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

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Knowledge of the Problem Domain Linder and Cantrell (2000) propose categorizing business models focusing on two main dimensions, which are a model’s core, profit-making activity, and its relative position on the price/value continuum (see Table 5). Business Model Category Price Models Convenience Models Commodity-Plus Models Experience Models Channel Models Intermediary Models Trust Models Innovation Models Business Models Buying Club, One-stop, low-price shopping Fee for advertising, Razor and blade One-stop, convenient shopping, Comprehensive offering, Instant gratification Low-price reliable commodity, Mass customised commodity, Service-wrapped commodity Experience selling, Cool brands Channel maximisation, Quality selling, Value-added reseller Market aggregation, Open market-making, Multi-party market aggregation Trusted operations, Trusted product leadership, Trusted service leadership Incomparable products, Incomparable services, Breakthrough markets Table 5: Linder and Cantrell’s (2000) categorization of business models Weill and Vitale (2001) describe eight so-called atomic business models. Each model describes a different way of conducting business electronically. They describe these atomic e-business models as the basic building blocks of an e-business initiative (see Table 6). Atomic Business Model Content Provider Direct to Customer Full-Service Provider Intermediary Shared Infrastructure Value net Integrator Virtual Community Whole-of- Enterprise/Government Description Content providers are firms that create and provide content (information, products, or services) in digital form to customers via third parties. In this model, the buyer and seller interact directly often bypassing traditional channel members. Firms in this category provide total coverage of customer needs in a particular domain, consolidated via a single point of contact. Domains cover any area where customer needs cover multiple products and services, such as financial services or health care. The intermediary links multiple buyers and sellers. Usually the sellers pay the intermediary listing fees and selling commissions and it is possible that the buyer may also pay a purchase or membership fee. Advertisers also provide revenue for intermediaries. There are six major classes of intermediaries, namely electronic mall, shopping agents, specialty auctions, portals, electronic auctions and electronic markets. In this atomic business model a firm provides infrastructure shared by its owners. The shared infrastructure generally offers a service that is not already available in the marketplace, and it may also be a defensive move to thwart potential domination by another major player. The value net integrator coordinates product flows from suppliers to allies and customers. He strives to own the customer relationship with the other participants in the model, thus knowing more about their operations than any other player. His main role is coordinating the value chain. In this model the firm is in the center, positioned between members of the community and suppliers. Fundamental to the success of this model is that members are able to communicate with each other directly. The single point of contact for the e-business customer is the essence of the whole-of-enterprise atomic business model. This model plays an important 28
The Business Model Ontology - a proposition in a design science approach role in public-sector organizations but also applies to the private sector. Table 6: Weill and Vitale’s (2001) atomic business models For Rappa (2001) a business model spells-out how a company makes money by specifying where it is positioned in the value chain. His classification scheme consists of nine generic forms of e-business models, which are Brokerage, Advertising, Infomediary, Merchant, Manufacturer, Affiliate, Community, Subscription and Utility (see Table 7). These generic models essentially classify companies among the nature of their value proposition or their mode of generating revenues (e.g. advertising, subscription or utility model). Type of Model Subcategories Description Brokerage Model Advertising Model Infomediary Model Merchant Model Manufacturer Model Affiliate Model Community Model Subscription Model Utility Model Marketplace Exchange, Business Trading Community, Buy/ Sell Fulfilment, Demand Collection System, Auction Broker, Transaction Broker, Bounty Broker, Distributor, Search Agent, Virtual Mall Portal, Personalised Portal, Niche Portal, Classifieds, Registered Users, Query-based Paid Placement, Contextual Advertising Advertising Networks, Audience Measurement Services, Incentive Marketing, Metamediary Virtual Merchant, Catalog Merchant, Click and Mortar, Bit Vendor Brand Integrated Content Voluntary Contributor Model, Knowledge Networks Content Services, Person-to-Person Networking Services, Trust Services, Internet Service Providers They bring buyers and sellers together and facilitate transactions. Usually, a broker charges a fee or commission for each transaction it enables. The broadcaster, in this case a web site, provides content (usually for free) and services (like email, chat, forums) mixed with advertising messages in the form of banner ads. The banner ads may be the major or sole source of revenue for the broadcaster. The broadcaster may be a content creator or a distributor of content created elsewhere. Some firms function as infomediaries (information intermediaries) by either collecting data about consumers or collecting data about producers and their products. Wholesalers and retailers of goods and services. Manufacturers can reach buyers directly and thereby compress the distribution channel. The affiliate model provides purchase opportunities wherever people may be surfing. It does this by offering financial incentives (in the form of a percentage of revenue) to affiliated partner sites. The affiliates provide purchase-point click-through to the merchant via their web sites. The community model is based on user loyalty. Users have a high investment in time and emotion in the site. In some cases, users are regular contributors of content and/or money. Users are charged a periodic – daily, monthly or annual – fee to subscribe to a service. The utility model is based on metering usage, or a pay as you go approach. Unlike subscriber services, metered services are based on actual usage rates Table 7: Rappa’s (Rappa 2001) classification scheme Applegate (Applegate 2001) identifies four categories for digital business models, for which she gives a number of examples (see Table 8). 29
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