Running head: BUSINESS MODEL GENERATION EXERCISE 1 1
Business Model Generation Exercise 1
Brittany Alston
Liberty University
BUSI 690
BUSINESS MODEL GENERATION EXERCISE 1
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Business Model
A business model depicts the method of reasoning of how an organization creates,
conveys, and captures value (Osterwalder & Pigneur, 2010). A business model must be able to be
understood by everyone, but the complexities of the functions of the enterprise should not be
over simplified. Utilizing hierarchal structures, procedures, and frameworks, a blueprint is
implemented. The four main areas of a business, customers, offer, infrastructure, and financial
viability are used in the nine basic building blocks. The nine building blocks shows how a
business intends to make money. The nine building blocks are customer segments, value
proposition, channels, customer relationships, revenue stream, key resources, key activities, key
partnerships, and cost structure (Osterwalder & Pigneur, 2010).
In the customer segment block, an enterprise determines what groups of people they aim
to reach and serve. Customers are the key element to any business model. Value proposition is
determining what products and services will be utilized to create value for customer segments.
This enables customers determine what company they will utilize. Distinctive channels are
utilized to communicate with customer segments. Customer relationships are the foundation of
connections a company has with various customer segments. The revenue stream is self-
explanatory, it is the measure cash made from each customer segment. The key resources are the
most important assets, budgetary, physical, scholarly, or human, that a company require for its
business model to work. The most important things a company must do to make their business
model work are referred to as the key activities. Every business needs a network of suppliers or
partners to make their business model work, that is where the key partnerships building block is
formed. The last building block and potentially the most essential is the cost structure. This is
where all costs incurred from each block is laid out (Osterwalder & Pigneur, 2010).
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Business Model Beyond a Definition
Rothaermel (2017) defines a business model as, “a firm’s plan that details how it intends
to make money”. Osterwalder and Pigneur (2010) definition of a business model is, it “describes
the rationale of how an organization creates, delivers, and captures value”. A portion of the key
segments include: the intended interest group of the firm, keeping up and making customer
relationships through direct or indirect contact, crating value at each progression of the esteem
chain, and in addition getting ready for revenue streams and the cost structure of the firm.
While there are diverse schools of thought with respect to most of the parts of a business
model, one gathering of researchers attest that the fundamental subject which spins around
business models is creating value at each level (Zott, Amit, and Massa, 2011). Substantially more
analysts examine that convincing business models are of outrageous significance on account of
the manner in which they empower companies to understand that the clarification for each
progressive method that is set up is to make an impetus for both firm and the buyer (Lindgren
and Aagaard, 2014). Fundamentally, a business model is the means by which a company
composes and does its procedures to create value for its stakeholders. Literature has revealed that
numerous business managers regularly trust that the expressions "business model" and "business
strategy" are compatible, yet that while a business model is consumed with value creation,
business strategy is consumed with how the company rivals outside firms for piece of the pie
(Casadesus-Masanell and Ricart, 2010).
Value Proposition
Value propositions is one of the nine building blocks of a business model. It is the
products and services that will create value for customer segments. There is a different value
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proposition for each customer segment. There are select products and services that are used to
satisfy specific customer segments. Value proposition is what is being offered to customers and
how is the company catering to the needs of each customer segment.
A few of the questions that are considered when formulating the value proposition are:
what value do we deliver to the customer, which one of our customer’s problems are we helping
to solve, which customer needs are we satisfying, and what bundles of products and services are
we offering to each customer segment” (Osterwalder & Pigneur, 2010). Customer value creation
can be considered through the newness of what is being offered to customers, the improvement
of performance of products and services, the customization of the products and services, and the
accessibility of the products and services, just to name a few. There are many other elements that
contribute to the creation of value for customers.
“What If”
Effective organizations perceive the need to constantly assess their present business
model and to investigate potential open doors for future improvements inside the organization.
Doing as such enables the organization to additionally tweak their objectives and guarantee they
make the fundamental changes. “What If” questions urge organizations to conceive brand new
ideas for inventive approaches to produce a new business model without being held down by the
status quo. They start as speculative situations, however, can make ready for totally new,
inventive business model.
When “Brainstorming a New Business Model” answering the “What If” questions are a
starting point that will challenge management to develop a business model that will make their
theory work. Answering the “What If” questions will allow management to go beyond the status
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quo and make the impossible possible. They ought to bother managers as captivating, hard to
execute recommendations and stimulate their thinking. Management could assist with breaking
free from the institutionalized business model by proposing straightforward “What If” questions
regarding merchandise, administration, or inward procedures.
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References
Casadesus-Masanell, R., & Ricart, J. E. (2010). From strategy to business models and onto
tactics. Long Range Planning, 43(2), 195-215. doi:10.1016/j.lrp.2010.01.004
Lindgren, P., & Aagaard, A. (2014). The sensing business model. Wireless Personal
Communications, 76(2), 291-309. doi:10.1007/s11277-014-1689-z
Osterwalder, A., & Pigneur, Y. (2010). Business model generation. Hoboken, NJ: John Wiley &
Sons.
Rothaermel, F. T. (2017). Strategic management concepts (Custom 3rd ed.) New York, NY:
McGraw-Hill.
Zott, C., Amit, R., & Massa, L. (2011). The business model: Recent developments and future
research. Journal of Management, 37(4), 1019-1042. doi:10.1177/0149206311406265
