Business model frameworks: waterfall, lifecycle, and learning approaches

Business Models

What is meant by the term business model?

Used universally to define the coordinated synchronization and sequencing of processes companies rely on create value for their customers, a business model defines in detail how an organization goes about transforming resources into products or services (Shi, Manning, 2009). The most successful business models streamline the collection of resources, which often range from raw materials, subassemblies, and finished assemblies, direct and indirect labor all coordinated to deliver value to customers. Time is often the most critical resources that business models must manage as well. Project-based business models have become pervasive in the last decade as many manufacturing companies outsource the development of it systems and also support for compliance initiatives ranging from Sarbanes-Oxley (SOX) to government-mandated requirements (Wikstrom, Artto, Kujala, Soderlund, 2010).

Business models are also strategic in scope, defining the many interrelated infrastructure components, systems, organizational structures and key business processes needed to create value for customers profitably on an ongoing basis (Laplante, Neill, 2004). All of these factors also have led to business models being predicated on the value chain as defined by Porter (Porter, 1986). The value chain framework provides a linear analysis of each component or organizational area that directly contributes to value being generated, culminating in gross margin being generated for the firm. Underscoring these key strategic component areas are the core functional departments of a business including information technologies (it), Human Resource Management (HRM), Accounting, Finance and Supply Chain Management (SCM) (Porter, 1986).

Business models succeed or fail based on their agility and responsiveness to the market over time, including the design of systems to support having every major product or service initiative be customer-centric first, process- and efficiency-driven second (Ghezzi, Balocco, Rangone, 2010). The greater the centricity of a business model around customers and their changing preferences the higher the level of long-term agility and performance, and the greater the ability to withstand significant change over time (Baird, Gonzalez-Wertz, 2011).

What is meant by the term business approach and methodology?

The business approach of a business model concentrates on the underlying series of assumptions of the business model is based on, and the methodology used for fueling new tacit and explicit knowledge in the company as well (Shi, Manning, 2009). This focus on business approach also strives to define the creation of value through knowledge-sharing networks as well (Shi, Manning, 2009).

What is meant by the concept of business modeling from an architecture perspective?

The concept of business modeling relates to the designing of the core functional areas of a business model and determining how they will be coordinated to create value over time (Ghezzi, Balocco, Rangone, 2010). Business modeling from an architectural standpoint refers to the development of a business model that can scale to keep pace and in step with customers' needs and preferences over time as well (Leavy, 2010).