ITS business and revenue models Chapter | 10 125is cocreated between actors in a network. These authors define business models
as constellations of interrelated design elements, outlining the design principles,
resources and capabilities (i.e., design layers) related to markets, offerings, op-
erations and organization (i.e., design dimensions). The key elements of this
framework consist of three key design layers—design principles, resources, and
capabilities.
The design principles are the first design layers in Fig. 10.3. They describe
fundamental ideas or choices that actors must make regarding the business mod-
el. Design principles are related to each of the four design dimensions—market,
offering, operations, and management.
The market and customer definition principles answer the following ques-
tions:
• How does the actor define its market?
• How does the actor position within that market?
• What is the actor’s go-to-market or channel strategy?
• Who are the actor’s target customers, based on its customer definition?
• How does the actor segment its existing and potential customer base?
The offering design principles outline the offering components available and
the possible offering configurations. Value propositions refer to the resource
integration promises that actors do to communicate how their offering can in-
crease resource density in a specific context. Earnings logic defines how the ac-
tor makes a profit from its operations, it is affected by the pricing logic (selection
of price carries and level of price bundling), cost structure and asset structure.
The operations design principles define how the actor conducts its operations.
The operations design principles depict an actor’s “make-or outsource” deci-
sions in all processes and practices ranging from purchasing and production,
to customer service and after-sales support. The organizational structure and
key performance indicator (KPI) principles help managers to create a cohesive
management system and to direct managerial attention to the areas that are most
crucial for the viability of the business model.
The second of the design layers in Fig. 10.3 is resources. They are the foun-
dation for cocreation. Customers and brands are the main market resources.
Technology and related intellectual property rights are main offering resources.
These are crucial in increasing use-value as major improvements in resource
density as enabled by advances in technology. Actor’s infrastructure, suppliers
and partners are main resources associated with operations. The actor’s infra-
structure also covers items, such as information and communication technol-
ogy (ICT) infrastructure and the actor’s geographical coverage area. The main
resources associated with the organization design dimension of the business
model are human and financial resources. Availability of resources affects co-
creation.
Capabilities are the final design layer in Fig. 10.3. Capabilities are impor-
tant in business model design because they are manifested in the practices used