Business model is a relatively new term. Although it first appeared in the 1950s, it wasn't until the 1990s that it began to be widely used and spread. Today, there is still no authoritative version of the definition of the term, although it appears with extreme frequency. The definition given after reviewing a large body of literature is:
A business model is a conceptual tool that incorporates a set of elements and their relationships to articulate the business logic of a particular entity. It describes the value that a company can provide to its customers and the elements of the company's internal structure, partner networks, and relationship capital that are used to realize (create, market, and deliver) that value and generate sustainable and profitable revenues.
When people use the term business model in the literature, they tend to blur two different meanings: one group of authors uses it simply to refer to the specific ways and means of how a company does business, while the other group of authors emphasizes the modeling aspect more. The two are substantively different: the former refers generally to the way in which a firm engages in business, while the latter refers to the conceptualization of that way. Proponents of the latter view propose ReferenceModels, consisting of elements and relationships between them, to describe a company's business model.
Concepts of Business Models
There are many versions of the conceptualization of business models. They have varying degrees of similarity and difference. Based on a synthesis of the various conceptualizations***, a reference model with nine elements is proposed. These elements include:
Value Proposition: i.e., the value that a company can offer to consumers through its products and services. The value proposition recognizes the utility of the company to the consumer.
Target Customer Segments: the groups of consumers that the company is targeting. These segments have certain ****nesses that enable the company to create value (in response to these ****nesses). The process of defining consumer segments is also known as Market Segmentation.
Distribution Channels: the various ways a company uses to reach consumers. This describes how a company develops a market. It deals with the company's marketing and distribution strategy.
Customer Relationships: the connections a company makes with its consumer base. What we call Customer Relationship Management is related to this.
ValueConfigurations: the allocation of resources and activities.
CoreCapabilities: The capabilities and qualifications a company needs to execute its business model.
Partner Network: i.e., the network of cooperative relationships between a company and other companies to effectively deliver and commercialize value.
Temos defines a business model as a complete system of products, services and information flows, including each participant and its role in it, as well as the potential benefits of each participant and the corresponding sources and means of revenue. In the process of analyzing the business model, the main focus of a class of enterprises in the market with the user, supplier, other cooperative office relationship, especially the logistics, information flow and capital flow between each other.
The design of a business model is an integral part of Business Strategy. The implementation of the business model into the company's organizational structure (including organizational setup, workflow and human resources, etc.) and systems (including IT architecture and production lines, etc.) is part of Business Operations. It is important to distinguish between two confusing terms: Business Modeling usually refers to Business Process Design at the operational level, while Business Model and Business Model Design refer to the definition of Business Logic at the strategic level.
Business model and business model design refer to the definition of business logic at the strategic level of a company.
Types of Business Models
Generally speaking, business models in the service sector are more complex than those in manufacturing and retail. The oldest and most basic business model is the "Shopkeeper Model," specifically, a business that opens a store and displays its products or services in a location with a potential consumer base.
A business model is a description of how an organization functions, an outline of its main activities. It defines the company's customers, products, and services. It also provides information about how the company is organized and generates revenue and profit. Together with the (company) strategy, the business model dominates the company's main decisions. The business model also describes the company's products, services, customer markets, and business processes.
Today, most business models depend on technology. Entrepreneurs on the Internet have invented many new business models that are completely dependent on existing and emerging technologies. By utilizing technology, businesses can reach more consumers with minimal effort.
Business models have become more and more refined as times have progressed. The "Bait and Hook" model - also known as the "Razor and Blades" model or the "Hitchhiking" model - has become more sophisticated. The "Tied Products" model emerged in the early years of the twentieth century. In this model, the basic product is sold at a very low price, often at a loss, while the associated consumable or service is very expensive. For example, razors (bait) and blades (hook), cell phones (bait) and airtime (hook), printers (bait) and ink cartridges (hook), cameras (bait) and photographs (hook), and so on. There's another interesting twist to this model: software developers give out their text readers for free, but price their text editors in the hundreds of dollars.
In the 1950s, new business models were created by McDonald's and Toyota; in the 1960s, the innovators were Wal-Mart and Hypermarkets, which were supermarkets and warehouse sales in one; in the In the 1970s, new business models were found in FedEx Express and Toys R US toy store operations; in the 1980s, Blockbuster, Home Depot, Intel, and Dell; and in the 1990s, Southwest Airlines, Netflix, eBay, Amazon.com and Starbucks. And the lack of a well-thought-out business model is a serious problem for many dot-coms.
Every business model innovation gives a company a competitive advantage for a certain period of time. But as time changes, a company must constantly rethink its business design. As values (of consumers) shift from one industry to another, companies must constantly change their business models. Ultimately, a company's success or failure depends on how well its business design meets consumer priorities.
Some scholars and experts have attempted to systematically categorize business models. Among the first to do so were Timmers and Rappa.
The Way to Profit: Business Model Innovation
The question of profitability is the first issue that every company needs to consider, and it is also a topic of interest to everyone. The way to win, it is easy to understand, that is, the way to win, the idea of winning. So, what should we do to run our business? Mr. Lu Xun said well: "In fact, there is no road on the ground, walking more people, there is a road." In the growth and development of enterprises, Mr. Lu Xun's aphorism gives us strength and encourages us to be sure to make positive efforts, the courage to explore and open up the road.
But the current situation is often confusing, and positive efforts and courageous exploration may not solve the problem. I think we will often encounter the trouble of traffic jams: to the peak of the commute, let's say the North Fourth Ring Road, Beijing, fourteen lanes, is spacious enough avenue it, but often cars such as the tide of the long line, crawling slow, spectacular. Business operations are the same, often similar faces, familiar means, the same ideas, crowded on the same road, so it is the thousands of horses across the log bridge, who can not go. So the reality of our inspiration is that business operations must be good at innovation, anti-paraphrase of Mr. Lu Xun's words are: "on the ground there was a road, walking more people, there is no road." In order to stand out from the crowd, enterprises must be "out of the ordinary". This is also the guiding principle of our course "The Way to Win - Business Model Innovation in the New Economic Era".
Well, let's start with what's going on around us - the Olympics. Let's see how the "out-of-the-ordinary" innovations promote social progress and change the course of events. As we all know, the Olympic Games is the biggest global sports and humanities feast and party, for many years it carries the passion, pride, glory and dreams, can be successfully held in their own country, the Olympic Games, is the dream of each of our friends. You must remember that on July 13, 2001, Mr. Samaranch announced in Moscow that "Beijing has become the host city of the 2008 Olympic Games," the moment, our 1.3 billion people how the cheers of the masses, passionate burning, the country boiled, and many compatriots were so excited that they left their faces full of tears of happiness. But not for everyone to know is that before 1984, the host of the Olympic Games is mainly by mandatory designation, that time and no country is willing to host the Olympic Games, not to mention the public expectation or competition for hosting, and even can be said to be the various countries are avoided. Why? The reason is very simple and the situation is serious: organizing the Olympic Games is too expensive, the income is too small, the loss of money is too strong, everyone is afraid. to host the games, until finally the genius businessman Peter Ueberroth stepped in to organize them. Ueberroth stepped in to take charge of the organization, and only then rewrote the history of the Olympic legacy in one fell swoop. Mr. Ueberroth vigorously cut down on expenses and was innovative in his management. As we all know, the two biggest expenses for organizing the Olympic Games are building a new stadium and the Olympic Village. Uberroth lift Zhang do not cover the Olympic Village, borrowing three nearby university student dormitories a **** 20,000 apartments to provide temporary reception; competition venues are also mostly the use of existing facilities, there is no major construction of new venues. At the same time, on the one hand, vigorously downsizing the regular staff, regular staff halved; on the other hand, vigorously recruiting volunteers to obtain support. In terms of open source, Ueberroth is trying his best to collect as much money as possible: a substantial increase in ticket prices, at the same time, almost all the facilities are clearly marked, a small TV broadcasting room charges 500,000 yuan, and even the torch relay per kilometer to charge 3,000 U.S. dollars. In the sponsorship fee to generate revenue is more innovative: only limited to 30 companies ultimately eligible for sponsorship, one for each industry, a minimum sponsorship threshold of 4 million U.S. dollars. Sponsorship program announced, the industry rivals fought, Coca-Cola and Pepsi Cola competition, the final Coca-Cola 12.6 million U.S. dollars to obtain exclusive sponsorship qualification; Kodak believes that $ 4 million is too expensive and only willing to pay $ 1 million, Uberrose immediately flew to Japan to find the president of Fuji, Fuji was worried about not finding a knock on the door of the U.S., and was delighted to immediately 7 million dollars in sponsorship fees to close the deal!
The highest is the auction of television broadcasting rights, the three major U.S. television networks competed for the auction, and finally NBC won the broadcasting rights with 120 million dollars.
The result was a successful application of the 2:8 principle by Ueberroth, with 30 sponsors*** sponsoring $3. 85 billion, compared with 381 sponsors in Moscow in 1980 for $9 million. In the end, the Los Angeles Olympics total **** revenues of 760 million, winning 250 million dollars, becoming the first Olympic Games in the history of mankind to win. Since then, the Olympic Games have become an opportunity for mayors to get rich, and everywhere is scrambling to organize. Nowadays, the Olympic Games are even more incomparable, the Olympic Games has long gotten rid of the embarrassing situation of no one asked for, has become a rare opportunity for each country to scramble for. We this year, the Beijing Olympic Games, only souvenirs - Olympic auspicious cloud torch issued 200,000, each priced at 2990 yuan, income of several hundred million yuan. The continuation of the Olympic Games for more than 2,000 years, the smooth to inherit the light.
Looking back at the history of the development of Olympic hosting, Uberrose used the Olympic Games the world's only resource advantage, through sponsorship to limit the number of companies and set the threshold of sponsorship successfully created a scarcity of opportunities and enhance the commercial value, and at the same time vigorously open source cost cutting and ultimately profitable, so that the Los Angeles Olympic Games has become a milestone in the history of the development of the Olympic Games. We say that when facing difficulties, it is often not that there is no way out, but that we have not found a way to solve the problem. The key is to find the original problem point and find a solution to the problem point. Uberroth through the unusual thinking innovation, the use of new business operation methods successfully broke through the Olympic Games since the Millennium serious loss of the plight of the Olympic Games, to create the Olympic Games profit-making business success model, and further casting the Olympic Games brilliant.
Like the Olympic Games, businesses facing fierce competition also need to make such a breakthrough. We say that there is no sunset industry, only sunset business; no sunset business, only sunset thinking. Let's take a look at an example around us: how a cannery that was about to go bankrupt went into new life through innovative thinking.
1992 is the beginning of the retreat of the state and the people, Yiyuan County, Shandong Province, a former director of the Foreign Economic Relations Commission of the state cadres surnamed Zhu resigned to go to sea, to buy a local loss of more than ten million yuan of state-owned canned food factory. The so-called buy, and did not spend a penny, just open a forward promissory note - to save the cannery with the project, feed hundreds of workers, plus assume the original factory 4.5 million yuan in debt as a condition of the cannery disk. After taking over the cannery, he wanted to introduce advanced production equipment from abroad. However, Zhu, who was heavily in debt, did not have the money to buy the equipment, so he tried to solve the problem by doing compensatory trade. The solution for the cannery to successfully introduce foreign production equipments was to produce the products in China and offset the purchase of equipments by exporting the products in the next 5 years, and at the same time make partial payment to pay off the equipments, which resulted in the introduction of the advanced production equipments and the signing of more than 8 million US dollars in one breath. in the beginning of 1993, more than 20 German specialists and technicians were working in the cannery. In early 1993, under the guidance of more than 20 German experts and technicians, we started to debug the production line to produce products. At this time when Germany held an international food exposition, Zhu went to the meeting alone, with the help of overseas Chinese in Munich, Germany and Lausanne, Switzerland, signed the first batch of business - 3,000 tons of apple juice, the contract amount of more than 5 million U.S. dollars. The cannery utilized the advance payment of this contract to purchase raw materials and start a new production line, which made the first bucket of gold. Since then the development was smooth sailing, they found the domestic product gaps at that time - fruit juice drinks, after the first, rapid growth and occupation of the highest point. 1994, the enterprise headquarters moved from Shandong to Beijing, has now developed into the largest fruit juice manufacturers in China. Many of our friends drink juice drinks every day, are produced by the enterprise. Speaking of which, you must have guessed who the original cannery that was about to go bankrupt was? It is the predecessor of today's Huiyuan Group. And the factory manager who could only afford a plane ticket to Germany to attend the Food Expo without an interpreter is today's famous entrepreneur Zhu Xinli, who of course is now worth billions.
We look back and sort out, Huiyuan's development idea is to use the commitment to feed the enterprise disk of state-owned canneries, through the compensation trade with the future output of products in exchange for advanced production lines, overseas contract orders to start the production line in advance, and the use of new contracts to finance, repayment, that is, to achieve the primitive accumulation and continue to rolling development, and ultimately to find the juice that has not formed a climate in China, and then take advantage of the first-mover advantage! The product has not yet formed a climate in China, and then take advantage of the first-mover advantage, quickly become the industry leader.
What can we summarize through these two real cases? There must be a way to succeed, and there must be a way of thinking about business. Both cases show a clear business idea. Here, we call this kind of business thinking business model. What exactly is a business model?
In October 1997, Robertson Stevens, one of Silicon Valley's most famous venture capital advisors, asked a famous Chinese high-tech company about its business model. Steven asked Tian Suning, CEO of China's leading high-tech company AsiaInfo, "What is AsiaInfo's business model?" Tian asked Robertson, "What is a business model?" Robertson was surprised that Tian Suning, as the CEO, didn't know what a business model was. Robertson explained to Tian Shuining, "A dollar goes around the block through your company and becomes a dollar one, and the business model is where that dime adds up." This example graphically illustrates what a business model is, and also shows that the concept of "business model" is an imported one, in fact, any enterprise in China sells its products and then recovers the money, which is a business model, only that we didn't mention "business model" in the past. This is a business model, but we didn't talk about "business model" before. The development experience of both the Los Angeles Olympics and Huiyuan Group actually describe a complete profit-making process respectively, elaborating on their unique business models.
In 2000, the Internet bubble burst at the end of the year, and a large number of Internet star companies that had no real value and could not stand up to scrutiny closed their doors. Former Time Warner chief technology officer CTO of Michael? Dunn said in an interview with Business Week: "A new enterprise, it must first establish a solid business model, high technology is secondary. In the process of running a business, the business model is more important than high technology because the former is a prerequisite for a company to be able to gain a foothold." Drucker, a management scientist, said, "The competition between companies today is not between products, but between business models." Visible business model of the important position. According to a survey, 23% of the failures of today's Chinese entrepreneurial enterprises are due to strategic failures, 28% are due to implementation problems, and as much as 49% of the failures are due to the failure to find their own business model for sustained profitability.
Among all innovations, business model innovation belongs to the most fundamental innovation of the enterprise. Without a business model, other management innovations and technological innovations lose their sustainability and profitability. All successful large enterprises are from small enterprises adhering to the successful business model step by step. We say that Wal-Mart is actually a grocery store, Coca-Cola is a soda seller, Microsoft is a software seller, Gome is an electrical appliance store, and Little Sheep is a hot pot restaurant. What does the success of these ordinary industries indicate? In fact, it shows a truth: no matter high-tech, low-tech, can be successful, the key is that you have to find out the success of the business model, and the business model of the profitability of the fast to the extreme.
Business model in the academic for most people recognized the definition is: "in order to achieve customer value maximization, the internal and external elements that enable enterprises to run the integration of the formation of high-efficiency with a unique core competitiveness of the operating system, and through the provision of products and services, to achieve the goal of sustained profitability of the organization designed to achieve the overall solution. " Among them, "integration", "high efficiency", "system" is the foundation or prerequisite, "core competitiveness" is the means, "maximize customer value" is the subjective purpose, "sustained profitability" is the objective result, but also the only external standard to test the success of a business model.
The essence of the business model is about what the enterprise does, how to do, how to profit, the essence of the business law in the operation of the specific application. Just now we talked about Huiyuan's process and elaborated on his business model. It is through the commitment to pay the disk down the enterprise, the introduction of compensation trade equipment, new products back to profit, sign a new contract to collect prepayment into a virtuous cycle of development of a profitable business process.
Successful business model is not necessarily a technical innovation, but may be a part of the business operation of the transformation, or the original business model of the reorganization, innovation, or even the subversion of the rules of the game. The innovation of business model runs through the whole process of enterprise operation, throughout the enterprise resource development, R & D mode, manufacturing mode, marketing system, distribution system and other links. The innovation in each link may shape a new and successful business model.
Any big enterprise is a small business start, our pride, run faster than the wind Liu Xiang is also from toddling on the road to success. Let's take a hard look at these "created a business legend" around us today: Baidu, Mengniu, Gome, Haier, Lenovo, Li-Ning, Wahaha, Huiyuan, Wuliangye, Little Sheep ... they are from small to large success in the development of the same method?
Lev? Tolstoy said: happy families are generally similar, unfortunate families are different. And here, careful friends must see: the failure of the enterprise is largely similar, the success of the enterprise has its own different. The failure of the enterprise is generally those kinds of reasons: capital, talent, strategy, implementation and so on. And the road to success of the enterprise is different. Baidu's bidding rankings, Mengniu's event marketing, Gome's multi-component system model, Haier's focus on service, Lenovo's diversified business, Li-Ning's athlete brand management, Wahaha's channel affiliation ... ... Each successful enterprise, are to find a unique business ideas and business model for their own development in order to grow and develop, and continue to grow and expand with the business environment, competitive factors, as well as Every successful company finds a unique business idea and business model that suits its development in order to grow and develop. In our course system of "The Way to Win - Business Model Innovation in the New Economic Era", we have designed the "5R Model of Business Model", which discusses the five chapters that every enterprise will go through, namely, product, operation, communication, financing and social value chain interaction. The value chain interaction chapter to discuss and design each enterprise's unique business model, and ultimately strive to design a business model system that changes with time and the environment.