Business Model as a Value Chain
If you wish to employ
Business Models in your enterprise analysis and strategy specification, you may
first have to understand what that is.
A
Business Model shows how a company goes about its business to be able to return
value/profit. Representing properly the business model down on paper is a bit
more difficult though.
In fact,
I would say that, on paper, a business model, rather than showing a list
or disconnected boxes on a diagram as it does today, should illustrate the
value chain, represented in sufficient detail to reveal the costs and revenue
for the calculation of profitability. That’s not the case today though, not to
my knowledge.
Hence, to
be of any use, the representation of the business model should be built on the
value chain which in effect illustrates how value is returned step by
step.
In turn,
the value chain should be mapped on an enterprise wide architecture (EA) to enable
the analysis of the chain of components and their resources that deliver the
product.
A
business model may be represented thus as a path through a full EA that
illustrates the customer segments, channels, partnerships, processes and
the resources that execute them. A map of disjoint boxes would not do the job
to illustrate the sequence of processes, technology, people resources and
partnerships that add value and accumulate cost at each stage of product
delivery necessary to estimate the business model profitability.
The
assessment of the business model processes and resources and estimation of
total cost can be properly calculated only on the EA that describes the value
delivery in sufficient detail.
But true,
there is not often that you see a simple EA blueprint today either.
As
an observation though, profit appears to be the only value taken into
consideration by a business model today. Still, there are other things though
that matter to a company, such as the impact on the environment and in general
corporate social responsibility and customer satisfaction.
These
may be estimated though on a value chain business model.
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