Literature/2004/Osterwalder

Excerpts

Business models

• "[T]his work tries to dig into the details and define a generic model to describe business models." (p 2)
• "A ‘model’ is a standard or example for imitation or comparison. It provides a pattern on which to base an artifact."^[1] (p. 2)
• "A quick lookup in the online version of the Cambridge Learner's Dictionary (Cambridge 2003)^[2] returns no result for the full combined term but the following definitions for the two separate terms:

• business: the activity of buying and selling goods and services, or a particular company that does this, or work you do to earn money.
• model: a representation of something, either as a physical object which is usually smaller than the real object, or as a simple description of the object which might be used in calculations." (p. 14)

• "In general the purpose of creating a model is to help understand, describe, or predict how things work in the real world by exploring a simplified representation of a particular entity or phenomenon. Thus, in the case of a business model the model (i.e. representation) shall help understand, describe and predict the "activity of buying and selling goods and services" and "earning money" of a particular company. But as the notion buying and selling seems too narrow, I try to extend it. So differently put, the business model is an abstract representation of the business logic of a company. (p. 14)
• "[T]here is an ongoing discussion on the difference between strategy and business models (Stähler 2002; Seddon and Lewis 2003)^[3][4]. Currently, there are different points of view that differ widely. In this dissertation I will not address this discussion and simply look at a business model as the translation of a company's strategy into a blueprint of the company's logic of earning money. Putting strategy, business models and process models together one can say that they address similar problems (e.g. the one of earning money in a sustainable way) on different business layers." (p. 14)
• "A business model is a conceptual tool that contains a set of elements and their relationships and allows expressing a company's logic of earning money. It is a description of the value a company offers to one or several segments of customers and the architecture of the firm and its network of partners for creating, marketing and delivering this value and relationship capital, in order to generate profitable and sustainable revenue streams. (p. 15)

Business Model Types

• Design Busniess Models
• Finance Busniess Models
• Implement Busniess Models

Complexity

• "[O]ne of the major impacts of ICTs has been an increase in the possible business configurations a company can adopt because of the reduced coordination and transaction costs (see Coase 1937^[5]; Williamson 1975^[6])" (p 2)
• "According to Hodgson (2003) capitalism naturally leads to more complexity driven by powerful economic forces. Under this he understands a growing diversity of interactions between human beings and between people and their technology (Hodgson 2003).^[7]

Uncertainty

• "The problem with uncertainty is that it increases the environmental risk that a company faces because the future becomes unpredictable. Referring to this Courtney, Kirkland et al. (1997)^[8] speak of four levels of uncertainty that managers face (...). At the first level there is a single view of the future, at the second level one of several futures will occur, at the third level there is a range of possible futures and at the fourth level true ambiguity rules in regard to future. Managing uncertainty is probably one of the most important challenges that managers face today. Providing a specification of the conceptualization of business models could eventually improve scenario approcaches and one day lead to simulation. This would help managers to be better prepared for the future. (p 13)

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References