WHAT IS A BUSINESS MODEL?

"Content analysis of key words in 30 definitions led the authors to identify 3 general categories of definitions based on their principal emphasis." p726
1. These 3 categories "represent a hierarchy in that the perspective becomes more comprehensive as one progressively moves from the economic to the operational to the strategic levels." p727
2. 1) Economic: the "most rudimentary level" & "the concern is with the logic of profit generation." p726/7
  1. "Stewart and Zhao (2000) approach the model as 'a statement of how a firm will make money & sustain profit stream over time'." p727
3. 2) Operational: "the model represents and architectural configuration. The focus is on internal processes and design of infrastructure that enables the firm to create value." p727
  1. "Mayo & Brown (1999) refer to the 'design of key interdependent systems that create and sustain a competitive business."p727
4. 3) Strategic: "definitions at the strategic level emphasize overall direction in the firm's market positioning, intention across organizational boundaries, & growth opportunities. p727
  1. "Of concern is competitive advantage & sustainability." p727
  2. "Slywotsky (1996) refers to 'the totality of how a company selects its customers, defines & differentiates its offerings, defines the tasks it will perform itself & those it will outsource, configures its resources, goes to market, creates utility for custoemrs & captures profit'." p727
  3. "Among the available definitions, strategic elements are most prominent." p727
    1. "An analysis of models frequently cited as being well conceptualized (e.g. Dell, Nucor, WalMart, IKEA, Walgreen) suggests that the elements making these models unique transcend the architecture of the firm or how it makes money," & "the model captures the essence of how the business system will be focused." p727
"No generally accepted definition of the term 'business model' has emerged." p726
"Diversity in the available definitions poses substantive challenges for delimiting the nature and components of a model and determining what constitutes a good model." p726
"The Dell business model integrates strategic considerations, operational processes, and decisions related to economics. It is designed around elimination of intermediaries, systems built to order, highly responsive customer service, moderate margins, rapid inventory turn-over, speedy integration of new technologies, and a highly efficient procurement, manufacturing, and distribution process." p727
1. "Adherence to these elements guides operational decision making and the firm's ongoing strategic direction." p727
"The business model is related to a number of other managerial concepts. It captures key components of a business plan, but the plan deals with a number of start-up and operational issues that transcend the model. It is not a strategy but includes a number of strategy elements. Similarly, it is not an activity set, although activity sets support each element of a model." p727
"Associated with the 'new economy'." p727
"Early work focused on capturing web-based firms. Subsequent efforts identified model types based on product offerings, value-creating processes a, and firm architecture, among other variables." p727
"It became evident that the number of potential models was limitless, researchers began focusing on model taxonomies." p727
"Progress in the field has been hindered by lack of consensus over key components of a model." p727
"Few insights are available regarding the conditions that make a particular model appropriate, ways in which models interact with organizational variables, existence of generic model types, and dynamics of model evolution, among other questions." p727
"Attempts at model decomposition acknowledge the existence of interdependencies among other components but shed little light on the nature of the relationships." p727
"Limited progress has also been made in establishing methodologies for evaluating method quality." p727

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WHAT IS A BUSINESS MODEL?

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	Created by Alex Okrent over 9 years ago