Journal of management http://jom.sagepub.com The Business Model: Recent Developments and Future Research Christoph Zott, Raphael Amit and Lorenzo Massa Journal of Management 2011 37: 1019 originally published online 2 May 2011 Do|:10.1177/014 11406265 The online version of this article can be found at http:/om.sagepub.com/content/37/4/1019 Published by ⑤SAGE http://www.sagepublications.com On behalf of SOUTHERN MANAGEMENT Southern Management Association dditional services and information for Journal of Management can be found at: EmailAlerts:http://jom.sagepub.com/cgilalerts Subscriptionshttp://jom.sagepub.com/subscriptions Reprints:http://www.sagepub.com/journalsreprints.nav PErmissions:http://www.sagepub.com/journalspermissions.nav Citationshttp://jom.sagepub.com/content/37/4/1019.refs.html > Version of record - Jun 8. 2011 Online First Version of Record- May 2, 2011 What is this? Downloadedfromjom.sagepub.comaFudaNUnivLibonMarch13,2012
http://jom.sagepub.com/ Journal of Management http://jom.sagepub.com/content/37/4/1019 The online version of this article can be found at: DOI: 10.1177/0149206311406265 Journal of Management 2011 37: 1019 originally published online 2 May 2011 Christoph Zott, Raphael Amit and Lorenzo Massa The Business Model: Recent Developments and Future Research Published by: http://www.sagepublications.com On behalf of: Southern Management Association Additional services and information for Journal of Management can be found at: Email Alerts: http://jom.sagepub.com/cgi/alerts Subscriptions: http://jom.sagepub.com/subscriptions Reprints: http://www.sagepub.com/journalsReprints.nav Permissions: http://www.sagepub.com/journalsPermissions.nav Citations: http://jom.sagepub.com/content/37/4/1019.refs.html What is This? OnlineFirst Version of Record - May 2, 2011 >> Version of Record - Jun 8, 2011 Downloaded from jom.sagepub.com at FUDAN UNIV LIB on March 13, 2012
Journal of managemer Vo.37No.4,July201l10191042 DOI:10.11770149206311406265 C The Author(s)2011 Reprintsandpermissionhttp://ww sagepub. com/journals Permissions.nav The Business Model: Recent Developments and Future research Christoph Zott IESE Business school Raphael Amit Lorenzo massa usiness school This article provides a broad and multifaceted review of the received literature on business models in which the authors examine the business model concept through multiple subject latter lenses. The review reveals that scholars do not agree on what a busines interest of the respective researchers. However, the authors also found emerging common themes among scholars of business models Specifically (1) the business model is emerging as a new unit of analysis; (2) business models emphasize a system-level, holistic approach to explaining how firmsdo business"()firm activities play an important role in the various conceptualizations of business models that have been proposed; and (4) business models seek to explain how value is created, not just how it is captured. These emerging themes could serve as catalysts fora more ified study of business models Keywords: innovation; business model; value creation, value capture;strategy In recent years, the business model has been the focus of substantial attention from both academics and practitioners. Since 1995, there have been at least 1, 177 articles published in anomymous reviewers on earlier drafts of this ar orenzo Massa acknowledge the support of IESE in sponsoring this research. Raffi Amit is eBusiness initiative and to the robert B orresponding author: Christoph Zott, IESE Business School, Av Pearson 21, 08034 Barcelona, Spain Email Downloadedfromjom.sagepub.comaFudaNUnivLibonMarch13,2012
The Business Model: Recent Developments and Future Research Christoph Zott IESE Business School Raphael Amit University of Pennsylvania Lorenzo Massa IESE Business School This article provides a broad and multifaceted review of the received literature on business models in which the authors examine the business model concept through multiple subjectmatter lenses. The review reveals that scholars do not agree on what a business model is and that the literature is developing largely in silos, according to the phenomena of interest of the respective researchers. However, the authors also found emerging common themes among scholars of business models. Specifically, (1) the business model is emerging as a new unit of analysis; (2) business models emphasize a system-level, holistic approach to explaining how firms “do business”; (3) firm activities play an important role in the various conceptualizations of business models that have been proposed; and (4) business models seek to explain how value is created, not just how it is captured. These emerging themes could serve as catalysts for a more unified study of business models. Keywords: innovation; business model; value creation; value capture; strategy In recent years, the business model has been the focus of substantial attention from both academics and practitioners. Since 1995, there have been at least 1,177 articles published in Acknowledgments: We gratefully acknowledge the very helpful comments and suggestions of the editor and of two anonymous reviewers on earlier drafts of this article. Chris Zott and Lorenzo Massa acknowledge the support of IESE in sponsoring this research. Raffi Amit is grateful to the Wharton eBusiness Initiative and to the Robert B. Goergen Chair for financial support of this research. Corresponding author: Christoph Zott, IESE Business School, Av. Pearson 21, 08034 Barcelona, Spain Email: czott@iese.edu Journal of Management Vol. 37 No. 4, July 2011 1019-1042 DOI: 10.1177/0149206311406265 © The Author(s) 2011 Reprints and permission: http://www. sagepub.com/journalsPermissions.nav 1019 Downloaded from jom.sagepub.com at FUDAN UNIV LIB on March 13, 2012
1020 Journal of Management/ July 2011 peer-reviewed academic journals in which the notion of a business model is addressed. The business model also has been the subject of a growing number of practitioner-oriented studies. While there has been an explosion in the number of articles published, and an abundance of conference sessions and panels on the subject of business models, it appears that researchers (and practitioners) have yet to develop a common and widely accepted language that would allow researchers who examine the business model construct through different lenses to draw effectively on the work of others. In this comprehensive review of the academic literature, we have attempted to explore the origin of the business model concept and to examine it through multiple disciplinary and subject-matter lenses. This broad and multifaceted review revealed several insights, including the following Despite the overall surge in the literature on business models, scholars do not agree on what a business model is. We observe that researchers frequently adopt idiosyncratic definitions that fit the purposes of their studies but that are difficult to reconcile with each other. As a result, cumu- The literature is developing largely in silos, according to the phenomena of interest to the respec- tive researchers. The main interest areas identified are(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. Despite conceptual differences among researchers in different silos (and within the same silo), there are some emerging themes. Notably, (1)there is widespread acknowledgement--implicit and explicit-that the business model is a new unit of analysis that is distinct from the product firm, industry, or network; it is centered on a focal firm, but its boundaries are wider than those the firm;(2) business models emphasize a system-level, holistic approach to explaining how firms"do business";(3)the activities of a focal firm and its partners play an important role in the various conceptualizations of business models that have been proposed; and (4)business serve as important catalysts for a more unified study of business models erging themes could models seek to explain both value creation and value capture. These hensive and up-to-date literature review on business models, as well as to document carefull the discrepancies and dissonances in that literature, and second, to structure the literature along its main fault lines and begin to bridge the seemingly wide gaps between the various pproaches. This should facilitate future cumulative research on the topic The review is structured as follows: We begin by briefly reviewing the emergence of the business model concept. Next, we proceed to the Method section, where we discuss the way this review has been carried out. We then review the business model literature by examinin it through multiple lenses Method To conduct this study, we followed a multistep process. First, we searched for articles pub- lished in leading academic and practitioner-oriented management journals during the period January 1975 to December 2009. Our initial list of academic journals included the Academy of Management Journal(AM), Academy of Management Review(AMR), Administrative Science Downloadedfromjom.sagepub.comaFudaNUnivLibonMarch13,2012
1020 Journal of Management / July 2011 peer-reviewed academic journals in which the notion of a business model is addressed. The business model also has been the subject of a growing number of practitioner-oriented studies. While there has been an explosion in the number of articles published, and an abundance of conference sessions and panels on the subject of business models, it appears that researchers (and practitioners) have yet to develop a common and widely accepted language that would allow researchers who examine the business model construct through different lenses to draw effectively on the work of others. In this comprehensive review of the academic literature, we have attempted to explore the origin of the business model concept and to examine it through multiple disciplinary and subject-matter lenses. This broad and multifaceted review revealed several insights, including the following: • Despite the overall surge in the literature on business models, scholars do not agree on what a business model is. We observe that researchers frequently adopt idiosyncratic definitions that fit the purposes of their studies but that are difficult to reconcile with each other. As a result, cumulative progress is hampered. • The literature is developing largely in silos, according to the phenomena of interest to the respective researchers. The main interest areas identified are (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. • Despite conceptual differences among researchers in different silos (and within the same silo), there are some emerging themes. Notably, (1) there is widespread acknowledgement—implicit and explicit—that the business model is a new unit of analysis that is distinct from the product, firm, industry, or network; it is centered on a focal firm, but its boundaries are wider than those of the firm; (2) business models emphasize a system-level, holistic approach to explaining how firms “do business”; (3) the activities of a focal firm and its partners play an important role in the various conceptualizations of business models that have been proposed; and (4) business models seek to explain both value creation and value capture. These emerging themes could serve as important catalysts for a more unified study of business models. Our intended contributions in this article are twofold: first, to provide the most comprehensive and up-to-date literature review on business models, as well as to document carefully the discrepancies and dissonances in that literature, and second, to structure the literature along its main fault lines and begin to bridge the seemingly wide gaps between the various approaches. This should facilitate future cumulative research on the topic. The review is structured as follows: We begin by briefly reviewing the emergence of the business model concept. Next, we proceed to the Method section, where we discuss the way this review has been carried out. We then review the business model literature by examining it through multiple lenses. Method To conduct this study, we followed a multistep process. First, we searched for articles published in leading academic and practitioner-oriented management journals during the period January 1975 to December 2009. Our initial list of academic journals included the Academy of Management Journal (AMJ), Academy of Management Review (AMR), Administrative Science Downloaded from jom.sagepub.com at FUDAN UNIV LIB on March 13, 2012
Zott et al. The Business Model 1021 Quarterly (as), Journal of Management (OM), Journal of Management Studies (JMS) Management Science (MS), MIS Quarterly, Organization Science (OS), and Strategic Management Journal (SM). To these we added three of the leading practitioner-oriented journals, namely, the California Management Review(CMR), Harvard Business Review(HBR), and MIT Sloan Management Review(MSM). Focusing on articles that contain the term business model in the title or keywords, our initial search revealed 70 articles on business models of which 10 had been published in academic journals and 60 had appeared in CMR, HBR, and MSM his relatively small set of articles(especially those published in academic outlets) led us to extend our search, using the EBSCO Business Source Complete database as a starting point(see Certo, Holcomb, Holmes, 2009: Laplume, Sonpar, Litz, 2008 ). This database ncludes more than 1,300 business journals and represents one of the most complete sources on business studies. We searched the database for academic articles published from January 1975 to December 2009 containing the term business model in the title, abstract, or keywords As a result of this process, we obtained 1, 202 articles, which we added to our initial sample of 70 articles. As 19 of the newly added articles were already present in the initial sample, our overall sample contained 1, 253 articles An initial cursory analysis of these articles, performed by reading article titles, journal names, abstracts, and introductions, revealed that not all the articles identified by our search would be useful for the purpose of writing this review. Many of these articles were case studies, summaries of articles published elsewhere, or studies in which the business model is not really the subject of the analysis To identify relevant articles, we adopted the following three additional criteria for our iterature review on business models. first to be included in our review an article must deal with the business model concept in a nontrivial and nonmarginal way. Second, an article also must refer to the business model as a concept related to business firms(as opposed to, e.g economic cycles). Finally, the journal in which the article appeared must be ranked in the ISI Web of Knowledge. As a result, we eliminated 1, 120 articles that did not fit these criteria, which left us with a sample of 133 articles Through reading these 133 articles in depth, we became aware of further works on bus ness models(in particular, books)that appeared relevant and that we therefore decided to include in our review. We also found working papers that our database research had failed to reveal, some of which were subsequently published and are included in the reference section, which lists their updated publication status. Moreover, our careful reading of these articles also allowed us to exclude studies in which the business model was treated in a rather arginal or trivial way. Our final sample, therefore, included 103 publications Moreover, as we highlight below in the Discussion section, our analysis of these publica- ions suggested some common themes, such as(1)the business model as a new unit of analysis, (2)a holistic perspective on how firms do business, (3)an emphasis on activities, and(4)an acknowledgement of the importance of value creation. These themes led us to review adjacent literatures that might be relevant for the study of business models but do not directly refer to the concept--namely, the literatures on new organizational forms, ecosys- tems, activity systems, and value chains and value networks. Drawing on these literatures could help put future research on business models on a more solid conceptual footing. Given the space and scope considerations for this article, however, we present our brief reviews of these adjacent literatures in an appendix that is available upon request from the authors Downloadedfromjom.sagepub.comaFudaNUnivLibonMarch13,2012
Zott et al. / The Business Model 1021 Quarterly (ASQ), Journal of Management (JOM), Journal of Management Studies (JMS), Management Science (MS), MIS Quarterly, Organization Science (OS), and Strategic Management Journal (SMJ). To these we added three of the leading practitioner-oriented journals, namely, the California Management Review (CMR), Harvard Business Review (HBR), and MIT Sloan Management Review (MSM). Focusing on articles that contain the term business model in the title or keywords, our initial search revealed 70 articles on business models of which 10 had been published in academic journals and 60 had appeared in CMR, HBR, and MSM. This relatively small set of articles (especially those published in academic outlets) led us to extend our search, using the EBSCO Business Source Complete database as a starting point (see Certo, Holcomb, & Holmes, 2009; Laplume, Sonpar, & Litz, 2008). This database includes more than 1,300 business journals and represents one of the most complete sources on business studies. We searched the database for academic articles published from January 1975 to December 2009 containing the term business model in the title, abstract, or keywords. As a result of this process, we obtained 1,202 articles, which we added to our initial sample of 70 articles. As 19 of the newly added articles were already present in the initial sample, our overall sample contained 1,253 articles. An initial cursory analysis of these articles, performed by reading article titles, journal names, abstracts, and introductions, revealed that not all the articles identified by our search would be useful for the purpose of writing this review. Many of these articles were case studies, summaries of articles published elsewhere, or studies in which the business model is not really the subject of the analysis. To identify relevant articles, we adopted the following three additional criteria for our literature review on business models. First, to be included in our review, an article must deal with the business model concept in a nontrivial and nonmarginal way. Second, an article also must refer to the business model as a concept related to business firms (as opposed to, e.g., economic cycles). Finally, the journal in which the article appeared must be ranked in the ISI Web of Knowledge. As a result, we eliminated 1,120 articles that did not fit these criteria, which left us with a sample of 133 articles. Through reading these 133 articles in depth, we became aware of further works on business models (in particular, books) that appeared relevant and that we therefore decided to include in our review. We also found working papers that our database research had failed to reveal, some of which were subsequently published and are included in the Reference section, which lists their updated publication status. Moreover, our careful reading of these articles also allowed us to exclude studies in which the business model was treated in a rather marginal or trivial way. Our final sample, therefore, included 103 publications. Moreover, as we highlight below in the Discussion section, our analysis of these publications suggested some common themes, such as (1) the business model as a new unit of analysis, (2) a holistic perspective on how firms do business, (3) an emphasis on activities, and (4) an acknowledgement of the importance of value creation. These themes led us to review adjacent literatures that might be relevant for the study of business models but do not directly refer to the concept—namely, the literatures on new organizational forms, ecosystems, activity systems, and value chains and value networks. Drawing on these literatures could help put future research on business models on a more solid conceptual footing. Given the space and scope considerations for this article, however, we present our brief reviews of these adjacent literatures in an appendix that is available upon request from the authors. Downloaded from jom.sagepub.com at FUDAN UNIV LIB on March 13, 2012
Business model literature Emergence of the Business Model Concept and Definitions Emergence of the business model concept. Although business models have been integral to trading and economic behavior since pre-classical times (Teece, 2010), the business model concept became prevalent with the advent of the Internet in the mid-1990s, and it has been gathering momentum since then. From that time on, ideas revolving around the concept have resonated with scholars and business practitioners, as documented by the number of publications, including articles, books, and book chapters in the business press and scientific ournals. In a frame analysis of the use of the term business model in public talk, Ghaziani and Ventresca(2005) searched for the use of the term in general management articles from 1975 to 2000. Their search, conducted using the ABI/INFORM database, returned 1, 729 publications that contained the term business model. Of these, only 166 were published in the period 1975-1994; the remaining(1, 563) belonged to the period 1995-2000, revealing a dramatic increase in the incidence of the term We performed a similar search using the EBSCOhost database, distinguishing betweer academic and journalistic outlets and extending the analysis to 2009. We found that up to December 2009. the term business model had been included in 1.202 articles in academic journals. Nonacademic articles followed a similar trend. From 1975 to December 2009, the term had been mentioned in 8, 062 documents As Figure I suggests, interest in the concept virtually exploded in the 15-year period between 1995 and 2010, which is consistent with Ghaziani and Ventresca's(2005) findings. Figure 1 also indicates that academic research on business models seems to lag behind practice. Some scholars surmise that the emergence of the business model concept, and the exte Internet(e.g, Amit& Zott, 2001), rapid growth a y have been driven by the advent of the of-the-pyramid" issues(Prahalad Hart, 2002; Seelos Mair, 2007; Thompson MacMillan, 2010), and the expanding industries and organizations dependent on postindus trial technologies(Perkmann Spicer, 2010) Business model definitions. At a general level, the business model has been referred to a statement(Stewart Zhao, 2000), a description(Applegate, 2000; Weill Vitale, 2001) a representation(Morris, Schindehutte, Allen, 2005; Shafer, Smith, Linder, 2005),an architecture(Dubosson-Torbay, Osterwalder, Pigneur, 2002; Timmers, 1998), a concep- tual tool or model( George Bock, 2009; Osterwalder, 2004; Osterwalder, Pigneur, tucci, 2005), a structural template(Amit Zott, 2001), a method(Afuah tucci, 2001), a frame- work(Afuah, 2004), a pattern(Brousseau Penard, 2006), and a set(Seelos Mair, 2007) Surprisingly, however, the business model is often studied without an explicit definition of the concept Of the 103 business model publications reviewed, more than one third (37%)do not define the concept at all, taking its meaning more or less for granted. Fewer than half (44%)explicitly define or conceptualize the business model, for example, by enumerating its main components. The remaining publications(19%)refer to the work of other scholars in defining the concept. Moreover, existing definitions only partially overlap, giving rise to a multitude of possible interpretations Downloadedfromjom.sagepub.comaFudaNUnivLibonMarch13,2012
1022 Journal of Management / July 2011 Business Model Literature Emergence of the Business Model Concept and Definitions Emergence of the business model concept. Although business models have been integral to trading and economic behavior since pre-classical times (Teece, 2010), the business model concept became prevalent with the advent of the Internet in the mid-1990s, and it has been gathering momentum since then. From that time on, ideas revolving around the concept have resonated with scholars and business practitioners, as documented by the number of publications, including articles, books, and book chapters in the business press and scientific journals. In a frame analysis of the use of the term business model in public talk, Ghaziani and Ventresca (2005) searched for the use of the term in general management articles from 1975 to 2000. Their search, conducted using the ABI/INFORM database, returned 1,729 publications that contained the term business model. Of these, only 166 were published in the period 1975-1994; the remaining (1,563) belonged to the period 1995-2000, revealing a dramatic increase in the incidence of the term. We performed a similar search using the EBSCOhost database, distinguishing between academic and journalistic outlets and extending the analysis to 2009. We found that up to December 2009, the term business model had been included in 1,202 articles in academic journals. Nonacademic articles followed a similar trend. From 1975 to December 2009, the term had been mentioned in 8,062 documents. As Figure 1 suggests, interest in the concept virtually exploded in the 15-year period between 1995 and 2010, which is consistent with Ghaziani and Ventresca’s (2005) findings. Figure 1 also indicates that academic research on business models seems to lag behind practice. Some scholars surmise that the emergence of the business model concept, and the extensive use of the concept since the mid-1990s, may have been driven by the advent of the Internet (e.g., Amit & Zott, 2001), rapid growth in emerging markets and interest in “bottomof-the-pyramid” issues (Prahalad & Hart, 2002; Seelos & Mair, 2007; Thompson & MacMillan, 2010), and the expanding industries and organizations dependent on postindustrial technologies (Perkmann & Spicer, 2010). Business model definitions. At a general level, the business model has been referred to as a statement (Stewart & Zhao, 2000), a description (Applegate, 2000; Weill & Vitale, 2001), a representation (Morris, Schindehutte, & Allen, 2005; Shafer, Smith, & Linder, 2005), an architecture (Dubosson-Torbay, Osterwalder, & Pigneur, 2002; Timmers, 1998), a conceptual tool or model (George & Bock, 2009; Osterwalder, 2004; Osterwalder, Pigneur, & Tucci, 2005), a structural template (Amit & Zott, 2001), a method (Afuah & Tucci, 2001), a framework (Afuah, 2004), a pattern (Brousseau & Penard, 2006), and a set (Seelos & Mair, 2007). Surprisingly, however, the business model is often studied without an explicit definition of the concept. Of the 103 business model publications reviewed, more than one third (37%) do not define the concept at all, taking its meaning more or less for granted. Fewer than half (44%) explicitly define or conceptualize the business model, for example, by enumerating its main components. The remaining publications (19%) refer to the work of other scholars in defining the concept. Moreover, existing definitions only partially overlap, giving rise to a multitude of possible interpretations. Downloaded from jom.sagepub.com at FUDAN UNIV LIB on March 13, 2012
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
Zott et al. /The Business Model 1027 Table 2 Components of e-Business Models First-Order Theme(s) Second-Order Theme(s) Mahadevan, 2000 Value stream for partners and buyers network(identifies the alue proposition for the buyer sellers and market makers and portals in an Internet context) Revenue stream(a plan for assuring revenue generation for the business Logistical stream(addresses various issues related to the design of the supply chain for the business) Stewart, Zhao, Profit stream(includes the Customer selection revenue stream and cost structure) Differentiation and strategic control Afuah& Tucci, A system made of components, Connected activities Customer value(the extent to Implementation which the firms offer is distinct Capabilities or has a lower cost than its ompetitors) Revenue sources( Where do the dollars comes from? Who pays what value and when? What the margins in each market, and what drives them? What drives value in each source?) Alt Mission Mission: Zimmerman Structure Goals, vision, value proposition 2001 Processes Structure Revenues Actors and governance, focus Legal Processes Technology Customer orientation. coordination mechanism Revenues Source of revenues, business logic Applegate, 2001 Concept(describes an opportunity) Market opportunity, product and service Capabilities(define the resources offered, competitive dynamic, strategy for needed to turn concept into capturing a dominant position, strategic options ality) evolving the business Value(measures the return to Capabilities investors and other stakeholders) People and partners, organization and culture, operating model, marketing sales model, management model, business development model. infrastructure model Downloadedfromjom.sagepub.comaFudaNUnivLibonMarch13,2012
Zott et al. / The Business Model 1027 Table 2 Components of e-Business Models Author(s), Year First-Order Theme(s) Second-Order Theme(s) Mahadevan, 2000 • Value stream for partners and buyers network (identifies the value proposition for the buyer, sellers, and market makers and portals in an Internet context) • Revenue stream (a plan for assuring revenue generation for the business) • Logistical stream (addresses various issues related to the design of the supply chain for the business) Stewart, & Zhao, 2000 • Profit stream (includes the revenue stream and cost structure) • Customer selection • Value capture • Differentiation and strategic control • Scope Afuah & Tucci, 2001 • A system made of components, linkages between components, and dynamics • Customer value (the extent to which the firm’s offer is distinct or has a lower cost than its competitors’) • Revenue sources (Where do the dollars comes from? Who pays what value and when? What are the margins in each market, and what drives them? What drives value in each source?) • Scope • Price • Connected activities • Implementation • Capabilities • Sustainability Alt & Zimmerman, 2001 • Mission • Structure • Processes • Revenues • Legal issues • Technology Mission: • Goals, vision, value proposition Structure: • Actors and governance, focus Processes: • Customer orientation, coordination mechanism Revenues: • Source of revenues, business logic Applegate, 2001 • Concept (describes an opportunity) • Capabilities (define the resources needed to turn concept into reality) • Value (measures the return to investors and other stakeholders) Concept: • Market opportunity, product and service offered, competitive dynamic, strategy for capturing a dominant position, strategic options for evolving the business Capabilities: • People and partners, organization and culture, operating model, marketing sales model, management model, business development model, infrastructure model (continued) Downloaded from jom.sagepub.com at FUDAN UNIV LIB on March 13, 2012
