What is business modeling

Business model

1. origin: The term Business model established itself in the period from 1998 to 2001 in particular. This is confirmed by a study on the frequency with which the term “business model” is mentioned in business newspapers such as WirtschaftsWoche, Focus Magazin, Capital, Frankfurter Allgemeine Zeitung and Financial Times Deutschland.

2. Differentiation between business model and strategy: Researchers in business administration largely agree that the terms strategy and Business model denote different things. Nevertheless, both terms are used as synonyms, especially in non-scientific, but also in some cases in scientific publications. According to Magretta, a business model describes the function of individual components of a company and their interaction. A business model does not make any statements about the competitive situation. In contrast, a strategy describes how a company can differentiate itself from the competition and develop a sustainable competitive advantage.

3. Different definitions: Many definitions of business models have been proposed since 1998; some definitions are more detailed, others more compact. In spite of this, it has not yet been possible to develop a generally applicable definition. Zott et al. offer a comprehensive overview of the current definitions. Timmers provided one of the first definitions for a business model (1998): “… an architecture for the product, service and information flows, including a description of the various business actors and their roles, and a description of the potential benefits for the various business actors , and a description of the sources of revenues ”. Osterwalder and Pigneur (2010) contributed a new, relatively short definition: "A business model describes the rationale of how an organization creates, delivers, and captures value." Bieger and Reinhold (2011) provide one of the most detailed definitions: “A business model describes the basic logic of how an organization creates value. The business model determines (1) what an organization offers that is of value to customers, (2) how values ​​are created in an organizational system, (3) how the created values ​​are communicated and transferred to the customer, (4) how the Created values ​​are “captured” by the company in the form of income, (5) how the values ​​are distributed in the organization and to stakeholders and (6) how the basic logic of value creation is further developed to ensure the sustainability of the business model in the future to ensure. ")

4. Business model typology: So far, no clear system of business model types has emerged. The following is an incomplete list of widespread business model types:

  • Unbundling business models: business models that combine the three areas of customer relationships, product innovation and the provision and maintenance of infrastructures in different forms (example: Deutsche Telekom, Swisscom).
  • Long-tail business model: superior logistics enable a company to offer niche products that are normally unprofitable (example: Amazon.com, Ebay.com).
  • Multi-sided platform business model: A platform enables two or more independent groups to interact. The value for a single group arises from the presence of another group (example: Google.com; the groups are advertisers and search engine users. The more users who use the Google search engine, the more data Google has to improve the search results. And the larger the market share of the Google search engine, the more advertisers place their ads on Google. This in turn strengthens Google's negotiating position on pricing. There are several positive, powerful control loops in this business model.)
  • Freemium business model (Freemium-Business model): a standard service is offered free of charge; Extended functionalities require a paid subscription (example: Xing Online Community).
  • Tied products business model: an inexpensive or free first product or service motivates the use of future chargeable replacement products or services (example: Gillette, HP color inkjet printer). Also known as the bait-and-hook or razorblade business models.
  • Open business model): a business model based on cooperation, which uses external experts to create and secure value (example: GlaxoSmithKilne).

5. Use of a business model: A business model shows the logical connections between the business activities of a company. According to Bieger (2011), using a business model perspective results in three specific benefit components. The first benefit is the analysis of the current business model. It represents the business activity of a company and its relationships in a simplified manner. The essential elements of the business model and their systemic relationships are shown. This analysis process leads to a specification of parts of the business model as well as a consistent and integrated design of the current logical relationships in the company. The second benefit is the planning of the future business model, which serves to further develop existing activities and the existing business model. The third benefit is easier communication with stakeholders. With the help of a business model, communication in business activities and its basic mechanisms are presented to internal and external stakeholders in a simplified and structured picture. In particular, the mechanisms of value creation for the implementation of the organizational or corporate strategy can be explained plausibly.