demands made by the digital environment.

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