114 PART | III ITS business models
According to Mullins & Komisar (2009), a business model is the pattern of
economic activity—cash flowing in and out of the business for various purpos-
es. This dictates whether one runs out of cash or not and whether or not one de-
livers attractive returns to ones’ investors. The business model is the economic
underpinning of the business. Debelak (2006) defines a business model as the
instrument by which a business intends to generate revenue and profits and how
a company serves its employees and customers and involves both strategy as
well as an implementation. Chesbrough (2006) argues that a business model is
a useful framework to link ideas and technologies to economic outcomes. Oth-
ers such as Wheelen & Hunger (2010) define business model as a method for
making money in the concrete business environment consisting of key structural
and operational characteristics of company—how a company earns and creates
profit.
A business model based only on economic view does not represent a com-
plex view of the company, argued some authors. These authors argued that a
business model should also capture the other side of the business that is creating
value. These authors believe a business model is a combination of economic and
value view (Osterwalder, 2004; Shafer et al., 2005).
Shafer et al. (2005) gave this definition to a business model. A business model
is a representation of a firm’s underlying core logic and strategic choices for
creating and capturing value within a value network. Following this perspective,
Osterwalder (2004) defines a business model as a conceptual tool that contains a
set of elements and their relationships and allows expressing the business logic
of a specific firm. According to him, the business model describes the value a
company offers to one or several segments of customers and of the architecture
of the firm and its network of partners for creating, marketing, and delivering
this value and relationship capital, to generate profitable and sustainable rev-
enue streams. This business model has nine main building blocks.
Another definition given to business model is by Amit & Zott (2001). Ac-
cording to these authors, a business model shows the content, structure, and
governance of transactions designed to create value through the exploitation
of business opportunities. It describes how the company operates and creates
value through exploitation in a system of transactions. Zott & Amit (2010) later
expanded and redefined the business model to be a set of activities, wherefore
it is an activity system, still with the same back-bone and thoughts from their
research paper from 2001. As an activity system, Zott & Amit (2010) provide
a framework that separates the approach into two categories, namely consider-
ations of design elements and considerations of a design theme.
Teece (2010) defined a business model as “... how enterprises create and
deliver value to customers, and then converts payments received to profits”
(Teece, 2010 ) (p. 173). This model highlights the importance of the customers
because they affect and define the successfulness of the business model. Ac-
cording to Teece (2010), it is important to build a business model differentiated
to create viability, which is harder for competitors to imitate.