Monday, October 08, 2007

The relevance of business models: Business model functions

The particular functions of business models will be related to the application areas. A common application area of business models is innovation. A business model can be used for mediating between market and technology. Another application area of business models is the tactical level that brings strategy and operations together. Sometimes, business models are even considered as part of strategy. Business models can also produce business requirements that can be used in information system development.

When one takes a comprehensive perspective, it can even be argued that business models are a management approach that supports the process of designing, implementing, operating, and improving the way one or more firms deliver a specific service. Maybe the other functions discussed above can be seen as different subfunctions of business models as a management approach.

In practice different applications of business models come together. We take the application of business models for electronic business as an example. Electronic business models are often presented as an innovation in a particular industry, for example, direct sales via the Internet. Moreover, a business model enables one to try out different varieties of direct sales. The direct sales model can also be seen as a strategic move to compete with incumbents who make use of intermediaries and, therefore, cannot make a move towards direct sales easily. The specification of the direct sales model can serve as an input for the information systems development identifying building blocks such as a catalogue and online payment.

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