There are several definitions that can be found in the Business litterature:
Johnson et al. (2008) - "Business models consist of four interlocking elements, that, taken together, create and deliver value. These are: customer value proposition, profit formula, key resources, and key processes."
Casadeus-Mansell, Ricart (2010) - "A business model is [...] a reflection of the firm realized strategy"
Amit, Zott (2001) - "The business model depicts „the content, structure, and governance of transactions designed so as to create value through the exploitation of business opportunities"
Chesbrough, Rosenbloom (2002) - "The business model is the heuristic logic that connects technical potential with the realization of economic value"
But there is one that I prefer the most, and that is the definition used in Alexander Osterwalder book, Business Model Generation; "A Business Model describes the rationale of how an organization creates, delivers and captures value."
A business Model (according to Alex Osterwalder) is defined by 9 building blocks as shown in the picture below:
- The Customer Value Proposition of what is offered to the market
- The Customer Segment(s) of clients that are addressed by the value proposition
- The communication and distribution channels to reach clients and offer them the value proposition
- The Customer Relationships established with clients
- The Key Resources needed to make the business model possible
- The Key Activities necessary to implement the business model
- The Key Partners and their motivations to participate in the business model
- The Revenue Streams generated by the business model (constituting the revenue model)
- The Cost Structure resulting from the business model
Another Business Model Definition and Structure:
Another structure of a Business Model is defined in the recent Mark W. Johnson book, "Seizing the white space" where Mark outlines a Four-Box Framework describing a Business Model.
The elements of Mark's Four-Box Framework are:
- The Customer Value Proposition (CVP), an offering that helps customers more effectively, reliably, conveniently, or affordably solve an important problem (or satisfy a job-to-be-done) at a given price.
- The Profit Formula that defines how the company will create value for itself and its shareholders. It specifies the revenue model, the cost structure, target unit margin and how quickly resources need to be used to support target volume.
- The Key Resources, the people, technology, products, equipment, information, channels, partnerships, funding, and brand required to deliver the value proposition to the customer.
- The Key Processes such as design, development, sourcing, manufacturing, marketing, hiring and training by which a company delivers on the customer value proposition.
Some examples of popular business model patterns:
- Long-tail (vs. Blockbuster)
- Free/freemium
- Bottom of the Pyramid
- Bundling/Unbundling
- Servitization
- Total Solution
- Intermediation
- Platform
- Open
- Razor & Blades (Gillette)
