Analysing the Characteristics of a Business Model

For Unit 6 at my Master’s in Design Management at Ravensbourne College I chose the enterprise option with the aim of learning more about startups and business modelling. I am working with two student mates on a live startup idea that will act as a case study for me to experiment with different business models and to test them with focus groups. At the same time I will learn what it means to start up lean and from scratch.

Business model is defined in existing literature in a variety of ways; as a statement, a description, a representation, an architecture, a conceptual tool or model, a structural template, or a method.

(Amit, R., Zott, C. & Massa, L., 2010)

This quote shows how generic the definition of a business model is and even though there are existing tools out there, e.g. Alexander Osterwalder’s business model canvas, I first had to a look at the theoretical framework to get a better understanding about the challenges and composition of a business model.

Thanks to my tutor of this unit, Sheila Pontis, I found this paper written by Michael Morris, Minet Schindehutte and Jeffrey Allen, which gives a good overview over the existing literature about business models and its characteristics.

I started to work with the information of this paper and analysed the data. Morrisa et al. are listing 19 different authors on business modelling including all characteristics that the authors regard to be crucial for a business model. Some authors mention as many as eight different characteristics of a business model, others as only state three different aspects.

Characteristics of a Business Model

Review of business model characteristics in existing literature (Author’s own, based on Morris et al.)

In the analysed literature terminology is quite diverse. Some authors write about the ‘value model’ others call it the ‘value proposition’ another author mentions a ‘value cluster’. As outlined by the paper of Morris at al., even though these authors call these things differently, in the end there is an overlapping of meaning. I have highlighted the terms in different colours and sorted them by the six basic characteristics and criteria that business models are composed of: value offering, economic model, customer interface/relation, partner networks/roles, internal infrastructure/connected activities, target markets.

Characteristics of business modelling highlighted by colour-coding (Author’s own, based on Morris et al.)

Characteristics of a Business Model Sorted by Relevance

I then ordered them by relevance / importance. Apparently, aspects connected to economics were the most important factors, mentioned 17 times by these authors (A rough figure, I don’t claim completeness of contents here). The value offering obviously was named a crucial factor to a business model as well. Interestingly, the partner network / roles were not mentioned that often, compared to the other factors.

Characteristics of business modelling sorted by their relevance (Author’s own, based on Morris et al.)

I am hoping that these insights will help me to get a better understanding of what aspects are considered most import for business modelling. Furthermore it will help to understand existing tools and frameworks such as the business model canvas better, and I might consider customising my approach to creating a business model for our startup idea.

References