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Chapter 10
ITS business and revenue
models
10.1 Business model is important
According to Chesbrough (2006), every company has a business model. Fielt
(2014) gave some well-known business models—SouthWest Airlines’ low-cost
carrier model; Rolls Royce’s “power-by-the-hour” model. Chesbrough (2010)
argues that the same idea or technology taken to market using two different
business models will yield two different economic outcomes. Business model is
important. Teece (2010) argued that business models are needed because of the
features of market economies where there is consumer choice, transaction costs,
heterogeneity among consumers and producers, and competition.
10.2 Business model definition
Many different disciplines, such as e-business, information systems, manage-
ment, entrepreneurship, innovation, strategy, and economics have shown inter-
est in business (Fielt, 2014). In recent years, business models have been the
focus of substantial attention by both academics and practitioners. There is no
dominant or consistent theoretical agreement on a business model conception
or definition despite its popular uses (Zott, Amit, & Massa, 2011; Fielt, 2014).
Scholars tend to adopt their own definition that fits in their specific context
when defining a business model.
There are many definitions given to what is a business model. Some of the
authors define a business model as a system for making money. According to
these authors; a business model is an economic concept, which produces rev-
enues and costs (Slávik & Bednár, 2014). From this perceptive, the business
model is a set of activities, which create profit due to the cooperation of pro-
cesses and technologies.
Afuah and Tucci (2001) give the definition of a business model as the meth-
od by which a firm builds and uses its resources to offer its customers better
value than its competitors and makes money doing so. It describes how a firm
makes money currently and in the future. The model emphasizes what enables
a firm to have a sustainable competitive advantage, to perform better than its
rivals in the long-term (p. 3–4).