By Hanan Awaad
Every type of business needs a different business model. The business modelling process depends upon the visualization, management and proper documentation of the idea and the core elements of the business. It will help to define the activities yielding services with net value creation. Textbooks are full of different approaches and techniques to assist in the modelling process. Each model comprises some elements and frameworks that identify the characteristics of the company or the product or the service. Elements include functions, questions, components and building blocks etc. In this article, we summarized the business modelling techniques and frameworks that Corporita’s team utilizes to define these elements and help our clients in creating the right accurate model. We believe that these frameworks are suitable for service-based, knowledge-based as well as product-based businesses.
THE BUSINESS MODEL CANVAS
This business modelling framework was developed by Osterwalder and Pigneur. The model visualizes components of the business as different building blocks of customer dealings, product/service and infrastructure management, value propositions and their management, core activities and partnerships. This model is based on the idea of visualization to construct a complete business system.
Although this business modelling framework is trending these days, our team uses other frameworks based on the need of the business and how comprehensive the modelling process is. We usually use this framework with new companies because of its simplicity and the neglecting previous data, trends and information and also because of its popularity among entrepreneurs and start-ups.
However, our team found that this modelling framework is limited when it comes to discussing the strategic objectives of the business and its long-term vision. It was also limited in initiating discussions around competition, and even the concept of the value proposition is short-lived concept and businesses have to think of ways to make the value proposition sustainable.
THE FOUR-BOX BUSINESS MODEL
This model was presented by Mark W. Johnson and discusses the infrastructure of business that depends upon processes and resources. It defines the profit formulas and the cost-effectiveness. This model is very similar to the Business Canvas Model. However, the difference between the two models is mainly of customer box and the concept of visualization.
So, in many cases, our team starts with the Four-Box business model in the initial phases of the modelling process and switch to Business Model Canvas for a more in-depth analysis. Both models focus on how the company/business is going to make money neglecting some critical strategic aspects of the business.
THE STOF MODEL
This was presented by Bouwman, De Vos, and Haaker, and it is one of the favourite business modelling frameworks that we use in Corporita because of its focus on knowledge and technology-based businesses especially wireless or mobile services. The framework divides the modelling process into four primary domains: services, finance, technology, and organization. Services domain is related to the customer value proposition and the target groups or markets, innovation, Perceived and experienced values. Technology domain is connected to service delivery and systems. Organization domain is associated with the management system and organizational design and network and other organizational, technical and operational enablers and constraints, while the Finance domain is related to the revenue model, cost structure and other financial projections.
All these four domains are interrelated and focus more on mobile services. This business model framework is very specialized and includes all the questions that a technology-based business should ask.
BUSINESS MODEL SCHEMATICS
Weill and Vitale presented this model, which is based on e-business and its relationship with other models. This model gives the schematic illustration of different aspects of business like products, cost-effectiveness, and the customer services. These vital building blocks were considered in this model:
- Revenue sources
- Customer valuation
- Customer relationships
- Customer transactions
- Customer data ownership
- Essential information
Our team usually uses this model with all the e-business clients we support.
This model was presented by Chesbrough and Rosenbloom and emphasizes on technology development and its conversion into economic value creation. The model components are customer value proposition, market segment, firm’s position in the chain, cost management and its effectiveness and the other business-related strategies.
It differs from the previous frameworks related to technology-based businesses and e-business as it focuses heavily on business-related strategy. In many projects, we use Corporita’s hybrid approach to technology-based companies, which blends in different components of the STOF Model, the Business Model Schematics and the Technology/Market Mediation Model to include all the necessary elements and building blocks in a comprehensive elaborating business modelling process geared towards technology-based businesses.
ENTREPRENEURS’ BUSINESS MODEL
Morris, Schindehutte, and Allen built their model based on a theoretical framework including the self-efficacy theory, the theory of effectuation and the theories related to nature and scope of the project. It comprises of three levels of business management as:
- Foundation level
- Proprietary level
- Rules level
This model is also known as the investment model that describes the internal and external income and growth values.
Our team did not apply this model as it is but used the foundational theoretical framework for developing our Business Coaching Program for entrepreneurs.
The Complete Picture
In business planning, we don’t only include tools and frameworks of business modelling, but we also cover other tools included in Corporita’s fundamental business planning toolkit, such as:
- SWOT Analysis
- PEST and LongPEST Analysis
- Cost Structure
- Porter’s 5-Forces Competition Analysis
- ADKAR Change Management Model
All these models and tools interrelate and overlap depending on the needs of the business, communication, management system, organizational networks, and visualization. Each framework has specific strengths and limitations, that’s why we have developed our hybrid approach. However, the typical characteristics (which we call “the business modelling staples” are related to the value logic (the ability to understand and articulate the value of the business), the value proposition, value architecture and value economics.