"Business model' is one of the latest buzzwords in the Internet and electronic business world" (Torbay, Osterwalder, and Pigneur, 2002). After some research I realized that, even thou business model as a term has been used a lot, there are surprisingly many, quite different definitions and understandings of it. My initial understanding was that a business model is just an outline of how a business will work and "e-business model" was just a transition of this model into the electronic world. I found out that there is much more depth to this simple term that meets the eye. In the following paragraphs I will summarize some of the definitions given by scholars and try to derive my own.
One of the most well known definitions of a business model that is being cited over and over again in different articles is the one given by Paul Timmers:
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An architecture for the 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 revenues.
Timmers goes on to explain that for an e-business model to work all components of a normal business first need to be looked at separately, then the business needs to take advantage of the fact that it can be a global business that connects individuals or organizations from all around the world and decide how those fit into the strategy of the business, and finally to construct a value chain that fits with the targets the firm has set for itself in the above two steps. (Timmers, 1998)
While Timmers' definition focuses more on the business as a structure or architecture - meaning a more static model of a centralized organization - other authors believe that for an e-business model to be successful there are more aspects to factor in. Joan Magretta for example states: "
Business models â€¦ are, at heart, stories - stories that explain how enterprises work. A good business model answers peter Drucker's age-old question: Who is the customer? And what does the customer value? It also answers the fundamental questions every manager must ask: How do we make money in this business? What is the underlying economic logic that explains how we can deliver value to customers at an appropriate cost?
This explanation adds another point that is very important for every business - customer relationship and customer behavior. In my opinion, this is even more applicable to e-businesses where customers can come from completely different backgrounds with their own wishes and visions. An e-business needs to take into consideration and if possible satisfy all of them. A further development of this idea is that an e-business model has for its foundation four pillars: "products and services" which include what products the business shall offer, how important they are for the customer, and understanding what price the customer is ready to pay for them; "infrastructure and the network of partners" which represent the partners of the business and how those connections will raise the value of the product in the eyes of the customers; "relationship capital" which is the trust that the business gains with its customers through their products and services; and "the financial aspect" which include the obvious goal of the business to create a system that brings profit for its founders. (Osterwalder and Pigneur, 2002)
Since we are dealing with e-business models we should not and cannot overlook the technology involved in electronic business. Even thou methods from the IT department can be very resilient to business models and business models might not be easy to translate in "IT language", those two need to work in synchrony for an e-business to prosper. (Gordijn and Akkemans, 2001) The new technology gives businesses a wider range of new opportunities to innovate, market, and distribute their products. Creating and executing a successful e-business model does not simply mean to use the new technologies but to serve the customer with new more convenient and innovative work practices, customer relationships, marketing and delivery techniques, and technical support. (Vassilopoulou et al. 2002) For an e-business to be successful it needs to be innovative and upgrade on old models finding new, more convenient, products or services. Finally, because of the hasty pace at which ICT change and e-business model needs "a set of indicators or metrics" that will show the business how successful they are and "include a way of finding necessary changes, when the original model does not work", meaning the model needs to be flexible and "open-sourced" enough for changes to be possible. (Audience Dialogue, 2010)
Always on Time
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Drawing from all those I believe that a reasonable definition for e-business would be something along the lines of: a structured representation of your business plan - acquisition, marketing, selling, and distribution of your product - that takes into account the customer's needs, takes advantage of technology and innovation in order to result in beneficial revenue for the organization, and has a way of checking and correcting itself if needs be. The criteria which could be used to assess if business model is successful would be questions directed to every part of this definition: Does the business have a structured infrastructure that starts from its suppliers and partners and reaches the end users; is the business taking into account customer behavior and needs; does the business use the advantages of technology to a degree where it could be easily identified as an "electronic" business; is the model of the business in any way innovative-does it have new elements that make it more convenient or original than the existing ones; will the business have any profit from this business model; is the business model flexible enough to allow changes if technology, customer needs, acceptance by the general public etc. changes?
Now lets use this definition and criteria to evaluate a couple of business models integrated in the following sites: http://zoomii.com/ and http://www.wix.com/. In the case of zoomii.com we have a site that sells books. It is very clearly shown that the supplier of the site is the infamous amazon.com and that the site's end users are individuals. The site has a good overview and every customer can easily navigate to the product or category he seeks. Clearly the idea to make a virtual bookstore is not so innovative but the concept of having the books shelved rather than just cramped into a search engine definitely qualifies as some innovation and good use of technology - users might prefer to randomly search through book shelves than to just go to the robust search engine of amazon.com. As it is stated in the "about" section of the site, the business makes money through a percentage they receive from amazon.com every time someone orders a book through them. This helps to also analyze how successful the business is by providing a metric system of how many users prefer this book shelve concept (otherwise they would have just used amazon.com in the first place). As to flexibility, in my opinion, the site does not have big opportunities to change a lot which might beget their downfall in the future. I believe this business model fits well in my definition of e-business model.
The other site is wix.com which is a site that helps you create an internet site/webpage of your own by providing you with ready templates and easy to use user-friendly software. From what I understood by looking around the site its infrastructure is very simple. It is a site that provides users with templates for websites and an easy-to-use software. Those templates are from the founders of the site and therefore there are no suppliers, while the end users are individuals or small to medium businesses. The service offered seems very customizable even thou there are some limitations and therefore will satisfy a lot of the specific customer needs. The templates and software provided might not be the most advanced technology when it comes to webpage creation but for the average user, and since it does provide a service that and be "consumed" only online, it fits into the criteria of using technology to its advantage. Even thou, I have stumbled across other sites and guides on how to create a webpage, the simplicity and the obvious user-friendly interface of this one definitely feels innovative to me. The business does provide information on how it makes its profit in the "about wix" tab - through the premium accounts that they offer (which let you in on more advanced options) and by selling some merchandise of wix.com - which means this business already has its "brand" acknowledged to some degree. Furthermore, the business does have a very clear metric system of how many users have used it which clearly shows its success. Finally, since the business deals with providing a service those changes with the advancement of technology it has high capabilities of changing when the customers demand it.
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When looking at the future I believe that the definition I have provided will be viable to a certain extend. Because the definition I derived is very general and deals with issues that are universal for any business it should not go out of date so easily. Customer satisfaction, profit maximization, and a clear chain between suppliers and customers are things that I believe business will need forever. The fact that I have included that a successful business model needs to be able to change with technology and demand leaves and open end for future changes that might become necessary. On the negative side I believe my definition and criteria are very general but I justify this with the fact that there should be a distinction made between business model and business plan. In conclusion I want to state that with the radical development of technology everything is possible. A paper on e-business models state:
Mobile multimedia internet (MMI)-mobile business has to be supported by mobile multimedia internet networks. Once the new technology is living up for utilization, mobile business shall be occurred. In other words, the new technology drives new economy and business
(Li, Salleh, and Min, 2008)
which makes me thing that there already is a new wave of e-business or m-business (mobile business) models coming up.