Zott et al. The Business Model 1023 Business model articles in the business/ management field 1975198019851990199520002005 year PnAJ PAJ Note: This area graph shows trends in the number of business model articles. PnAJ= articles published in monaca- demic journals: PAJ= articles published in academic journals. Source: Business Source Complete, EBSCOhost database, January 1975-December 2009 This lack of definitional clarity represents a potential source of confusion, promoting spersion rather than convergence of perspectives and obstructing cumulative research progress on business models. Table I summarizes some of the most prevalent definitions suggested for the business model and shows which articles have adopted these definitions. Our review further revealed that the business model has been employed mainly in trying to address or explain three phenomena: (1)e-business and the use of information technology in organizations; (2)strategic issues, such as value creation, competitive advantage, and firm performance; and (3) innovation and technology management. Although we do not wish to claim mutual exclusivity among these categories, we believe that they allow us to broadly classify the business model literature. Therefore, we use them as organizing principles for his review Business Models for e-Business The research stream that, to date, has devoted the greatest attention to business models concerns e-business. The term e-business means"doing business electronically. "It encom passes e-commerce, e-markets, and Internet-based business and refers to firms that conduct Downloadedfromjom.sagepub.comaFudaNUnivLibonMarch13,2012
Zott et al. / The Business Model 1023 This lack of definitional clarity represents a potential source of confusion, promoting dispersion rather than convergence of perspectives and obstructing cumulative research progress on business models. Table 1 summarizes some of the most prevalent definitions suggested for the business model and shows which articles have adopted these definitions. Our review further revealed that the business model has been employed mainly in trying to address or explain three phenomena: (1) e-business and the use of information technology in organizations; (2) strategic issues, such as value creation, competitive advantage, and firm performance; and (3) innovation and technology management. Although we do not wish to claim mutual exclusivity among these categories, we believe that they allow us to broadly classify the business model literature. Therefore, we use them as organizing principles for this review. Business Models for e-Business The research stream that, to date, has devoted the greatest attention to business models concerns e-business. The term e-business means “doing business electronically.” It encompasses e-commerce, e-markets, and Internet-based business and refers to firms that conduct Note: This area graph shows trends in the number of business model articles. PnAJ = articles published in nonacademic journals; PAJ = articles published in academic journals. Source: Business Source Complete, EBSCOhost database, January 1975–December 2009. 0 200 400 600 800 number of publications (by year) 1975 1980 1985 1990 1995 2000 2005 year PnAJ PAJ 1000 Figure 1 Business Model Articles in the Business/Management Field Downloaded from jom.sagepub.com at FUDAN UNIV LIB on March 13, 2012
1024 Journal of Management July 2011 Table 1 Selected Business Model Definitions Papers Citing the The business model is"an architecture of the product, Hedman& Kalling, 2003 service and information flows, including a description of the various business actors and their roles: a description of the potential benefits for the various revenues”"(p.2) Amit Zott, 2001: The business model depicts"the content, structure, and Hedman Kalling, 2003 Zott Amit, 2010 governance of transactions designed so as to create orris. Schindehutte. value through the exploitation of business Allen, 2005: Zott opportunities"(2001: 511). Based on the fact that Amit,2007,2008 ansactions connect activities. the authors further Santos, Spector, Van evolved this definition to conceptualize a firms Der Heyden, 2009: Bock, usiness model as"a system of interdependent Opsahl, George, 2010 activities that transcends the focal firm and spans its boundaries"(2010: 216) Chesbrough The business model is"the heuristic logic that connects Chesbrough, Ahern, Finn. Rosenbloom, 2002 chnical potential with the realization of economi lue”(p.529) Chesbrough, 2007a. els are"stories that expla Peter Druckers age old questions: Who is the Tyrvainene, 2006: Demil customer? And what does the customer value? It also Lecocq, 2010 the fundamental questions every manager must ask: How do we make money in this business? What is the underlying economic logic that explai how we can deliver value to customers at an appropriate cost? "(p. 4) Morris et al. 2005 A business model is a"concise representation of how Calia, Guerrini, Moura, an interrelated set of decision variables in the areas of 2007 enture strategy. architecture. and economics are addressed to create sustainable competitive advantage defined markets"(. 727). It has six fundamental components: Value proposition, customer, internal ocesses/competencies, extemal positioning, omic model, and personal/investor factors. Johnson, Christensen Business models"consist of four interlocking elements, Johnson Suskewicz Kagermann, 2008 that, taken together, create and deliver value"(p 52) These are customer value proposition, profit formula and k Casadesus-Masanell "A business model is. a reflection of the firms Hurt, 2008: Baden-Fuller Ricart. 2010 realized strategy"(p. 195) morgan, 2010 Teece. 2010 "A business model articulates the logic, the data and Gambardella McGahan. other evidence that support a value proposition for the 2010 customer. and a viable structure of revenues and costs for the enterprise delivering that value"(p. 179) Downloadedfromjom.sagepub.comaFudaNUnivLibonMarch13,2012
1024 Journal of Management / July 2011 Table 1 Selected Business Model Definitions Author(s), Year Definition Papers Citing the Definition Timmers, 1998 The business model is “an architecture of the product, service and information flows, including a description of the various business actors and their roles; a description of the potential benefits for the various business actors; a description of the sources of revenues” (p. 2). Hedman & Kalling, 2003 Amit & Zott, 2001; Zott & Amit, 2010 The business model depicts “the content, structure, and governance of transactions designed so as to create value through the exploitation of business opportunities” (2001: 511). Based on the fact that transactions connect activities, the authors further evolved this definition to conceptualize a firm’s business model as “a system of interdependent activities that transcends the focal firm and spans its boundaries” (2010: 216). Hedman & Kalling, 2003; Morris, Schindehutte, & Allen, 2005; Zott & Amit, 2007, 2008; Santos, Spector, & Van Der Heyden, 2009; Bock, Opsahl, & George, 2010 Chesbrough & Rosenbloom, 2002 The business model is “the heuristic logic that connects technical potential with the realization of economic value” (p. 529). Chesbrough, Ahern, Finn, & Guerraz, 2006; Chesbrough, 2007a, 2007b; Teece, 2007, 2010 Magretta, 2002 Business models are “stories that explain how enterprises work. A good business model answers Peter Drucker’s age old questions: Who is the customer? And what does the customer value? It also answers the fundamental questions every manager must ask: How do we make money in this business? What is the underlying economic logic that explains how we can deliver value to customers at an appropriate cost?” (p. 4). Seddon, Lewis, Freeman, & Shanks, 2004; Ojala & Tyrväinene, 2006; Demil & Lecocq, 2010 Morris et al., 2005 A business model is a “concise representation of how an interrelated set of decision variables in the areas of venture strategy, architecture, and economics are addressed to create sustainable competitive advantage in defined markets” (p. 727). It has six fundamental components: Value proposition, customer, internal processes/competencies, external positioning, economic model, and personal/investor factors. Calia, Guerrini, & Moura, 2007 Johnson, Christensen, & Kagermann, 2008 Business models “consist of four interlocking elements, that, taken together, create and deliver value” (p. 52). These are customer value proposition, profit formula, key resources, and key processes. Johnson & Suskewicz, 2009 Casadesus-Masanell & Ricart, 2010 “A business model is . . . a reflection of the firm’s realized strategy” (p. 195). Hurt, 2008; Baden-Fuller & Morgan, 2010 Teece, 2010 “A business model articulates the logic, the data and other evidence that support a value proposition for the customer, and a viable structure of revenues and costs for the enterprise delivering that value” (p. 179). Gambardella & McGahan, 2010 Downloaded from jom.sagepub.com at FUDAN UNIV LIB on March 13, 2012
Zott et al. The Business Model 1025 commercial transactions with their business partners and buyers over the Internet(e.g Mahadevan, 2000). We exclude those firms that merely make use of websites to display information for products or services Recent advances in communication and information technologies, such as the emergence nd swift expansion of the Internet and the rapid decline in computing and communication costs,have allowed the development of new ways to create and deliver value, which have offered scope for the creation of unconventional exchange mechanisms and transaction architectures(Amit Zott, 2001)and accentuated the possibilities for the design of new boundary-spanning organizational forms(Daft Lewin, 1993; Dunbar Starbuck, 2006) Indeed, these developments have opened new horizons for the design of business models by enabling firms to change fundamentally the way they organize and engage in economic exchanges, both within and across firm and industry boundaries(Mendelson, 2000). According to Brynjolfsson and Hitt(2004), this includes the ways in which firms interact with supplier as well as with customers The Internet is a principal driver of the surge of interest in business models and the con- equent emergence of a literature that revolves around the topic(e. g, see Ghaziani Ventresca, 2005; Magretta, 2002; Yip, 2004). Shafer et al.(2005)review 12 definitions established publications during the period 1998-2000, finding that 8 were related to e-business Our literature review confirms this trend. In a total of 49 conceptual studies in which the business model is clearly defined, almost one fourth of the studies are related to e-business Research on e-business models can be organized around two complementary streams: The first aims to describe generic e-business models and provide typologies; the second focuses on the components of e-business models Description of generic e-business models and typologies. Several scholars have attempted to classify e-business models by describing types. Timmers(1998)distinguishes among 11 generic e-business models, from e-shops and e-procurement to trust and other third-party services. Tapscott, Lowy, and Ticoll(2000) propose a network-and value-centered taxonomy that identifies five types of value networks that they call b-webs(business webs), which e fer in their degree of economic control and value integration. Rappa(2001)classifies com- panies according to the nature of their value propositions and their modes of generating revenues. Weill and Vitale(2001)describe eight so-called atomic business models, each of which describes a different way of conducting business electronically; e-business initiatives can be represented by pure atomic business models or by combining them. Applegate(2001 introduces the following six e-business models: focused distributors, portals, producers, infrastructure distributors, infrastructure portals, and infrastructure producers. And Dubosson Torbay et al. (2002)identify the following principal dimensions for classifying business models: user's role, interaction pattern, nature of the offering, pricing system, level of cus tomization, and economic control. What is common to all these approaches is an attempt to describe and organize around typologies and taxonomies the plethora of new perceived busi ness archetypes enabled mainly by Internet technologies Components of e-business models. In addition to developing typologies that enlist and describe various generic e-business models, scholars of e-business have also attempted to Downloadedfromjom.sagepub.comaFudaNUnivLibonMarch13,2012
Zott et al. / The Business Model 1025 commercial transactions with their business partners and buyers over the Internet (e.g., Mahadevan, 2000). We exclude those firms that merely make use of websites to display information for products or services. Recent advances in communication and information technologies, such as the emergence and swift expansion of the Internet and the rapid decline in computing and communication costs, have allowed the development of new ways to create and deliver value, which have offered scope for the creation of unconventional exchange mechanisms and transaction architectures (Amit & Zott, 2001) and accentuated the possibilities for the design of new boundary-spanning organizational forms (Daft & Lewin, 1993; Dunbar & Starbuck, 2006). Indeed, these developments have opened new horizons for the design of business models by enabling firms to change fundamentally the way they organize and engage in economic exchanges, both within and across firm and industry boundaries (Mendelson, 2000). According to Brynjolfsson and Hitt (2004), this includes the ways in which firms interact with suppliers as well as with customers. The Internet is a principal driver of the surge of interest in business models and the consequent emergence of a literature that revolves around the topic (e.g., see Ghaziani & Ventresca, 2005; Magretta, 2002; Yip, 2004). Shafer et al. (2005) review 12 definitions in established publications during the period 1998-2000, finding that 8 were related to e-business. Our literature review confirms this trend. In a total of 49 conceptual studies in which the business model is clearly defined, almost one fourth of the studies are related to e-business. Research on e-business models can be organized around two complementary streams: The first aims to describe generic e-business models and provide typologies; the second focuses on the components of e-business models. Description of generic e-business models and typologies. Several scholars have attempted to classify e-business models by describing types. Timmers (1998) distinguishes among 11 generic e-business models, from e-shops and e-procurement to trust and other third-party services. Tapscott, Lowy, and Ticoll (2000) propose a network- and value-centered taxonomy that identifies five types of value networks that they call b-webs (business webs), which differ in their degree of economic control and value integration. Rappa (2001) classifies companies according to the nature of their value propositions and their modes of generating revenues. Weill and Vitale (2001) describe eight so-called atomic business models, each of which describes a different way of conducting business electronically; e-business initiatives can be represented by pure atomic business models or by combining them. Applegate (2001) introduces the following six e-business models: focused distributors, portals, producers, infrastructure distributors, infrastructure portals, and infrastructure producers. And DubossonTorbay et al. (2002) identify the following principal dimensions for classifying business models: user’s role, interaction pattern, nature of the offering, pricing system, level of customization, and economic control. What is common to all these approaches is an attempt to describe and organize around typologies and taxonomies the plethora of new perceived business archetypes enabled mainly by Internet technologies. Components of e-business models. In addition to developing typologies that enlist and describe various generic e-business models, scholars of e-business have also attempted to Downloaded from jom.sagepub.com at FUDAN UNIV LIB on March 13, 2012
1026 Journal of Management/ July 2011 distinguish first-and second-order themes among the components of e-business models. Table 2 presents a summary of these efforts. Business model representations. Several authors have attempted to represent business mod- ls through a mixture of informal textual, verbal, and ad hoc graphical representations(e.g Amit Zott, 2002). Weill and Vitale(2001)introduce a set of simple schematics intended to provide tools for the analysis and design of e-business initiatives. Their"e-business model schematics"are based on three classes of objects: participants(firm of interest, customers, suppliers, and allies), relationships, and flows(money, information, product, or service). In a related vein, Tapscott et al. (2000)suggest a value map for depicting how a business web oper ates. The value map depicts all key classes of participants(partners, customers, suppliers)and value exchanges between them(tangible and intangible benefits and knowledge Other scholars have provided a business model ontology, which is a conceptualization and formalization of the elements, relationships, vocabulary, and semantics of a business model (Osterwalder, 2004)and which is structured into several levels of decomposition with increasing depth and complexity. Tankhiwale(2009)applies such an ontology in a longitu- dinal case study in order to trace the evolution of a telecommunication firms business model and its impact on the firms business process architecture. Gordijn and Akkermans(2001 propose a conceptual modeling approach. Their ontology borrows concepts from the busi ness literature, such as actors, value exchanges, value activities, and value objects, and uses these notions to model networked constellations of enterprises and end-consumers who cre- ate, distribute, and consume things of economic value. Strategic marketing in e-business. In the domain of e-business, some scholars have focused on the changing nature of customer-firm relationships. A special concern has been the monetization of e-business Pauwels and Weiss(2008)examine ""fee and free"business models for providing digital content on the Internet. Their work focuses on the firm perfor- mance implications of a shift from the "free"to the"fee"model and empirically analyzes the role that marketing actions can play in accommodating this shift. In this regard, scholars have also examined the degree of Internet advertising effectiveness Clemons(2009) provides an overview of business models for monetizing Internet applica- tions. He argues that although the majority of attempts to monetize Internet applications tar- geted at individuals have focused on natural extensions of traditional media or traditional retailing, there are several potential online business models that are not based on advertising and that, given declining advertising effectiveness, might constitute a better choice Scholars have also noted the convergence of different media channels onto one digital platform(e. g, see Fidler, 1997), which has resulted in structural change in the media industry. McPhillips and Merlo(2008)refer to this convergence by introducing the term media busi- ness model. Structural change in the media industry also has been driven by the advent of new communication channels, such as mobile e-services(m-services). Eriksson, Kalling, Akesson and Fredberg(2008 )consider e-newspapers published for mobile reading devices equipped with e-paper displays, and they analyze the implication of future m-service innovation on the development of new business models. Huizingh(2002) has studied how to help managers design such e-business models Downloadedfromjom.sagepub.comaFudaNUnivLibonMarch13,2012
1026 Journal of Management / July 2011 distinguish first- and second-order themes among the components of e-business models. Table 2 presents a summary of these efforts. Business model representations. Several authors have attempted to represent business models through a mixture of informal textual, verbal, and ad hoc graphical representations (e.g., Amit & Zott, 2002). Weill and Vitale (2001) introduce a set of simple schematics intended to provide tools for the analysis and design of e-business initiatives. Their “e-business model schematics” are based on three classes of objects: participants (firm of interest, customers, suppliers, and allies), relationships, and flows (money, information, product, or service). In a related vein, Tapscott et al. (2000) suggest a value map for depicting how a business web operates. The value map depicts all key classes of participants (partners, customers, suppliers) and value exchanges between them (tangible and intangible benefits and knowledge). Other scholars have provided a business model ontology, which is a conceptualization and formalization of the elements, relationships, vocabulary, and semantics of a business model (Osterwalder, 2004) and which is structured into several levels of decomposition with increasing depth and complexity. Tankhiwale (2009) applies such an ontology in a longitudinal case study in order to trace the evolution of a telecommunication firm’s business model and its impact on the firm’s business process architecture. Gordijn and Akkermans (2001) propose a conceptual modeling approach. Their ontology borrows concepts from the business literature, such as actors, value exchanges, value activities, and value objects, and uses these notions to model networked constellations of enterprises and end-consumers who create, distribute, and consume things of economic value. Strategic marketing in e-business. In the domain of e-business, some scholars have focused on the changing nature of customer–firm relationships. A special concern has been the monetization of e-business. Pauwels and Weiss (2008) examine “fee and free” business models for providing digital content on the Internet. Their work focuses on the firm performance implications of a shift from the “free” to the “fee” model and empirically analyzes the role that marketing actions can play in accommodating this shift. In this regard, scholars have also examined the degree of Internet advertising effectiveness. Clemons (2009) provides an overview of business models for monetizing Internet applications. He argues that although the majority of attempts to monetize Internet applications targeted at individuals have focused on natural extensions of traditional media or traditional retailing, there are several potential online business models that are not based on advertising and that, given declining advertising effectiveness, might constitute a better choice. Scholars have also noted the convergence of different media channels onto one digital platform (e.g., see Fidler, 1997), which has resulted in structural change in the media industry. McPhillips and Merlo (2008) refer to this convergence by introducing the term media business model. Structural change in the media industry also has been driven by the advent of new communication channels, such as mobile e-services (m-services). Eriksson, Kalling, Åkesson, and Fredberg (2008) consider e-newspapers published for mobile reading devices equipped with e-paper displays, and they analyze the implication of future m-service innovation on the development of new business models. Huizingh (2002) has studied how to help managers design such e-business models. Downloaded from jom.sagepub.com at FUDAN UNIV LIB on March 13, 2012