Business model concepts and applications

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 the difference between waterfall model, lifecycle model, and learning model?

A waterfall model creates a business model and the corresponding products it is based on through the use of a sequential series of steps, often compressed in time, to ensure the most rapid development of both the business and products possible (Baird, Gonzalez-Wertz, 2010). This is often considered part of the Rapid Application Development (RAD) platform in software, and has increasingly been used in high technology industries to create business models as well.

The lifecycle model emulates the standard lifecycle curve of a product or service, in that it has specific phases of growth, maturity and decline. The lifecycle model is well-attuned to those product areas that have rapid product lifecycles and the need to continually bring new innovation into key markets. The lifecycle model of creating new ventures looks to capitalize on factors that will force a business to ascend or grow quickly over time. This is the case with Internet start-ups and the rise of e-commerce for example (Shi, Manning, 2009). The learning model is significantly different from the other two as it concentrates on creating a knowledge-sharing network within which information, insight, both tacit and explicit knowledge is shared throughout the network of people striving to create an effective business model (Shi, Manning, 2009). The learning model is the precursor to a business model becoming a knowledge-sharing network over time

(Leavy, 2010). This type of model places knowledge at the center of the competitive advantage for any company first and then builds out the processes and systems necessary to attain competitive advantage.

What is meant by the term business approach and methodology?