Running head: BUSINESS MODEL GENERATION EXERCISE 1
Business Model Exercise 1
Thonya Lucas
Liberty University
September 25, 2016
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Business Model
A business model defines the basis of how organizations produce, deliver, and portray
value (Osterwalder & Pigneur, 2010). It tells a story of how the business will function, and is
used in various aspects of a firm such as conveying the firm’s method of doing business that will
allow it to generate revenue. To create a successful business model, managers must convert the
organization’s strategy of how to compete into a plan of actions and projects that support their
primary goals (Osterwalder & Pigneur, 2010).
Following creation of the model, managers implement the plan through structures,
processes, values, and practices. The evolvement of the business model occurs through focusing
on several concepts: value creation, how the firm will compete in the marketplace, how it will
make money and the role of internal players (employees and managers), and external players
(stakeholders – customers, suppliers, and investors). Lastly, the business model specifies how the
organization will change inputs (capital, raw materials, and labor) into outputs in order to make a
return on investment.
Strategic Management Business Model
An organization’s strategy outlines the path the business will take to achieve its goals,
and how the firm will be positioned with respect to the environment. The framework of the
business model promotes implementation of the firm’s strategy by using various analysis tools
(i.e. SWOT, Value Chain analysis) to determine how value will be created for its customers and
partners. It also provides a guideline on how a company translates its resources and product-
market positions into profits (Osterwalder & Pigneur, 2010). A strategic business model answers
questions such as; what value does the business create for its investors and shareholders? What is
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the firm doing to generate revenue? What does the firm sell? What resources does the firm use to
earn money? Answers to these questions help the firm create a model that allows them to be
intentional and strategic in their efforts to satisfy customers and key stakeholders. This will help
to ensure that the organization remains in business, and makes and sustains returns for its
investors over time. previous research suggests viewing business models as a theoretical
depiction of a firm's strategy, where the models are used as patterns to create value. The business
model should be created first, and a combination of various business models could be used in
making strategic decisions (Mehmood, 2015).
Value Propositions
Value propositions define the collection of products and services that produce value for a
particular customer group (Osterwalder & Pigneur, 2010). Successful delivery of value is
contingent upon the creation of a business model. Organizations must know their market, value
proposition, and then design their business model to deliver that value. A value proposition also
defines the advantages customers or associates gain from the business model.
Customers and value partners are the firm’s main focus in the business model. Value is
created for customers by satisfying their needs. To do this, the value proposition must answer the
question of how the customer characterizes value and how well the firm is delivering it (Cavalho
& Jonker, 2015). The goal is to offer a product/service that is attractive to the customer.
Brainstorming
Brainstorming is “a group creativity technique by which a group tries to find a solution
for a specific problem by gathering a list of ideas spontaneously contributed by its members”
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(Sekhar & Lidiya, 2012, p. 113). Brainstorming encourages innovative thinking among team
members that causes them to forego present mindsets and consider new outlooks and
perspectives.
Managers must observe industry trends that have proven to be successful, and those that
have not. Asking a “what if” question is a method groups can use in forming new perspectives.
For example, considering alternative options in case the market changes; or what if the
marketing and sales fail to meet the desired outcome? What if the organization loses key
suppliers or customers? What if new and stronger rivals enter the market? Seeking answers to
these questions urges business managers to use creative, unconventional thinking to come up
with preventive measures for unexpected occurrences that may block the firm from reaching its
set goals and objectives. Answers to these questions affect the success of the business
particularly when the marketplace is filled with many influences that could be unfavorable to its
success.
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References
Carvalho, J.M.S., Jonker, J. (2015). Creating a balanced value proposition: Exploring the
advanced business creation model. Journal of Applied Management and
Entrepreneurship, 20(2), 49-64.
Mehmood, F. (2015). Business models and strategies of m-commerce: A review. Journal of
Internet Banking and Commerce, 20(1), 1-17.
Osterwalder, A., Pigneur, Y. (2010). Business model generation. Hoboken, NJ: John Wiley &
Sons. ISBN: 9780470876411.
Sekhar, S., Lidiya, K. (2012). Brainstorming. Scientific and Academic Publishing, 6(3), 113-117.
