The Essence Of A Business Model
In the 1990s, the business model concept became mainly popular to explain how new kinds of e-commerce related businesses emerged and could survive. Among all the business model definitions till today, one of the most acceptable definition is suggested by Teece (2010) as “Whenever a business enterprise is established, it either explicitly or implicitly employs a particular business model that describes the design or architecture of the value creation, delivery, and capture mechanisms it employs. The essence of a business model is in defining the manner by which the enterprise delivers value to customers, entices customers to pay for value, and converts those payments to profit”.
The new global environment is demanding for both addressing customer needs more wisely and creating value by introducing new products and services. Value creation is regarded as a core concern of the business models and needs to get understood as what really is. Value creation is quite different from what mostly assume as “commercial success” which merely points to revenue and producing sales, as this construct might be perceived different by various stakeholders within the value network. Value is not created through autonomous performance any more, but through enterprises and stakeholders’ collaboration via informal or formal channels.
The business model concept lacks solid theoretical grounding in economic literature where the main assumption is articulated as if value is delivered, customers will always pay for it; this points to this fact that value can be captured by simply selling products within markets, accordingly, analyzing business models appears to be unnecessary; yet in reality, entrepreneurs are supposed to design business models explaining the transactions which have not been fulfilled in the market yet. Even though there is broad literature on business models, still limited knowledge exists on what a business model is.
Business model related frameworks
Three elements are regarded as the most important ones in exploring business models as “value proposition”, “value creation” and “value capture”. Díaz-Díaz et al. (2017) argue that among all the frameworks which are applied in business model studies, business model canvas is the most widely used one among both practitioners and scholars due to its flexibility which allows businesses to get fitted into its nine blocks. The popularity of business model canvas stems from its holistic approach which allows enterprises to design business models based on nine elements: “value preposition”, “key activities”, “key resources”, “customer relationship”, “channels”, “key partners”, “customer segments”, “cost structure” and “revenue streams”. According to the generic business model framework by Boons and Lüdeke-Freund (2013), four elements are identified as: value proposition, supply chain, customer interface, and financial model.
Based on a business model framework by Afuah (2014), business models can be analyzed through five components of “value proposition”, “revenue model”, “growth model”, “capabilities” and “market segments”.
Wirtz et al. (2016) recently have been focusing on business model definitions, perspectives and its essential components in previous literature and nine components are recognized in order to portray an integrated framework to study business models through several partial business models (e.g. revenue model). These nine components consist of strategy, resources, network, customers, market offering, revenues, service provision, procurement and finances.
