Business Models

A business model represents how a business will make money and remain profitable across time. The choice, by managers and entrepreneurs of different business models, represents the most [Page 38]fundamental strategic question that a business needs to answer. Specifically, the business model defines how the company creates value for customers and what role the company plays in the overall supply chain. Entrepreneurs are most interested in developing a business model because it is critical to their business and an essential part of both attracting customers and developing a business plan. Interestingly, for existing companies, Boston Consulting Groups identifies business model innovation as the innovation opportunity most likely to enhance company profitability—even more important than product, process, or service innovation. H. Chesbrough's six different functions of ...