A
business model describes the rationale of how an organization creates, delivers, and captures value (economic, social, cultural, or other forms of value). The process of business model construction is part of business strategy. Whenever a business is established, it either explicitly or implicitly employs a particular business model that describes the architecture of the value creation, delivery, and capture mechanisms employed by the business enterprise. It thus reflects management’s hypothesis about what customers want, how they want it, and how an enterprise can organize to best meet those needs, get paid for doing so, and make a profit.
- Value Creation is to make something people want… There’s nothing more valuable than an unmet need that is just becoming fixable. If you find something broken that you can fix for a lot of people, you’ve found a gold mine.
- Value Delivery aims for "A satisfied customer is the best business strategy of all."
- Value Capture is the process of retaining some percentage of the value provided in every Transaction. For example, if you bring $1 million of revenue to a client, and you charge $100,000, you are capturing 10% of the value you created. The more value you capture, the less attractive your offer becomes.
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The template upon which all business model types are constructed consists of three choices management must make:
- The customer, i.e., who the business will serve
- The value proposition, i.e., the "offer" that will be made to the customer
- The resources and capabilities that will create/deliver the value proposition
These three choices, together, create a
configuration that is permanent. The individual business model components may undergo constant incremental change. Wholesale, radical change of any one element (e.g., serving an entirely new customer group) will be inhibited by the other two model elements.
