Link to earlier post here
A Business Model is a representation of how an organization make or intends to make money. It can also be defined as a simplified description of how a company does business and makes money without having to go into the complex details of all its strategy, processes, units, rules, hierarchies, workflows, and systems.
The interest in business models comes from two opposing sides:
- Established companies have to find new and innovative business models to compete against growing competition and to fend off insurgents.
- Entrepreneurs want to find new and innovative business models to carve out their space in the marketplace
Within this context the business model concept is a particularly helpful unit of strategic analysis tailored to today’s competitive business environment. It helps executives as well as entrepreneurs increase their capacity to manage continuous change and constantly adapt to rapidly changing business environments by injecting new ideas into their business model.
In order to deal with market changes, the companies have to handle five changes that threaten company’s growth:
- Erosion of low-end product segments.
- Erosion of customer segments.
- Erosion of micro-segments.
- Erosion of traditional business boundaries.
- New intermediaries and new control points.
Execution (Performance metrics) determines whether Strategy is working on not, and Execution is dependent on the Operating Model, and Operating Model’s relevance is dependent on Business Model.
