Business model - what is it? What are the business models?

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Business model is a new tool for designing and planning business processes. They are aimed at finding the most effective solutions in making a profit. The process of building business models received a powerful impetus with the massive development of e-commerce. Today, these tools are used not only in the online sphere, but also in traditional business industries. Let's talk about what the business model of an enterprise is, what types of it exist and why they are needed at all.

Business model concept

To briefly describe the essence of the business model, it is worth noting that this is a simplified, schematic, conceptual representation of the flow of business processes. This concept arises in response to the numerous challenges of the new economic reality that emerged at the end of the 20th century. More and more newcomers came into the business, and they did not have the time, money and knowledge toin order to develop deep development strategies, they needed effective and fast tools to maximize profits. And the business model is a clear, visual way to see all the components of the business and find points for development and increase in profitability.

Approaches to defining a business model

For the first time the term "business model" appeared in works on economics in the 40s of the 20th century. But then it was not widely used, for a long time it was used in combination with the concept of corporate strategy. And only in the 90s, business models became popular in connection with the understanding of business on the Internet. Later, the term organically entered the lexicon of managers and economists in various fields, not only online. There are two main approaches to formulating the definition of a business model. The first is related to the emphasis on the flow of production processes in the company and is aimed at finding the internal reserves of the company for additional profit. The second approach is related to the external environment of the company, in particular, to the consumer and his needs and values. In this case, the company chooses a consumer segment, develops a buyer, and establishes relationships with him. There are also many author's concepts, each of which formulates its own interpretation of this concept. In its most general form, we can say that a business model is an analytical tool that, in a schematized, visual form, describes all the processes in a company and helps to find points for making a profit.

Goalsconstruction

The main purpose of creating a business model is to find a way to develop the company. It helps to identify the advantages and competitive differences of the enterprise and evaluate new business processes. Also, the business model allows you to determine the need for changes in the already familiar ways of the company's existence in order to maximize profits. In addition, modeling helps to identify the weaknesses of the company and eliminate vulnerabilities. The business model is a good tool for assessing the effectiveness of production processes and management organization. It gives a holistic view of the company's activities and the state of the internal environment, allows you to improve the flow of all processes.

Business model and company strategy

It is not uncommon to find that the terms "business model" and "corporate strategy" are used interchangeably. Or even the strategy is represented as an integral element of the model. However, there are significant differences between these phenomena. The strategy is based on a comprehensive analysis of the external and internal environment of the company and the formulation of long-term goals. And the business model is associated with relatively close goals, it is more of a tactic, as it gives specific answers to questions about how to achieve goals. The business model of the project includes a set of necessary actions as close as possible to the current reality. It is more connected with the financial sphere of the company. The strategy, on the other hand, sets the direction of the company's development to a greater extent, it is much less specific. Optim althe sequence of planning is the development of a strategy, and already on its basis - the creation of a business model. The strategy in this case is the ideological platform for modeling.

Components

Because the field of business is extremely diverse, there are a large number of options for business models. Theorists and practitioners find different approaches to the definition of this phenomenon and identify diverse sets of components in it. Thus, there are many supporters of the point of view that the business model of an organization includes such components as the organizational structure, resources, business process, organizational functions, corporate strategy, and products and services produced. The generalized business plan model includes the following components: market and competitor analysis, organizational structure, marketing, production, finance plans, risk assessment, legal grounds. However, these concepts are not quite business models. Osterwalder's most popular business model has 9 main components: customer segments, customer relationships, distribution channels, selling proposition, resources, core activities, key partners, cost structure, and revenue streams. Below we consider this model in more detail. Traditionally, today the business model includes such blocks as consumer, product, marketing, suppliers and manufacturers, finance, competitors, market, non-economic factors of influence.

Steps in building a business model

Any modeling begins with an assessment of the existing situation and the formulation of goals. Further constructionbusiness models is associated with the choice of a suitable template and its competent filling. Osterwalder, the world's leading ideologue of business modeling, says the "design" process includes five main steps:

- Mobilization. At this stage, it is necessary to conduct preparatory studies, assess resources, set goals and, most importantly, assemble the necessary team.

- Understanding. This stage is associated with immersion in the situation, i.e. at this time you need to understand what is happening on the market and in what conditions you will have to do business.

- Design. This stage is associated with the generation of ideas, most often they appear as a result of the “brainstorming” of the team. At this stage, you need to find several viable business ideas and match them with appropriate business model templates.

- Application. This stage is connected with testing the developed model to the real conditions of the markets and its adjustment to the existing circumstances.

- Management. This is actually the stage of using the model, with a periodic assessment of its effectiveness and making adjustments to its functioning.

Types of business models

There are several approaches to identifying the types of objects under study. Realizable assets can serve as the basis for a typology. In this case, models with financial, human, intangible and physical assets are distinguished. According to the model object, such varieties are distinguished as templates for a specific product, for the company as a whole and for a group of companies. In this case, researchersthey talk about differentiated, undifferentiated, segmented, integrated, adaptive and externally oriented species. However, the best business models are difficult to typify, and they usually bear the name of the company for which they were first conceived. So, in the 50s of the 20th century, models appeared for companies such as the American McDonald's and the Japanese Toyota. The 60s were marked by the pioneering types of Wal-Mart and Hypermarket. In the 1980s, Home Depot, Intel, and Dell Computer set the trend. In the 90s, they were replaced by models invented for Netflix, eBay, Amazon.com, Starbucks, Microsoft. And the end of the 20th and the beginning of the 21st century were marked by a boom in models for Internet projects.

Business models on the Internet

Online commerce has only been gaining momentum in recent years, it is the fastest growing area of the modern economy. One of the secrets of such a boom is the ability to build a successful and profitable business with little investment. Since this area, first of all, is a place for young entrepreneurs to implement their plans, who do not have experience in deep research and strategic planning, it is on the Internet that a large number of models of different complexity appear. The most popular business model of a company on the Web is online auctions. There are several super-profitable and thousands of small companies built on this principle. Researchers argue that today there are 9 main types of business models implemented on the Internet: brokerage, subscription, trading, advertising, production, information-mediation,affiliate, consumer and community.

Blanck-Dorff Model

Steve Blank is one of the world's most successful startups, and his book with Bob Dorf talks about what new business models should be based on. They are proponents of a consumer-centric approach to business. When compiling a model, it is necessary to answer key questions from five groups:

- Consumers: who are they, what can you offer them and how to keep them?

- Product: what is good about it and how best to deliver it to the buyer?

- Income: how to make money and how to increase profit?

- Resources: what do you need to reach the goal, where are these resources and how to get them?

- Partners: who can help achieve the goal and how to attract them?

According to the authors of the model, in order to develop a project, it is necessary to overcome 4 stages: identification, verification, attraction and birth of a company. At the last stage, the project is “reborn” into a full-fledged company.

Osterwalder Model

One of the most famous in the world is the Osterwalder business model, it is suitable for projects in any field of activity. There are 9 blocks in the model:

- Consumer segments. It is necessary to analyze the market and identify suitable segments on which to focus your attention so as not to scatter resources.

- Value propositions. It should be understood what is important for the buyer, what are his main needs and on this basisto formulate an offer that would meet the needs and values of the consumer. He should get something that will help him solve some problems and satisfy his needs.

- Distribution channels. Based on the lifestyle of the consumer and his media preferences, one should choose channels for disseminating information about the product and ways to sell it.

- Relationship with the client. You should think about ways to attract and retain customers, as well as ways to encourage them to make a purchase.

- Key resources. Any company needs material, human and intangible resources, an entrepreneur must understand well what he will need and where he can get it.

- Key activities. One of the most important blocks, it is necessary to prescribe the production processes and management specific to this particular project.

- Key partners. Who can help in achieving the goals: suppliers, manufacturers of basic and related elements, it is important to understand how to involve them in your project.

- Cost structure and revenue streams are the building blocks for which the financial business model is responsible. It is necessary to have a good idea of what the costs of producing a product and its delivery are and where there are points for potential increase in profits. All of these template blocks need to be completed through research and brainstorming.

Model E. Maurya

The "lean" business model is a modification of the Osterwalder template. It also highlights several blocks that need to be filled in: problem, valueoffer, customer segments, key metrics, distribution channels. The most important thing in business, according to E. Maurya, is to find an advantage that dishonest competitors cannot copy. These can be technologies, ways of interacting with the buyer, distribution features. It is in the presence of such an advantage that the main secret of business lies.

Johnson Model

According to Mark Johnson, the business model is the right way to capture the market. He based his template on K. Christensen's concept of pure space capture. The model has three components: value proposition, profit formula, and key resources plus key processes. All components are interconnected and influence each other.