11.2 Defining the business model

It is not a simple matter to define the term business model. Porter (2001) points out that:

The definition of a business model is murky at best. Most often, it seems to refer to a loose conception of how a company does business and generates revenue.

There is no doubt that the term business model is now well grounded in business and management literature and that there are a large number of often conflicting ways in which it is used especially in the e-business discussion.

Timmers (1999) suggests that a business model is:

an architecture for product, service and information flows, including a description of the various business actors and their roles; and a description of the potential benefits for the various business actors; and a description of the sources of revenue.

This view of Timmers makes the business model a very comprehensive and wide ranging statement of the main factors underpinning the business.

Mahadevan (2000) defines a business model as:

A unique blend of three streams that are critical to the business. These include the value stream for the business partners and the buyers, the revenue stream and the logistical stream.

However, the term business model is often used in a more limiting sense and as such is seen as being synonymous with the concept of the business case or the value proposition or an economic justification. In this context the business model is the way in which a business organization envisages what value,...