The Business Model Ontology - a proposition in a design ... - HEC

The Business Model Ontology - a proposition in a design science approach
3.1.1 Business Model Definitions
The first column of Table 2 covers business model definitions. Paul Timmers, then working for the
European Commission, was one of the first to explicitly define and classify business models (Timmers
1998). He understands a business model as the architecture for the product, service and information
flows, including a description of the various business actors and their roles and a description of the
potential benefits for the various business actors and a description of the sources of revenues. In order
to understand how a company realizes its business mission he adds a marketing model that is the
combination of the business model and the marketing strategy of the business actor under
consideration. Like Timmers, Weill and Vitale (Weill and Vitale 2001) define a business model as a
description of the roles and relationships among a firm’s consumers, customers, allies and suppliers
and it identifies the major flows of product, information, and money, as well as the major benefits to
participants.
In their business model definition Linder and Cantrell (2000) from the Accenture Institute for Strategic
Change differentiate between three different types of models: the components of a business model,
real operating business models and change models. They define a business model as an organization’s
core logic for creating value. Similarly, Petrovic, Kittl et al. (2001) perceive business models as the
logic of a business system for creating value. They specify that this is in opposition to a description of
a complex social system itself with all its actors, relations and processes. Referring to this Gordijn,
Akkermans et al. (2000) mention that in research as well as in industry practice, often business models
are wrongly understood as business process models, and so can be specified using UML activity
diagrams or Petri nets. They explain that this is a misunderstanding and that a business model is not
about processes but about value exchanged between actors. In their opinion the failure to make this
separation leads to poor business decision-making and inadequate business requirements.
Like Petrovic, Kittl et al. (2001) Applegate (2001) perceives a business model as a description of a
complex business that enables the study of its structure, of the relationships among structural elements,
and of how it will respond to the real world. In this regard Stähler (2002) reminds that a model is
always a simplification of the complex reality. It helps to understand the fundamentals of a business or
to plan how a future business should look like. Magretta (2002) adds that a business model is like a
story that explains how an enterprise works. And like Stähler she distinguishes the concept of business
models from the concept of strategy. She explains that business models describe, as a system, how the
pieces of a business fit together, but as opposed to strategy do not include performance and
competition.
Tapscott, Ticoll et al. (2000) do not directly define business models, but what they call b-webs
(business webs). A b-web is a business on the internet and represents a distinct system of suppliers,
distributors, commerce service providers, infrastructure providers, and customers that use the Internet
for their primary business communication and transactions. Similarly, another highly networkcentered
approach is provided by Amit and Zott (2001). They describe a business model as the
architectural configuration of the components of transactions designed to exploit business
opportunities. Their framework depicts the ways in which transactions are enabled by a network of
firms, suppliers, complementors and customers.
A series of authors introduce a financial element into their definitions. Afuah and Tucci (2003) state
that each firm that exploits the Internet should have an Internet business model. They understand it as
a set of Internet- and non-Internet-related activities that allow a firm to make money in a sustainable
way. Hawkins (2001) describes a business model as the commercial relationship between a business
enterprise and the products and/or services it provides in the market. He explains that it is a way of
structuring various cost and revenue streams such that a business becomes viable, usually in the sense
of being able to sustain itself on the basis of income it generates. Rappa (2001) defines a business
model as the method of doing business by which a company can sustain itself -- that is, generate
revenue. For him the business model spells-out how a company makes money by specifying where it
is positioned in the value chain.
25