A business model (BM) is an organic description of how a business, for certain given customer categories, creates, delivers and captures value (see A. Osterwalder, Y. Pigneur, Business Model Generation).
Key Components
Businesses organize and use resources to generate value for their customers, directly or through partners, at a cost. Customers consequently reward them by giving back part of this value, in the form of economic returns.
Economic sustainability comes from the balance between returns coming from customers and the corresponding costs.
Business Model Description or Design?
BMs may refer to actually existing businesses or to the concept of new ones.
Zooming Out: Business Environment
Businesses operate in environments that usually include, among other aspects, other synergic or competitive businesses. Each of them can in turn be described as a BM. These can therefore be used to map and describe entire business ecosystems.
Zooming In: Value Proposition
The heart and the “engine“ of a business is its capability to generate value. Therefore, one of its key elements is its underlying value proposition.
Business Modeling at Different Scales
A BM may refer to a whole business concern or to a part of it, such as a single product or service line. From this perspective, we can see a structured business as a coherent set of interacting business models.
Tools
The Business Model Canvas
The Business Model Canvas (BMC) is a conceptual framework and a visual tool. It helps making sense of, communicate about, evaluate, or compare business models. It facilitates the elicitation of their key parts and the relationships between them, in a simple and intuitive manner.
The Value Proposition Canvas
Yhe Value Proposition Canvas (VPC) is a conceptual framework and a visual tool. It helps making sense of, communicate about, evaluate, or compare value propositions. It facilitates the elicitation of their key parts and the relationships between them, in a simple and intuitive manner.
Sources & References
- Alexander Osterwalder, Yves Pigneur, Business Model Generation
- Alexander Osterwalder, Value Proposition Design
- An early version of this was posted as one of the author’s answer to a Quora question