This is a key concept and model in enterprise modeling. The business model is the most common starting point in enterprise modeling.
This term is a well established term in the language of directors and executives, and is covered in MBA and other management development courses. The term has only recently emerged, though, as a result of the dotcom era in the late 1990s and early 2000s, It came to attention because the use of ICT as a fundamental underpinning of the dotcom businesses had allowed these businesses to operate to new and more competitive business models. Since then, more work has been done to understand and articulate the nature, essence and value of the business model concept. Most notable is the work of Alexander Osterwalder (whose thesis I have only just started reading), but whose work has also led to development of tools such as Business Model Canvas which support the articulation and refinement of the business model(s) being pursued by enterprises.
Key building blocks for the expression of a business model, as identified by Osterwalder, are:
- Product / value proposition
- Target customer segment
- Distribution channel
- Cost structure
- Revenue model
Validation of a business model gives cause for the organisation to consider:
- customers to whom its products and service offerings are being made
- value proposition for these customers
- differentiators which will prompt the customer to select these offerings over others
- channels being used to deliver these offerings
- costs involved in delivering the offerings to customers
These can change quite radically and, if not recognised, can lead to significant revenue losses and flowon consequences. It is wise to validate the business model(s) before proceeding to consider the operating model for producing the product or service offerings.
There are a range of well-established resources available in relation to developing business models, including:
There is further information in relation to my understanding, articulation and practices surrounding business models: