The Power of Business Models

Over the past few years, bbusiness modelsQ have surged into the
management vocabulary. But, while it has become quite fashionable to discuss
business models, there is still much confusion about what business models are and
how they can be used. In fact, business models can serve a positive and powerful role
in corporate management. While other authors have recently offered definitions of
bbusiness model,Q none appear to be generally accepted. This lack of consensus may
in part be attributed to interest in the concept from a wide range of disciplines, all of
which have found a connection to the term. To help managers better understand
business models, this paper reviews the extant literature and identifies and classifies
the components of business models cited therein. Components were classified into
four primary categories: strategic choices, the value network, creating value, and
capturing value. To address the absence of a generally accepted definition of a
business model, a new definition that integrates and synthesizes the earlier work is
offered. Based on the proposed definition, business models are then contrasted with
strategy. Four problems associated with business models are also discussed.