118 PART | III ITS business models
10.4 Types of business models
According to Christensen & Johnson (2009), there are three types of business
models—solution shops, value-adding process businesses, and facilitated-net-
work businesses. Solution shops are organizations whose resources and pro-
cesses are structured to diagnose and recommend solutions for complicated
problems. Solution shops typically get paid through a fee-for-service revenue
model. Value-adding process business models typically bring things in that are
incomplete or broken, add value to them, and then ship them out, repaired or
completed. These include—automobile manufacturing, restaurants, retailing,
petroleum refining, and the work of many educational institutions. Value-adding
process businesses usually have a fee-for-outcome revenue model. Facilitated
network businesses are organizations where the same people buy and sell and
deliver and receive things from each other. The companies that make money in
these industries are those that facilitate the effective operation of the network.
Typical business models are—bricks-and-mortar; distributor; manufacturer;
franchise; eCommerce; nickel-and-dime; retailer; etc.
10.5 Business model canvas
The business model canvas (BMC) was developed by Osterwalder (2004) based
on his earlier work on business model ontology. In this ontology the elements
are grouped into four pillars—customer interface (segments, relationships, and
channels), product (value proposition), infrastructure management (activities,
resources, and partners), and financial aspects (revenues and costs). The BMC is
a visual chart with elements describing a firm’s or product’s value proposition,
infrastructure, customers, and finances.
Osterwalder and Pigneur (2010) defined their business model, called canvas,
using nine components—customer segments, customer relationships, distribu-
tion channels, value proposition, key resources, key activities, partners, cost
structure, and revenue streams. This became the most well-known and widely
used framework in business models (Osterwalder & Pigneur, 2010). Canvas is
used for describing, visualizing, assessing, and changing business models. It
uses visual thinking which stimulates a holistic approach and storytelling on de-
sign and innovation. Canvas is a powerful visualization tool and clearly shows
all the components and their interconnections (Fig. 10.2).
FIGURE 10.2 The visualization tool. (Ref. Osterwalder & Pignuer, 2010)