Business Model

A Business Model is a for-profit organization model that defines how an organization creates, delivers, and captures value.

• Context:
  • It can (often) include key components such as:
    • Customer Value Proposition: Describes the unique product or service offering that satisfies a specific customer need or solves a particular problem.
    • Revenue Streams: Specifies the different ways the business earns money, such as direct sales, subscriptions, usage fees, licensing, advertising, or brokerage fees.
    • Customer Segments: Clearly defined groups of potential customers characterized by similar needs, demographics, or behaviors that the business aims to serve.
    • Distribution Channels: The methods and platforms through which products or services are delivered to customers, including online platforms, retail stores, direct sales, and logistics networks.
    • Customer Relationship Strategy: The planned approach for building and managing interactions with customers, such as personalized service, community engagement, or automated support.
    • Key Resources: The critical assets—such as technology, skilled personnel, proprietary tools, or intellectual property—required to support and execute the business model.
    • Key Activities: The primary tasks and operations necessary to produce the offering, such as product development, marketing, logistics, or customer support.
    • Key Partnerships: Strategic alliances with other companies, suppliers, or institutions that help the business optimize operations, acquire resources, or reduce risk.
    • Cost Structure: Outlines the primary costs associated with operating the business, such as manufacturing, distribution, personnel, technology maintenance, and partnership expenses.
    • ...
  • It can (typically) include Business Model Sections.
  • ...
  • It can range from being a Subscription Business Model to being a Freemium Business Model, based on how the product is monetized and the accessibility for different customer segments.
  • It can range from being a Direct-to-Consumer (DTC) Model to being a Business-to-Business (B2B) Model, depending on the nature of the target audience and the distribution strategy.
  • It can range from being a Product-Based Business Model to being a Service-Based Business Model, depending on whether the focus is on delivering tangible goods or intangible services.
  • It can range from being a Single-Sided Business Model to being a Platform Business Model, where value is either provided to a single type of customer or to multiple stakeholders interacting within a shared ecosystem.
  • ...
  • It can serve as a blueprint for an organization's strategy execution and operations.
  • It can be designed to exploit new opportunities or to optimize existing business processes.
  • It can be influenced by market conditions, technological advancements, regulations, and societal trends.
  • It can be evaluated and adapted to ensure alignment with organizational goals and changing business environments.
  • It can describe the Value Proposition which details the products or services offered and why customers find them valuable.
  • It can include the Revenue Model that explains how the business earns income.
  • It can encompass the Customer Segments the business targets.
  • It can outline the Distribution Channels used to deliver products or services to customers.
  • It can specify the Customer Relationships strategies employed to maintain and grow the customer base.
  • It can detail the Key Activities essential for the business's operation.
  • It can identify the Key Resources necessary to deliver the value proposition.
  • It can include the Key Partnerships with other organizations that help the business model succeed.
  • It can explain the Cost Structure detailing the major costs involved in operating the business.
  • ...
• Example(s):
  • a General Business Model, such as:
    • a Subscription Business Model that involves customers paying a recurring fee for continuous access to a product or service, such as Netflix or Spotify.
    • a Freemium Business Model that provides basic services free of charge, while premium features require payment, such as LinkedIn or Dropbox.
    • a Marketplace Business Model that connects buyers and sellers, facilitating transactions and generating revenue through commissions or fees, such as Amazon or Airbnb.
    • a Razor-Razorblade Model that involves selling a product at a low price to increase sales of complementary high-margin products, such as printers and ink cartridges.
    • a Licensing Model ...
    • a Franchise Model where a business allows another party to operate a branch of their business under the same brand, such as McDonald's or Subway.
    • a Go-to-Market Model that focuses on the company's strategy and tactics to launch a product or service and drive revenue.
    • ...
  • a Domain-Specific Business Model, such as:
    • a News Industry Business Model, such as The New York Times' digital subscription model.
    • a Law-Related Business Model, such as a LegalTech business model like LegalZoom's online legal services platform.
    • an E-learning Business Model, such as Coursera's partnership with universities to offer online courses.
    • a Healthcare Business Model, such as Teladoc's telemedicine platform.
    • a Fintech Business Model, such as Robinhood's commission-free stock trading app.
  • ...
• Counter-Example(s):
  • Non-Profit Organization, which operates to serve public or social benefits rather than focusing primarily on profit generation.
  • Operational Plans, which focus on day-to-day activities rather than the overall strategy of creating, delivering, and capturing value.
  • Marketing Plans, which detail specific strategies for promoting products or services but do not encompass the entire business framework.
• See: Business Process, Business Strategy, Competitive Advantage, Cost Structure, Customer Relationships, Distribution Channels, Key Activities, Key Partnerships, Key Resources, Lean Canvas, Mission Statement, Revenue Model, Strategic Planning, Target Market, Value Chain, Value Proposition, Value Creation.

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References

2024

• https://www.youtube.com/watch?v=L1Km-hJt-uI
  • NOTES:
    • Business Models are structured approaches that define how a business creates, delivers, and captures value for its customers and stakeholders.
    • It consists of core elements such as Customer Value Proposition, Go-To-Market Strategy, Technology and Operations Model, and a Cash Flow Formula.
    • A Business Model can be as disruptive as a Technology Innovation if it fundamentally changes how value is delivered and monetized.
    • Successful Business Models often focus on addressing a clear pain point or unmet need within a well-defined Customer Segment.
    • Companies like Netflix and Symantec showcase how evolving a Business Model can turn weaknesses into strengths and create sustainable competitive advantages.
    • Creating a Minimum Viable Segment (MVS) is crucial for startups to concentrate on a core audience with shared needs, ensuring focus and efficient use of resources.
    • Innovations in a Business Model—such as shifting to Subscription Models, Data-Driven Services, or Platform Ecosystems—can unlock new revenue streams and scalability.

2024

• (Wikipedia, 2024) ⇒ https://en.wikipedia.org/wiki/business_model Retrieved:2024-4-18.
  • A business model describes how an organization creates, delivers, and captures value, in economic, social, cultural or other contexts. For a business, it describes the specific way in which it conducts itself, spends, and earns money in a way that generates profit. The process of business model construction and modification is also called business model innovation and forms a part of business strategy.

    In theory and practice, the term business model is used for a broad range of informal and formal descriptions to represent core aspects of an organization or business, including purpose, business process, target customers, offerings, strategies, infrastructure, organizational structures, profit structures, sourcing, trading practices, and operational processes and policies including culture.

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