By : Dr Ranjan Upadhyaya

Dr Ranjan Upadhyaya
Author(s) Definition(s)
Hawkins A description of the commercial relationship between a business
(2001) enterprise and the products and/or services it provides in the market.
Amit & "A business model depicts the content, structure, and governance of
Zott transactions designed so as to create value through the exploitation
(2001) of business opportunities"
Gill(2000) A business model embodies the logic underlying the operation of business
organizations . It should enable one to understand and predict ”how a
business company is organized, what it sells, how it delivers products and
services, how it adds value”
Pigneur An architecture of a firm and its network of partners for creating,
(2000) marketing and delivering value and relationship capital to one or several
segments of customers in order to generate profitable and sustainable
Timmers revenue streams. for the product, service and information flows,
as architecture
(1998) including a description of the various business actors and their
roles; a description of the potential benefits for the various business
actors; and a description of the sources of revenues
Venkatrama a coordinated plan to design strategy along three vectors: customer
n & interaction, asset configuration, and knowledge leverage.
Henderson
(1998)
Dr Ranjan Upadhyaya
Author(s) Definition(s)
Alexander A business model is nothing else than a representation of how an
Osterwalder organization makes (or intends to make) money. This can be nicely
(2009) described through the 9 building blocks illustrated in our graphical
illustration that we mention it as "business model canvas“.

Afuah (2004) the set of activities which a firm performs, how it performs them, and
when it performs them so as to offer its customers benefits they
want and to earn a profit
Shafer & reviewing relevant literature and classifying different definitions
Smith (2004) categorized the business model components that were cited twice or
more. The resulting affinity diagram identified four major categories:
strategic choices, creating value, capturing value, and the value
network.
Thompson & "A company's business model deals with the revenue-cost-
Strick profit economies of its strategy"
(2003)
Krishnamurthy “A business model is a path to a company’s
(2003) profitability”.
Saloner (2001) A strategy that has a reasonable probability of succeeding if well
executed.

Dr Ranjan Upadhyaya
 Business Logic
• Problem: Interpretation •Positioning
of strategy •Objectives & goals
• Result: Re-inventing •Communication of strategy
strategy
Information &
Planning level Communication
Strategy Technology (ICT)
press
? ure

Implementation e-Business
level Business
Processes processes

e-Business Technology layer

Dr Ranjan Upadhyaya
Business Logic Tomorrow
Conceptual architecture
of a business strategy
Information &
Communication
Planning level Technology (ICT)
Strategy pressure

Architectural e-Business
level Business opportunities
Model &
change
Implementation e-Business
level Business
Processes processes
e-Business Technology layer

Dr Ranjan Upadhyaya
What is a Business Model anyway?
 A business model is not a description
of a complex social system itself with all
its actors, relations and processes.
Instead it describes the logic of a
“business system” for creating value,
that lies behind the actual processes.
Strategy
 A business model is the conceptual

Business Impact
and architectural implementation of
a business strategy and represents the Business
foundation for Model
the implementation of business
processes
Business
Processes
Dr Ranjan Upadhyaya
 Conceptualization
Conceptualizations of business models try to
formalize informal descriptions into building
blocks and their relationships . While many different
conceptualizations exist.
Oster Walder proposed a synthesis of different
conceptualizations into a single reference model
based on the similarities of a large range of
models, and constitutes a business model design
template which allows enterprises to describe their
business model:

Dr Ranjan Upadhyaya
4 Parts to the business model
Part 1- The offering – what the business produces and
sells
 Value proposition: The value proposition is a description
of the products and services the business offers and why
customers will be compelled to buy them. The value
proposition describes the problem the customers are
experiencing and how the products and services
being offered will help solve that problem. It describes
how the features and characteristics of the products and
services will contribute to the solution of the customers’
problem.

Dr Ranjan Upadhyaya
 4 Parts to the business model
Part 2- Infrastructure– the part of the business that creates
expenses. This part describes the basic facilities, skills,
manpower, partnerships, and production process needed
to exploit the business opportunity.
 Core capabilities: The capabilities and core competencies
necessary to operate the business. This includes land, facilities,
equipment, personnel and their required skills needed to
produce the products or services described in the value
proposition.
 Partner network: The business alliances needed to operate the
business. Most businesses need alliances, agreements, licenses,
or other third party assistance (legal, accounting, insurance,
security, etc.) which are usually purchased from specialized
service providers.
 Value configuration: The process by which the products or
services are produced and presented to the customer. It
describes the process that will be used to produce the products
and services described in the value proposition.
Dr Ranjan Upadhyaya
4 parts to the business model
Part 3- Customers– the part of the business that
generates revenue.
 Target customer: The demographics, purchasing
patterns, and location of the potential buyers of
the products described in the value proposition.
 Distribution channel: The means by which the
business delivers products and services to
customers. This includes the business's marketing
and distribution strategy.
 Customer relationships: The process of interacting
with the business’s customers. It includes
communicating, selling, supporting, and assisting
customers purchase and use the business’s
products or Drservices.
Ranjan Upadhyaya
4 parts to the business model
Part 4- Finances – the part of the business that determines
its financial performance and profit
 Investment: The investment needed to obtain the facilities,
equipment, and working capital to begin or sustain operations.
This should include an itemization of these expenses and
sources of financing to obtain these funds and when they will
be required.
 Cost structure: The expenses required to produce the products
or services described in the value proposition. Revenue: The
income a business receives from the sales of its products or
services.
 Profit, return on investment, and cash flow.

Dr Ranjan Upadhyaya
Six Components of the
Business Model
Henry Chesbrough and Richard S. Rosenbloom , Harvard Business
School

Dr Ranjan Upadhyaya
 Value Proposition

• A description the
of problem customer
• The solution
that problem addresses the
• The value of this solution from the
customer's perspective

Dr Ranjan Upadhyaya
 Market Segment

•
Recognizing that different
market segments have different
needs
• Sometimes the potential of an
innovation is unlocked only when
a different market segment is
targeted
Dr Ranjan Upadhyaya
 Value Chain Structure
• The firm's position in the value chain
• Activities in the value chain
• How the firm will capture part of the value
thatit creates in the chain.

Dr Ranjan Upadhyaya
 Revenue Generation and
Margins
• How revenue is generated
 (sales, leasing, subscription, support, etc.)
• The cost structure
• Target profit margins.

Dr Ranjan Upadhyaya
Position in the Value Network

• Identification of competitors
• Identification complementors
• Identify network effects that can be
utilized to deliver more value to the
customer
• linking suppliers and customers

Dr Ranjan Upadhyaya
 Competitive Strategy

• How will the company attempt

develop a sustainable to
advantage? competitive
• How it use that advantage to
will
improve the enterprise's
position
competitive
in the market?

Dr Ranjan Upadhyaya
 Business Model vs. Strategy
Henry Chesbrough and Richard S. Rosenbloom
Business Model Strategy
Value creation how it will be Building a sustainable competitive
and captured by the advantage
firm

An architecture for converting Delivering the business value to the

innovation to economic value for shareholders
business(business value)

Assumes a limited environmental Depends on a more complex analysis

knowledge that requires more certainty in the
knowledge of the environment

Dr Ranjan Upadhyaya
 The Business Model and the
Business Plan
The business model is the centerpiece of the business
plan but is not the entire business plan. The
business plan should include additional
information such as:
 Administrative information
 Company name and address
 Company phone number including area code
 Email address, URL, and Logo if applicable
 Names, titles, addresses, and phone numbers of the owners or
corporate officers
 Month and year in which this business plan is issued
 Name of the business plan preparer
 Date when business was started or estimated start date

Dr Ranjan Upadhyaya
 The business model and the
business plan-cont’d
 Purpose of the business and why it should be successful.
 Business objectives – what the company wants to accomplish (market
share, sales volume, revenue, return on investment, etc)
 The marketing plan.
 The competitive strategy describing how a sustainable
competitive advantage will be obtained.
 Management, the people who will manage the company and their
experience.
 Personnel plan describing the number and skills of the employees
and how they will be hired and compensated.
 A schedule describing when investment funds will be needed and for
what purpose, the sources of these funds and how they will be repaid.
 Annual revenue, expense, and cash flow projections and
assumptions upon which they are based, and critical milestones that
will define progress and results.
 Three year pro forma income statements, balance sheets, and cash
flow statements.
Dr Ranjan Upadhyaya
 References and further readings
 Afuah, A. 2004, Business models: A Strategic Management Approach, McGraw-Hill, Irwin.
 Afuah, A. & C.L. Tucci 2001, Internet Business Models and Strategies, McGraw-Hill, Irwin.
 Amit, R. & C. Zott 2004, Business Strategy and Business Model: Extending the Strategy-Structure-Performance Paradigm, Strategic
Management Journal, 22, 493-520.
 Brandenburger, AM. & H. Struart 1996, Value-based Business Strategy, Journal of Economics and management strategy, pp. 5-25.
 Hamermesh, RG. & P. W. Marshall 2006, Building a Business Model and Strategy: How they Work Together, Harvard business School Press.
 Hart, Myra M. & Victoria W. Winston & Kristin J. Leib 2004, Mavens and Moguls: Creating a New Business Model, Harvard Business Review.
 Lambert, S. 2003, A Review of Electronic Commerce Literature to Determine the Meaning of the Term ‘Business Model’, School of Commerce
Research Paper Series, London.
 Magretta, Joan 2002, Why Business Models Matter, Harvard Business Review.
 Mintzberg, H. 1994, The Rise and fall of Strategic Planning, Free Press, New York.
 Porter, M. E. 1985, Competitive advantage: Creating and Sustaining Superior Performance, Free Press, New York.
 Saloner, G. Shepard & J. Podolny 2001, Strategic Management, John Wiley & Sons, London.
 Shafer, S. & H. Smith & J. Linder (2005), The Power of Business Models, Business horizon, Elsevier, Vol. 48, pp. 199-207.
 Simon, H. 1997, The New Science of Management Decision. Prentice-Hall, Englewood Cliffs, New Jersey.
 Stabell, CB. & O. D. Fieldstad 1998, Configuring Value for Competitive Advantage: on Chains, Shops and Networks, Strategic Management
Journal, Vol. 19, pp. 413-437.
 Thompson, J. D. 1967, Organization in action. McGraw-Hill, Irwin.
 Timmers, P. 1998, Business Models for Electronic Markets, Electronic Markets 8, 3-8.
 Venkatraman V. & J. C. Henderson 1998, Real Strategies for Virtual Organization, Sloan Management Review, Vol. 40, No. 1, pp. 33-48.
 The Business Model Ontology - A Proposition In A Design Science Approach, Thesis by Alexander Osterwalder , 2004
 Gill, H.: The Case for Enterprise Business Model Management. DM Review ,2000
 Hawkins R. The “Business Model” as a Research Problem in Electronic Commerce. STAR (Socioeconomic Trends Assessment for the digital
Revolution) IST Project, Issue Report No. 4, SPRU –Science and Technology Policy Research, 2001
 Pigneur Y. The E-business Model Handbook. HEC Working Paper ,2000
 Chesbrough, Henry and Richard S. Rosenbloom, , 2000. “The Dual-Edged Role of the Business Model in Leveraging Corporate Technology
Investments,” in NIST Report GCR 00-787, Managing Technical Risk – Understanding Private Sector Decision Making on Early Stage
Technology-based Projects, Lewis Branscomb, principal investigator

Dr Ranjan Upadhyaya