importance of business model essay

What is a Business Model? A Short Guide to Developing Successful Business Models

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You’ll often hear professionals discuss how important it is to have a clearly defined business model . A company’s business model can literally make or break their chances of success

But what is a business model exactly? Let’s take a look.

What is a Business Model and Why is It Important?

In essence, a business model is how a company plans to make a profit. This scope includes the business’s value proposition, key expenses, products or services, and its target market.

The value proposition, a central part of any business model, defines the company’s key offering or offerings, whether products or services. Importantly, it also describes what differentiates this offering from existing products, and what makes it attractive to the business’ target market.

Business models can be broadly grouped into categories, such as:

• Manufacturer
• Marketplace
• Subscription
• Fee-for-Service

It’s also important to note that one company may operate more than one business model concurrently. For example, eCommerce giant Amazon acts as both a retailer and a marketplace.

It is essential for new companies to define their business model, as it allows them to attract more investors and talent, as well as develop effective strategies . 

However, it’s equally important that established businesses regularly review and update their business model in the face of changing market trends and as their company grows.

What Makes a Strong Business Model?

A strong business model must clearly lay out how your business is going to generate revenue, including drilling down into your target market and value proposition.

Key elements of a good business model include:

• A well-defined value proposition
• The business’ target market
• Start-up costs anticipated expenses
• Revenue projection
• Key competitors and how they measure up against the company
• Marketing strategy
• Key stakeholders and partnership opportunities

Additionally , the business models of successful companies generally share certain common characteristics. They often have a unique selling point, or unique selling proposition (USP), that sets them apart from their competition and meets their target customers’ needs, which they offer at an attractive price point. 

Furthermore, successful business models are financially sustainable and adapt to meet changes in the market or in the business’s own needs.

How to Create a Successful Business Model

1. conduct market research.

The best business models are based on a thorough understanding of current market trends, opportunities, and challenges. Start by conducting research into the latest trends, your top competitors, and what is and isn’t currently working well in the industry.

2. Define your Target Market

Next, you’ll need to identify who your business’ target market or customer base will be. Dig deeper into your ideal customer’s needs, and especially their key pain points. These will become the problems that your product or service will solve.

3. Develop Your Service Offering

Once you have a clear picture of your target audience and their main pain points, you can use this to develop a service offering that will most effectively address this.

Be sure to tie this back to your business’s value proposition: what makes your products or services not only desirable to your target market, but what differentiates you from your competitors?

4. Make a Road Map

Once you’ve defined your target market and the product or service you’re going to offer them, the next step is to work out what you need to make that happen. It’s essential to create a clear picture of the resources you’ll need to get your business up and running. 

At this point, you should also consider potential challenges you may face along the way, and how you plan to address them. 

Document all of these elements as part of a well-defined road map to launch your business.

5. Start Developing Partnerships

Another essential part of any business model is the partners who will help the company achieve success. This could be suppliers, service providers, contractors, advertising partners, collaborators, or other stakeholders. 

Having an idea of who these partners will be and how you will work together will help you to shape your business model.

6. Define Revenue Streams

Revenue is central to any business, and any strong business model must clearly define where revenue will come from. You’ll also need to consider how you will increase revenue over time, such as specific strategies to build your customer base and close sales.

7. Do Testing

The final step of this process is testing your business model to ensure you’re in the strongest possible position to go live. This could involve test surveys within your target market, or soft launches. The idea is to gauge how well your business model will perform and help you to reach your goals.

8. Continually Review and Adapt

Avoid taking a “set it and forget it” approach to your business model. There are many reasons why you may need to adapt your business model over time. Not only may the market change, but as your business begins to operate and grow, you may find you need to reassess some of your original ideas and assumptions.

Therefore, it is essential to take a flexible position and continually review and adapt your business model to reflect evolving circumstances, whether internal or external to your business.

What does a business development manager do?

Get the Skills You Need to Develop a Successful Business Model

It’s not enough to understand what a business model is: you also need to be familiar with the various push and pull factors that will allow you to create a winning model.

Experience is an essential part of being able to develop a successful business model. Knowledge of the latest industry trends, data insights , and strategic thinking are also critical. 

EDHEC Online Master of Science in International Business Management can help you develop your strategic thinking in order to use data insights to create business models that are sustainable, inclusive, and impactful.

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Why is a business model important?

Today, technology and innovation are the main players in how successful businesses are run and reinvented. With an explosive amount of information available through big data and the resources provided by digital tech, companies can more easily create and continue to capture value for stakeholders.

Businesses that want to start and stay at the cutting edge use design thinking, strategy, and continuous, fearless change in their business models. Some of the most successful businesses today are those that have reinvented the model, disrupting the industry that was and creating the kind of value customers are looking for in the digital era .

What is a business model?

Does a business model have a simple definition? Yes and no. Business models are the logic behind a company, but the concept can be framed in many different ways. And today, the way the idea has been reframed is inspiring the business owners and CEOs of companies from startups to well-established multinationals.

In his book The New, New Thing , Michael Lewis explains that the business model has been thought of as simply the way a business plans to make money. Expanding upon this idea, Peter Drucker talks about the business concept in terms of flexible assumptions about what a company will and will not do: what they get paid for; markets, customers, and competitors; values and behaviors; technology; and a company’s strengths and weaknesses. Joan Magretta adds that a business model is basically a story about how the company will operate, including the activities involved in making and selling a product or service.

Alex Osterwalder offers a simplified format for thinking about these hypotheses adopted by startups and established businesses alike, called the busi n ess model canvas. This business map is a one-page template that includes space for designing, discussing, and reinventing business models. The nine building blocks included are customer segments, value propositions, channels for delivering value, customer relationships, revenue streams, key resources, activities and partners, and cost structure. The idea of having everything mapped out on one page enables forward-thinking leaders to keep things light and flexible in order to invent or innovatively reiterate their business models as situations change and evolve.

Types of business models and tech

Business models have been transformed by technology . Interconnectivity , globalization , and a digital, tech-driven world have all allowed innovative thinkers to rethink traditional models in sectors from travel to retail.

One example of an age-old business model that has been transformed by tech is the platform business model. In the simplest terms, this model brings buyers and sellers together in one space. An in-person marketplace, auction house, or shopping mall are examples of this model that have been around for decades or even centuries. But digital tech has meant these platforms are no longer confined by time and space. Technology has allowed innovative business owners to use this type of model to create enormous digital networks enabling participation and collaboration across the globe. Some of the most successful companies today, including Airbnb , WhatsApp , Facebook , Google , and Alibaba , are examples of reinvented platform business models that use tech to their advantage.

The global business model is another example of one which has been inspired by technology. These models focus on producing and selling globally in a short period of time, relying on the fast pace of globalization and interconnectivity to thrive. The clothing brands Mango and Desigual are good examples of successful models based on selling to small target segments globally in order to achieve economy of scale, in a way that is only possible in a globalized world.

Interconnectivity and the digital world has also led to the availability of big data, allowing businesses to make sure they are offering the goods and services customers are actually looking for. The “seeking-excellence” business model depends on creating innovative products or services that consumers didn’t even know they wanted. The most disruptive thinkers today can use big data to analyze trends and find new value propositions that reinvent the business model—like Apple did with the iPod and iTunes store in the early 2000s.

Inspiring business models that have broken the status quo

Airbnb is one of the most disruptive businesses of the digital era. Founded by a couple of young startupers in 2008, it is the result of a recognized opportunity (when no hotel rooms were available in San Francisco during a conference held in the city), and the technology capable of connecting hosts and renters from around the globe.

As they put it on their About Us page, “ Airbnb uniquely leverages technology to economically empower millions of people around the world to unlock and monetize their spaces, passions, and talents to become hospitality entrepreneurs. ” It is a sharing-economy-based business , eliminating the overhead of owning the rooms that are rented out, like traditional hotels do. And its platform business model—which uses advances in digital tech to create networks that continuously improve—has allowed the business to boom around the world.

Uber is at the top of the list as another example of a business that has taken an existing business model and reinvented the wheel. By looking at how a current business model—taxis—could be improved, Uber was able to take a share of a preexisting market using a disruptive, tech-based model for grabbing a ride.

Now they have expanded and continue to grow through reiterations of their model, including Uber Eats for food delivery; Uber Freight offering shipping services; Uber Health providing rides for patients and healthcare providers; and even technology groups working towards self-driving vehicles and shared air transportation.

In the fast-paced digital world, innovation is a key element of any business model. Executives and CEOs are not responsible for maintaining the status quo defined in one iteration of the business model, but rather for experimenting, learning, and continuously improving to stay ahead of the competition.

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Business Model Canvas: Explained with Examples

Got a new business idea, but don’t know how to put it to work? Want to improve your existing business model? Overwhelmed by writing your business plan? There is a one-page technique that can provide you the solution you are looking for, and that’s the business model canvas.

In this guide, you’ll have the Business Model Canvas explained, along with steps on how to create one. All business model canvas examples in the post can be edited online.

What is a Business Model Canvas

A business model is simply a plan describing how a business intends to make money. It explains who your customer base is and how you deliver value to them and the related details of financing. And the business model canvas lets you define these different components on a single page.   

The Business Model Canvas is a strategic management tool that lets you visualize and assess your business idea or concept. It’s a one-page document containing nine boxes that represent different fundamental elements of a business.  

The business model canvas beats the traditional business plan that spans across several pages, by offering a much easier way to understand the different core elements of a business.

The right side of the canvas focuses on the customer or the market (external factors that are not under your control) while the left side of the canvas focuses on the business (internal factors that are mostly under your control). In the middle, you get the value propositions that represent the exchange of value between your business and your customers.

The business model canvas was originally developed by Alex Osterwalder and Yves Pigneur and introduced in their book ‘ Business Model Generation ’ as a visual framework for planning, developing and testing the business model(s) of an organization.

What Are the Benefits of Using a Business Model Canvas

Why do you need a business model canvas? The answer is simple. The business model canvas offers several benefits for businesses and entrepreneurs. It is a valuable tool and provides a visual and structured approach to designing, analyzing, optimizing, and communicating your business model.

• The business model canvas provides a comprehensive overview of a business model’s essential aspects. The BMC provides a quick outline of the business model and is devoid of unnecessary details compared to the traditional business plan.
• The comprehensive overview also ensures that the team considers all required components of their business model and can identify gaps or areas for improvement.
• The BMC allows the team to have a holistic and shared understanding of the business model while enabling them to align and collaborate effectively.
• The visual nature of the business model canvas makes it easier to refer to and understand by anyone. The business model canvas combines all vital business model elements in a single, easy-to-understand canvas.
• The BMC can be considered a strategic analysis tool as it enables you to examine a business model’s strengths, weaknesses, opportunities, and challenges.
• It’s easier to edit and can be easily shared with employees and stakeholders.
• The BMC is a flexible and adaptable tool that can be updated and revised as the business evolves. Keep your business agile and responsive to market changes and customer needs.
• The business model canvas can be used by large corporations and startups with just a few employees.
• The business model canvas effectively facilitates discussions among team members, investors, partners, customers, and other stakeholders. It clarifies how different aspects of the business are related and ensures a shared understanding of the business model.
• You can use a BMC template to facilitate discussions and guide brainstorming brainstorming sessions to generate insights and ideas to refine the business model and make strategic decisions.
• The BMC is action-oriented, encouraging businesses to identify activities and initiatives to improve their business model to drive business growth.
• A business model canvas provides a structured approach for businesses to explore possibilities and experiment with new ideas. This encourages creativity and innovation, which in turn encourages team members to think outside the box.

How to Make a Business Model Canvas

Here’s a step-by-step guide on how to create a business canvas model.

Step 1: Gather your team and the required material Bring a team or a group of people from your company together to collaborate. It is better to bring in a diverse group to cover all aspects.

While you can create a business model canvas with whiteboards, sticky notes, and markers, using an online platform like Creately will ensure that your work can be accessed from anywhere, anytime. Create a workspace in Creately and provide editing/reviewing permission to start.

Step 2: Set the context Clearly define the purpose and the scope of what you want to map out and visualize in the business model canvas. Narrow down the business or idea you want to analyze with the team and its context.

Step 3: Draw the canvas Divide the workspace into nine equal sections to represent the nine building blocks of the business model canvas.

Step 4: Identify the key building blocks Label each section as customer segment, value proposition, channels, customer relationships, revenue streams, key resources, key activities, and cost structure.

Step 5: Fill in the canvas Work with your team to fill in each section of the canvas with relevant information. You can use data, keywords, diagrams, and more to represent ideas and concepts.

Step 6: Analyze and iterate Once your team has filled in the business model canvas, analyze the relationships to identify strengths, weaknesses, opportunities, and challenges. Discuss improvements and make adjustments as necessary.

Step 7: Finalize Finalize and use the model as a visual reference to communicate and align your business model with stakeholders. You can also use the model to make informed and strategic decisions and guide your business.

What are the Key Building Blocks of the Business Model Canvas?

There are nine building blocks in the business model canvas and they are:

Customer Segments

Customer relationships, revenue streams, key activities, key resources, key partners, cost structure.

• Value Proposition

When filling out a Business Model Canvas, you will brainstorm and conduct research on each of these elements. The data you collect can be placed in each relevant section of the canvas. So have a business model canvas ready when you start the exercise.  

Let’s look into what the 9 components of the BMC are in more detail.

These are the groups of people or companies that you are trying to target and sell your product or service to.

Segmenting your customers based on similarities such as geographical area, gender, age, behaviors, interests, etc. gives you the opportunity to better serve their needs, specifically by customizing the solution you are providing them.

After a thorough analysis of your customer segments, you can determine who you should serve and ignore. Then create customer personas for each of the selected customer segments.

There are different customer segments a business model can target and they are;

• Mass market: A business model that focuses on mass markets doesn’t group its customers into segments. Instead, it focuses on the general population or a large group of people with similar needs. For example, a product like a phone.  
• Niche market: Here the focus is centered on a specific group of people with unique needs and traits. Here the value propositions, distribution channels, and customer relationships should be customized to meet their specific requirements. An example would be buyers of sports shoes.
• Segmented: Based on slightly different needs, there could be different groups within the main customer segment. Accordingly, you can create different value propositions, distribution channels, etc. to meet the different needs of these segments.
• Diversified: A diversified market segment includes customers with very different needs.
• Multi-sided markets: this includes interdependent customer segments. For example, a credit card company caters to both their credit card holders as well as merchants who accept those cards.

Use STP Model templates for segmenting your market and developing ideal marketing campaigns

Visualize, assess, and update your business model. Collaborate on brainstorming with your team on your next business model innovation.

In this section, you need to establish the type of relationship you will have with each of your customer segments or how you will interact with them throughout their journey with your company.

There are several types of customer relationships

• Personal assistance: you interact with the customer in person or by email, through phone call or other means.
• Dedicated personal assistance: you assign a dedicated customer representative to an individual customer.  
• Self-service: here you maintain no relationship with the customer, but provides what the customer needs to help themselves.
• Automated services: this includes automated processes or machinery that helps customers perform services themselves.
• Communities: these include online communities where customers can help each other solve their own problems with regard to the product or service.
• Co-creation: here the company allows the customer to get involved in the designing or development of the product. For example, YouTube has given its users the opportunity to create content for its audience.

You can understand the kind of relationship your customer has with your company through a customer journey map . It will help you identify the different stages your customers go through when interacting with your company. And it will help you make sense of how to acquire, retain and grow your customers.

This block is to describe how your company will communicate with and reach out to your customers. Channels are the touchpoints that let your customers connect with your company.

Channels play a role in raising awareness of your product or service among customers and delivering your value propositions to them. Channels can also be used to allow customers the avenue to buy products or services and offer post-purchase support.

There are two types of channels

• Owned channels: company website, social media sites, in-house sales, etc.
• Partner channels: partner-owned websites, wholesale distribution, retail, etc.

Revenues streams are the sources from which a company generates money by selling their product or service to the customers. And in this block, you should describe how you will earn revenue from your value propositions.  

A revenue stream can belong to one of the following revenue models,

• Transaction-based revenue: made from customers who make a one-time payment
• Recurring revenue: made from ongoing payments for continuing services or post-sale services

There are several ways you can generate revenue from

• Asset sales: by selling the rights of ownership for a product to a buyer
• Usage fee: by charging the customer for the use of its product or service
• Subscription fee: by charging the customer for using its product regularly and consistently
• Lending/ leasing/ renting: the customer pays to get exclusive rights to use an asset for a fixed period of time
• Licensing: customer pays to get permission to use the company’s intellectual property
• Brokerage fees: revenue generated by acting as an intermediary between two or more parties
• Advertising: by charging the customer to advertise a product, service or brand using company platforms

What are the activities/ tasks that need to be completed to fulfill your business purpose? In this section, you should list down all the key activities you need to do to make your business model work.

These key activities should focus on fulfilling its value proposition, reaching customer segments and maintaining customer relationships, and generating revenue.

There are 3 categories of key activities;

• Production: designing, manufacturing and delivering a product in significant quantities and/ or of superior quality.
• Problem-solving: finding new solutions to individual problems faced by customers.
• Platform/ network: Creating and maintaining platforms. For example, Microsoft provides a reliable operating system to support third-party software products.

This is where you list down which key resources or the main inputs you need to carry out your key activities in order to create your value proposition.

There are several types of key resources and they are

• Human (employees)
• Financial (cash, lines of credit, etc.)
• Intellectual (brand, patents, IP, copyright)
• Physical (equipment, inventory, buildings)

Key partners are the external companies or suppliers that will help you carry out your key activities. These partnerships are forged in oder to reduce risks and acquire resources.

Types of partnerships are

• Strategic alliance: partnership between non-competitors
• Coopetition: strategic partnership between partners
• Joint ventures: partners developing a new business
• Buyer-supplier relationships: ensure reliable supplies

In this block, you identify all the costs associated with operating your business model.

You’ll need to focus on evaluating the cost of creating and delivering your value propositions, creating revenue streams, and maintaining customer relationships. And this will be easier to do so once you have defined your key resources, activities, and partners.  

Businesses can either be cost-driven (focuses on minimizing costs whenever possible) and value-driven (focuses on providing maximum value to the customer).

Value Propositions

This is the building block that is at the heart of the business model canvas. And it represents your unique solution (product or service) for a problem faced by a customer segment, or that creates value for the customer segment.

A value proposition should be unique or should be different from that of your competitors. If you are offering a new product, it should be innovative and disruptive. And if you are offering a product that already exists in the market, it should stand out with new features and attributes.

Value propositions can be either quantitative (price and speed of service) or qualitative (customer experience or design).

What to Avoid When Creating a Business Model Canvas

One thing to remember when creating a business model canvas is that it is a concise and focused document. It is designed to capture key elements of a business model and, as such, should not include detailed information. Some of the items to avoid include,

• Detailed financial projections such as revenue forecasts, cost breakdowns, and financial ratios. Revenue streams and cost structure should be represented at a high level, providing an overview rather than detailed projections.
• Detailed operational processes such as standard operating procedures of a business. The BMC focuses on the strategic and conceptual aspects.
• Comprehensive marketing or sales strategies. The business model canvas does not provide space for comprehensive marketing or sales strategies. These should be included in marketing or sales plans, which allow you to expand into more details.
• Legal or regulatory details such as intellectual property, licensing agreements, or compliance requirements. As these require more detailed and specialized attention, they are better suited to be addressed in separate legal or regulatory documents.
• Long-term strategic goals or vision statements. While the canvas helps to align the business model with the overall strategy, it should focus on the immediate and tangible aspects.
• Irrelevant or unnecessary information that does not directly relate to the business model. Including extra or unnecessary information can clutter the BMC and make it less effective in communicating the core elements.

What Are Your Thoughts on the Business Model Canvas?

Once you have completed your business model canvas, you can share it with your organization and stakeholders and get their feedback as well. The business model canvas is a living document, therefore after completing it you need to revisit and ensure that it is relevant, updated and accurate.

What best practices do you follow when creating a business model canvas? Do share your tips with us in the comments section below.

Join over thousands of organizations that use Creately to brainstorm, plan, analyze, and execute their projects successfully.

FAQs About the Business Model Canvas

• Use clear and concise language
• Use visual-aids
• Customize for your audience
• Highlight key insights
• Be open to feedback and discussion

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Amanda Athuraliya is the communication specialist/content writer at Creately, online diagramming and collaboration tool. She is an avid reader, a budding writer and a passionate researcher who loves to write about all kinds of topics.

Business model innovation: a review and research agenda

New England Journal of Entrepreneurship

ISSN : 2574-8904

Article publication date: 16 October 2019

Issue publication date: 13 November 2019

The aim of this paper is to review and synthesise the recent advancements in the business model literature and explore how firms approach business model innovation.

Design/methodology/approach

A systematic review of business model innovation literature was carried out by analysing 219 papers published between 2010 and 2016.

Evidence reviewed suggests that rather than taking either an evolutionary process of continuous revision, adaptation and fine-tuning of the existing business model or a revolutionary process of replacing the existing business model, firms can explore alternative business models through experimentation, open and disruptive innovations. It was also found that changing business models encompasses modifying a single element, altering multiple elements simultaneously and/or changing the interactions between elements in four areas of innovation: value proposition, operational value, human capital and financial value.

Research limitations/implications

Although this review highlights the different avenues to business model innovation, the mechanisms by which firms can change their business models and the external factors associated with such change remain unexplored.

Practical implications

The business model innovation framework can be used by practitioners as a “navigation map” to determine where and how to change their existing business models.

Originality/value

Because conflicting approaches exist in the literature on how firms change their business models, the review synthesises these approaches and provides a clear guidance as to the ways through which business model innovation can be undertaken.

• Business model
• Value proposition
• Value creation
• Value capture

Ramdani, B. , Binsaif, A. and Boukrami, E. (2019), "Business model innovation: a review and research agenda", New England Journal of Entrepreneurship , Vol. 22 No. 2, pp. 89-108. https://doi.org/10.1108/NEJE-06-2019-0030

Emerald Publishing Limited

Copyright © 2019, Boumediene Ramdani, Ahmed Binsaif and Elias Boukrami

Published in New England Journal of Entrepreneurship . Published by Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode

1. Introduction

Firms pursue business model innovation by exploring new ways to define value proposition, create and capture value for customers, suppliers and partners ( Gambardella and McGahan, 2010 ; Teece, 2010 ; Bock et al. , 2012 ; Casadesus-Masanell and Zhu, 2013 ). An extensive body of the literature asserts that innovation in business models is of vital importance to firm survival, business performance and as a source of competitive advantage ( Demil and Lecocq, 2010 ; Chesbrough, 2010 ; Amit and Zott, 2012 ; Baden-Fuller and Haefliger, 2013 ; Casadesus-Masanell and Zhu, 2013 ). It is starting to attract a growing attention, given the increasing opportunities for new business models enabled by changing customer expectations, technological advances and deregulation ( Casadesus-Masanell and Llanes, 2011 ; Casadesus-Masanell and Zhu, 2013 ). This is evident from the recent scholarly outputs ( Figure 1 ). Thus, it is essential to comprehend this literature and uncover where alternative business models can be explored.

Conflicting approaches exist in the literature on how firms change their business models. One approach suggests that alternative business models can be explored through an evolutionary process of incremental changes to business model elements (e.g. Demil and Lecocq, 2010 ; Dunford et al. , 2010 ; Amit and Zott, 2012 ; Landau et al. , 2016 ; Velu, 2016 ). The other approach, mainly practice-oriented, advocates that innovative business models can be developed through a revolutionary process by replacing existing business models (e.g. Bock et al. , 2012 ; Iansiti and Lakhani, 2014 ). The fragmentation of prior research is due to the variety of disciplinary and theoretical foundations through which business model innovation is examined. Scholars have drawn on perspectives from entrepreneurship (e.g. George and Bock, 2011 ), information systems (e.g. Al-debei and Avison, 2010 ), innovation management (e.g. Dmitriev et al. , 2014 ), marketing (e.g. Sorescu et al. , 2011 ) and strategy (e.g. Demil and Lecocq, 2010 ). Also, this fragmentation is deepened by focusing on different types of business models in different industries. Studies have explored different types of business models such as digital business models (e.g. Weill and Woerner, 2013 ), service business models (e.g. Kastalli et al. , 2013 ), social business models (e.g. Hlady-Rispal and Servantie, 2016 ) and sustainability-driven business models ( Esslinger, 2011 ). Besides, studies have examined different industries such as airline ( Lange et al. , 2015 ), manufacturing ( Landau et al. , 2016 ), newspaper ( Karimi and Walter, 2016 ), retail ( Brea-Solís et al. , 2015 ) and telemedicine ( Peters et al. , 2015 ).

Since the first comprehensive review of business model literature was carried out by Zott et al. (2011) , several reviews were published recently (as highlighted in Table I ). Our review builds on and extends the extant literature in at least three ways. First, unlike previous reviews that mainly focused on the general construct of “Business Model” ( George and Bock, 2011 ; Zott et al. , 2011 ; Wirtz et al. , 2016 ), our review focuses on uncovering how firms change their existing business model(s) by including terms that reflect business model innovation, namely, value proposition, value creation and value capture. Second, previous reviews do not provide a clear answer as to how firms change their business models. Our review aims to provide a clear guidance on how firms carry out business model innovation by synthesising the different perspectives existing in the literature. Third, compared to recent reviews on business model innovation ( Schneider and Spieth, 2013 ; Spieth et al. , 2014 ), which have touched lightly on some innovation aspects such as streams and motivations of business model innovation research, our review will uncover the innovation areas where alternative business models can be explored. Taking Teece’s (2010) suggestion, “A helpful analytic approach for management is likely to involve systematic deconstruction/unpacking of existing business models, and an evaluation of each element with an idea toward refinement or replacement” (p. 188), this paper aims to develop a theoretical framework of business model innovation.

Our review first explains the scope and the process of the literature review. This is followed by a synthesis of the findings of the review into a theoretical framework of business model innovation. Finally, avenues for future research will be discussed in relation to the approaches, degree and mechanisms of business model innovation.

2. Scope and method of the literature review

Given the diverse body of business models literature, a systematic literature review was carried out to minimise research bias ( Transfield et al. , 2003 ). Compared to the previous business model literature, our review criteria are summarised in Table I . The journal papers considered were published between January 2010 and December 2016. As highlighted in Figure 1 , most contributions in this field have been issued within this period since previous developments in the literature were comprehensively reviewed up to the end of 2009 ( Zott et al. , 2011 ). Using four databases (EBSCO Business Complete, ABI/INFORM, JSTOR and ScienceDirect), we searched peer-reviewed papers with terms such as business model(s), innovation value proposition, value creation and value capture appearing in the title, abstract or subject terms. As a result, 8,642 peer-reviewed papers were obtained.

Studies were included in our review if they specifically address business models and were top-rated according to The UK Association of Business Schools list ( ABS, 2010 ). This rating has been used not only because it takes into account the journal “Impact Factor” as a measure for journal quality, but also uses in conjunction other measures making it one of the most comprehensive journal ratings. By applying these criteria, 1,682 entries were retrieved from 122 journals. By excluding duplications, 831 papers were identified. As Harvard Business Review is not listed among the peer-reviewed journals in any of the chosen databases and was included in the ABS list, we used the earlier criteria and found 112 additional entries. The reviewed papers and their subject fields are highlighted in Table II . Since the focus of this paper is on business model innovation, we selected studies that discuss value proposition, value creation and value capture as sub-themes. This is not only because the definition of business model innovation mentioned earlier spans all three sub-themes, but also because all three sub-themes have been included in recent studies (e.g. Landau et al. , 2016 ; Velu and Jacob, 2014 ). To confirm whether the papers addressed business model innovation, we examined the main body of the papers to ensure they were properly coded and classified. At the end of the process, 219 papers were included in this review. Table III lists the source of our sample.

The authors reviewed the 219 papers using a protocol that included areas of innovation (i.e. components, elements, and activities), theoretical perspectives and key findings. In order to identify the main themes of business model innovation research, all papers were coded in relation to our research focus as to where alternative business models can be explored (i.e. value proposition, value creation and value capture). Coding was cross checked among the authors on a random sample suggesting high accuracy between them. Having compared and discussed the results, the authors were able to identify the main themes.

3. Prior conceptualisations of business model innovation

Some scholars have articulated the need to build the business model innovation on a more solid theoretical ground ( Sosna et al. , 2010 ; George and Bock, 2011 ). Although many studies are not explicitly theory-based, some studies partially used well-established theories such as the resource-based view (e.g. Al-Debei and Avison, 2010 ) and transaction cost economics (e.g. DaSilva and Trkman, 2014 ) to conceptualise business model innovation. Other theories such as activity systems perspective, dynamic capabilities and practice theory have been used to help answer the question of how firms change their existing business models.

Using the activity systems perspective, Zott and Amit (2010) demonstrated how innovative business models can be developed through the design themes that describe the source of value creation (novelty, lock-in, complementarities and efficiency) and design elements that describe the architecture (content, structure and governance). This work, however, overlooks value capture which limits the explanation of the advocated system’s view (holistic). Moreover, Chatterjee (2013) used this perspective to reveal that firms can design innovative business models that translate value capture logic to core objectives, which can be delivered through the activity system.

Dynamic capability perspective frames business model innovation as an initial experiment followed by continuous revision, adaptation and fine-tuning based on trial-and-error learning ( Sosna et al. , 2010 ). Using this perspective, Demil and Lecocq (2010) showed that “dynamic consistency” is a capability that allows firms to sustain their performance while innovating their business models through voluntary and emergent changes. Also, Mezger (2014) conceptualised business model innovation as a distinct dynamic capability. He argued that this capability is the firm’s capacity to sense opportunities, seize them through the development of valuable and unique business models, and accordingly reconfigure the firms’ competences and resources. Using aspects of practice theory, Mason and Spring (2011) looked at business model innovation in the recorded sound industry and found that it can be achieved through various combinations of managerial practices.

Static and transformational approaches have been used to depict business models ( Demil and Lecocq, 2010 ). The former refers to viewing business models as constituting core elements that influence business performance at a particular point in time. This approach offers a snapshot of the business model elements and how they are assembled, which can help in understanding and communicating a business model (e.g. Eyring et al. , 2011 ; Mason and Spring, 2011 ; Yunus et al. , 2010). The latter, however, focuses on innovation and how to address the changes in business models over time (e.g. Sinfield et al. , 2012 ; Girotra and Netessine, 2014 ; Landau et al. , 2016 ). Some researchers have identified the core elements of business models ex ante (e.g. Demil and Lecocq, 2010 ; Wu et al. , 2010 ; Huarng, 2013 ; Dmitriev et al. , 2014 ), while others argued that considering a priori elements can be restrictive (e.g. Casadesus-Masanell and Ricart, 2010 ). Unsurprisingly, some researchers found a middle ground where elements are loosely defined allowing flexibility in depicting business models (e.g. Zott and Amit, 2010 ; Sinfield et al. , 2012 ; Kiron et al. , 2013 ).

Prior to 2010, conceptual frameworks focused on the business model concept in general (e.g. Chesbrough and Rosenbloom, 2002 ; Osterwalder et al. , 2005 ; Shafer et al. , 2005 ) apart from Johnson et al. ’s (2008 ), which is one of the early contributions to business model innovation. To determine whether a change in existing business model is necessary, Johnson et al. (2008) suggested three steps: “Identify an important unmet job a target customer needs done; blueprint a model that can accomplish that job profitably for a price the customer is willing to pay; and carefully implement and evolve the model by testing essential assumptions and adjusting as you learn” ( Eyring et al. , 2011 , p. 90). Although several frameworks have been developed since then, our understanding of business model innovation is still limited due to the static nature of the majority of these frameworks. Some representations ignore the elements and/or activities where alternative business models can be explored (e.g. Sinfield et al. , 2012 ; Chatterjee, 2013 ; Huarng, 2013 ; Morris et al. , 2013 ; Dmitriev et al. , 2014 ; Girotra and Netessine, 2014 ). Other frameworks ignore value proposition (e.g. Zott and Amit, 2010 ), ignore value creation (e.g. Dmitriev et al. , 2014 ; Michel, 2014 ) and/or ignore value capture (e.g. Mason and Spring, 2011 ; Sorescu et al. , 2011 ; Storbacka, 2011 ). Some conceptualisations do not identify who is responsible for the innovation (e.g. Casadesus-Masanell and Ricart, 2010 ; Sinfield et al. , 2012 ; Chatterjee, 2013 ; Kiron et al. , 2013 ). Synthesising the different contributions into a theoretical framework of business model innovation will enable a better understanding of how firms undertake business model innovation.

4. Business model innovation framework

Our framework ( Figure 2 ) integrates all the elements where alternative business models can be explored. This framework does not claim that the listed elements are definitive for high-performing business models, but is an attempt to outline the elements associated with business model innovation. This framework builds on the previous work of Johnson et al. (2008) and Zott and Amit (2010) by signifying the elements associated with business model innovation. Unlike previous frameworks that mainly consider the constituting elements of business models, this framework focuses on areas of innovation where alternative business models can be explored. Moreover, this is not a static view of the constituting elements of a business model, but rather a view enabling firms to explore alternative business models by continually refining these elements. Arrows in the framework indicate the continuous interaction of business model elements. This framework consists of 4 areas of innovation and 16 elements (more details are shown in Table IV ). Each will be discussed below.

4.1 Value proposition

The first area of innovation refers to elements associated with answering the “Why” questions. While most of the previously established models in the literature include at least one of the value proposition elements (e.g. Brea-Solís et al. , 2015 ; Christensen et al. , 2016 ), other frameworks included two elements (e.g. Dahan et al. , 2010 ; Cortimiglia et al. , 2016 ) and three elements (e.g. Eyring et al. , 2011 ; Sinfield et al. , 2012 ). These elements include rethinking what a company sells, exploring new customer needs, acquiring target customers and determining whether the benefits offered are perceived by customers. Modern organisations are highly concerned with innovation relating to value proposition in order to attract and retain a large portion of their customer base ( Al-Debei and Avison, 2010 ). Developing new business models usually starts with articulating a new customer value proposition ( Eyring et al. , 2011 ). According to Sinfield et al. (2012) , firms are encouraged to explore various alternatives of core offering in more depth by examining type of offering (product or service), its features (custom or off-the-shelf), offered benefits (tangible or intangible), brand (generic or branded) and lifetime of the offering (consumable or durable).

In order to exploit the “middle market” in emerging economies, Eyring et al. (2011) suggested that companies need to design new business models that aim to meet unsatisfied needs and evolve these models by continually testing assumptions and making adjustments. To uncover unmet needs, Eyring et al. (2011) suggested answering four questions: what are customers doing with the offering? What alternative offerings consumers buy? What jobs consumers are satisfying poorly? and what consumers are trying to accomplish with existing offerings? Furthermore, Baden-Fuller and Haefliger (2013) made a distinction between customers and users in two-sided platforms, where users search for products online, and customers (firms) place ads to attract users. They also made a distinction between “pre-designed (scale) based offerings” and “project based offerings”. While the former focuses on “one-size-fits-all”, the latter focuses on specific client solving specific problem.

Established firms entering emerging markets should identify unmet needs “the job to be done” rather than extending their geographical base for existing offerings ( Eyring et al. , 2011 ). Because customers in these markets cannot afford the cheapest of the high-end offerings, firms with innovative business models that meet these customers’ needs affordably will have opportunities for growth ( Eyring et al. , 2011 ). Moreover, secondary business model innovation has been advocated by Wu et al. (2010) as a way for latecomer firms to create and capture value from disruptive technologies in emerging markets. This can be achieved through tailoring the original business model to fit price-sensitive mass customers by articulating a value proposition that is attractive for local customers.

4.2 Operational value

The second area of innovation focuses on elements associated with answering the “What” questions. Many of the established frameworks included either one element (e.g. Sinfield et al. , 2012 ; Taran et al. , 2015 ), two elements (e.g. Mason and Spring, 2011 ; Dmitriev et al. , 2014 ). However, very few included three or more elements (e.g. Mehrizi and Lashkarbolouki, 2016 ; Cortimiglia et al. , 2016 ). These elements include configuring key assets and sequencing activities to deliver the value proposition, exposing the various means by which a company reaches out to customers, and establishing links with key partners and suppliers. Focusing on value creation, Zott and Amit (2010) argued that business model innovation can be achieved through reorganising activities to reduce transaction costs. However, Al-Debei and Avison (2010) argued that innovation relating to this dimension can be achieved through resource configuration, which demonstrates a firm’s ability to integrate various assets in a way that delivers its value proposition. Cavalcante et al. (2011) proposed four ways to change business models: business model creation, extension, revision and termination by creating or adding new processes, and changing or terminating existing processes.

Western firms have had difficulty competing in emerging markets due to importing their existing business models with unchanged operating model ( Eyring et al. , 2011 ). Alternative business models can be uncovered when firms explore the different roles they might play in the industry value chain ( Sinfield et al. , 2012 ). Al-Debei and Avison (2010) suggested achieving this through answering questions such as: what is the position of our firm in the value system? and what mode of collaboration (open or close) would we choose to reach out in a business network? Dahan et al. (2010) found cross-sector partnerships as a way to co-create new multi-organisational business models. They argued that multinational enterprises (MNEs) can collaborate with nongovernmental organisations (NGOs) to create products/or services that neither can create on their own. Collaboration allows access to resources that firms would otherwise need to solely develop or purchase ( Yunus et al. , 2010 ). According to Wu et al. (2010) , secondary business model innovation can be achieved when latecomer firms fully utilise strategic partners’ complementary assets to overcome their latecomer disadvantages and build a unique value network specific to emerging economies context.

4.3 Human capital

The third area of innovation refers to elements associated with answering the “Who” questions. Most of the established frameworks in this field tend to focus less on human capital and include one element at most (e.g. Wu et al. , 2010 ; Kohler, 2015 ). However, our framework highlights four elements, which include experimenting with new ways of doing business, tapping into the skills and competencies needed for the new business model through motivating and involving individuals in the innovation process. According to Belenzon and Schankerman (2015) , “the ability to tap into a pool of talent is strongly related to the specific business model chosen by managers” (p. 795). They claimed that managers can strategically influence individuals’ contributions and their impact on project performance.

Organisational learning can be maximised though continuous experimentation and making changes when actions result in failure ( Yunus et al. , 2010 ). Challenging and questioning the existing rules and assumptions and imagining new ways of doing business will help develop new business models. Another essential element of business model design is governance, which refers to who performs the activities ( Zott and Amit, 2010 ). According to Sorescu et al. (2011) , innovation in retail business models can occur as a result of changes in the level of participation by actors engaged in performing the activities. An essential element of retailing governance is the incentive structure or the mechanisms that motivate those involved in carrying out their roles to meet customer demands ( Sorescu et al. , 2011 ). For example, discount retailers tend to establish different compensation and incentive policies ( Brea-Solís et al. , 2015 ). Revising the incentive system can have a major impact on new ventures’ performance by aligning organisational goals at each stage of growth ( Roberge, 2015 ). Zott and Amit (2010) argued that alternative business models can be explored through adopting innovative governance or changing one or more parties that perform any activities. Sinfield et al. (2012) suggested that business model innovation only requires time from a small team over a short period of time to move a company beyond incremental improvements and generate new opportunities for growth. This is supported by Michel’s (2014) finding that cross-functional teams were able to quickly achieve business model innovation in workshops through deriving new ways to capture value.

4.4 Financial value

The final area of innovation focuses on elements associated with answering the “How” questions. Previously developed frameworks tend to prioritise this area of innovation by three elements (e.g. Eyring et al. , 2011 ; Huang et al. , 2013 ), and in one instance four elements (e.g. Yunus et al. , 2010 ). These elements include activities linked with how to capture value through revenue streams, changing the price-setting mechanisms, and assessing the financial viability and profitability of a business. According to Demil and Lecocq (2010) , changes in cost and/or revenue structures are the consequences of both continuous and radical changes. They also argued that costs relate to different activities run by organisations to acquire, integrate, combine or develop resources. Michel (2014) suggested that alternative business models can be explored through: changing the price-setting mechanism, changing the payer, and changing the price carrier. Different innovation forms are associated with each of these categories.

Business model innovation can be achieved through exploring new ways to generate cash flows ( Sorescu et al. , 2011 ), where the organisation has to consider (and potentially change) when the money is collected: prior to the sale, at the point of sale, or after the sale ( Baden-Fuller and Haefliger, 2013 ). Furthermore, Demil and Lecocq (2010) suggested that changes in business models affect margins. This is apparent in the retail business models, which generate more profit through business model innovation compared to other types of innovation ( Sorescu et al. , 2011 ).

5. Ways to change business models

From reviewing the recent developments in the business model literature, alternative business models can be explored through modifying a single business model element, altering multiple elements simultaneously and/or changing the interactions between elements of a business model.

Changing one of the business model elements (i.e. content, structure or governance) is enough to achieve business model innovation ( Amit and Zott, 2012 ). This means that firms can have a new activity system by performing only one new activity. However, Amit and Zott (2012) clearly outlined a systemic view of business models which entails a holistic change. This is evident from Demil and Lecocq’s (2010) work suggesting that the study of business model innovation should not focus on isolated activities since changing a core element will not only impact other elements but also the interactions between these elements.

Another way to change business models is through altering multiple business model elements simultaneously. Kiron et al. (2013) found that companies combining target customers with value chain innovations and changing one or two other elements of their business models tend to profit from their sustainability activities. They also found that firms changing three to four elements of their business models tend to profit more from their sustainability activities compared to those changing only one element. Moreover, Dahan et al. (2010) found that a new business model was developed as a result of MNEs and NGOs collaboration by redefining value proposition, target customers, governance of activities and distribution channels. Companies can explore multiple combinations by listing different business model options they could undertake (desirable, discussable and unthinkable) and evaluate new combinations that would not have been considered otherwise ( Sinfield et al. , 2012 ).

Changing business models is argued to be demanding as it requires a systemic and holistic view ( Amit and Zott, 2012 ) by considering the relationships between core business model elements ( Demil and Lecocq, 2010 ). As mentioned earlier, changing one element will not only impact other elements but also the interactions between these elements. A firm’s resources and competencies, value proposition and organisational system are continuously interacting and this will in turn impact business performance either positively or negatively ( Demil and Lecocq, 2010 ). According to Zott and Amit (2010) , innovative business models can be developed through linking activities in a novel way that generates more value. They argued that alternative business models can be explored by configuring business model design elements (e.g. governance) and connecting them to distinct themes (e.g. novelty). Supporting this, Eyring et al. (2011) suggested that core business model elements need to be integrated in order to create and capture value ( Eyring et al. , 2011 ).

6. Discussion and future research directions

From the above synthesis of the recent development in the literature, several gaps remain unfilled. To advance the literature, possible future research directions will be discussed in relation to approaches, degrees and mechanisms of business model innovation.

6.1 Approaches of business model innovation

Experimentation, open innovation and disruption have been advocated as approaches to business model innovation. Experimentation has been emphasised as a way to exploit opportunities and develop alternative business models before committing additional investments ( McGrath, 2010 ). Several approaches have been developed to assist in business model experimentation including mapping approach, discovery-driven planning and trail-and-error learning ( Chesbrough, 2010 ; McGrath, 2010 ; Sosna et al. , 2010 ; Andries and Debackere, 2013 ). Little is known about the effectiveness of these approaches. It will be worth investigating which elements of the business model innovation framework are more susceptible to experimentation and which elements should be held unchanged. Although business model innovation tends to be characterised with failure ( Christensen et al. , 2016 ), not much has been established on failing business models. It is interesting to explore how firms determine a failing business model and what organisational processes exist (if any) to evaluate and discard these failed business models. Empirical studies could examine which elements of business model innovation framework are associated with failing business models.

Another way to develop alternative business models is through open innovation. Although different categories of open business models have been identified by researchers (e.g. Frankenberger et al. , 2014 ; Taran et al. , 2015 ; Kortmann and Piller, 2016 ), their effectiveness is yet to be established. Further research is needed to examine when can a firm open and/or close element(s) of the business model innovation framework. Future studies could also examine the characteristics of open and/or close business models.

In responding to disruptive business models, how companies extend their existing business model, introduce additional business model(s) and/or replace their existing business model altogether remains underexplored. Future research is needed to unravel the strategies deployed by firms to extend their existing business models as a response to disruptive business models. In introducing additional business models, Markides (2013) suggested that a company will be presented with several options to manage the two businesses at the same time: create a completely separate business unit, integrate the two business models from the beginning or integrate the second business model after a certain period of time. Finding the balance between separation and integration is of vital importance. Further research could identify which of these choices are most common among successful firms introducing additional business models, how is the balance between integration and separation achieved, and which choice(s) prove more profitable. Moreover, very little is known on how firms replace their existing business model. Longitudinal studies could provide insights into how a firm adopts an alternative model and discard the old business model over time. It may also be worth examining the factors associated with the adoption of business model innovation as a response to disruptive business models. Moreover, new developments in digital technologies such as blockchain, Internet of Things and artificial intelligence are disrupting existing business models and providing firms with alternative avenues to create new business models. Thus far, very little is known on digital business models, the nature of their disruption, and how firms create digital business models and make them disruptive. Future research is needed to fill these important gaps in our knowledge.

6.2 Degrees of business model innovation

Business models can be developed through varying degrees of innovation from an evolutionary process of continuous fine-tuning to a revolutionary process of replacing existing business models. Recent research shows that survival of firms is dependent on the degree of their business model innovation ( Velu, 2015, 2016 ). This review classifies these degrees of innovation into modifying a single element, altering multiple elements simultaneously and/or changing the interactions between elements of the business model innovation framework.

In changing a single element, further research is needed to examine which business model element(s) is (are) associated with business model innovation. It is not clear whether firms intentionally make changes to a single element when carrying out business model innovation or stumble at it when experimenting with new ways of doing things. It may also be worth investigating the entry (or starting) points in the innovation process. There is no consensus in the literature on which element do companies start with when carrying out their business model innovation. While some studies suggest starting with the value proposition ( Eyring et al. , 2011 ; Landau et al. , 2016 ), others suggest starting the innovation process with identifying risks in the value chain ( Girotra and Netessine, 2011 ). Dmitriev et al. (2014) suggested two entry points, namely, value proposition and target customers. In commercialising innovations, the former refers to technology-push innovation while the latter refers to market-pull innovation. Also, it is not clear whether the entry point is the same as the single element associated with changing the business model. Further research can explore the different paths to business model innovation by identifying the entry point and subsequent changes needed to achieve business model innovation.

There is little guidance in the literature on how firms change multiple business model elements simultaneously. Landau et al. (2016) claimed that firms entering emerging markets tend to focus on adjusting specific business model components. It is unclear which elements need configuring, combining and/or integrating to achieve a company’s value proposition. Furthermore, the question of which elements can be “bought” on the market or internally “implemented” and their interplay remains unanswered ( DaSilva and Trkman, 2014 ). Casadesus-Masanell and Ricart (2010) argued that “[…] there is (as yet) no agreement as to the distinctive features of superior business models” (p. 196). Further research is needed to explore these distinctive elements of high-performing business models.

In changing the interactions between business model elements, further research is needed to explore how these elements are linked and what interactions’ changes are necessary to achieve business model innovation. Moreover, the question of how firms sequence these elements remains poorly understood. Future research can explore the synergies created over time between these elements. According to Dmitriev et al. (2014) , we need to improve our understanding of the connective mechanisms and dynamics involved in business model development. More work is needed to explore the different modalities of interdependencies among these elements and empirically testing such interdependencies and their effect on business performance ( Sorescu et al. , 2011 ).

It is surprising that the link between business model innovation and organisational performance has rarely been examined. Changing business models has been found to negatively influence business performance even if it is temporary ( McNamara et al. , 2013 ; Visnjic et al. , 2016 ). Contrary to this, evidence show that modifying business models is positively associated with organisational performance ( Cucculelli and Bettinelli, 2015 ). Empirical research is needed to operationalise the various degrees of innovation in business models and examine their link to organisational performance. Longitudinal studies can also be used to explore this association since it may be the case that business model innovation has a negative influence on performance in the short run and that may change subsequently. Moreover, it is not clear whether high-performing firms change their business models or innovation in business models is a result from superior performance ( Sorescu et al. , 2011 ). Further studies are needed to determine the direction of causality. Another link that is worth exploring is business model innovation and social value, which has only been explored in a few studies looking at social business models (e.g. Yunus et al. , 2010 ; Wilson and Post, 2013 ). Further research is needed to examine this link and possibly examine both financial and non-financial business performance.

6.3 Mechanisms of business model innovation

Although we know more about how firms define value proposition, create and capture value ( Landau et al. , 2016 ; Velu and Jacob, 2014 ), what remains as a blind spot is the mechanism of business model innovation. This is due to the fact that much of the literature seems to focus on value creation. To better understand the various mechanisms of business model innovation, future studies must integrate value proposition, value creation and value capture elements. Empirical studies could use the business model innovation framework to examine the various mechanisms of business model innovation. Also, the literature lacks the integration of internal and external perspectives of business model innovation. Very few studies look at the external drivers of business model innovation and the associated internal changes. The external drivers are referred to as “emerging changes”, which are usually beyond manager’s control ( Demil and Lecocq, 2010 ). Inconclusive findings exist as to how firms develop innovative business models in response to changes in the external environment. Future studies could examine the external factors associated with the changes in the business model innovation framework. Active and reactive responses need to be explored not only to understand the external influences, but also what business model changes are necessary for such responses. A better understanding of the mechanisms of business model innovation can be achieved by not only exploring the external drivers, but also linking them to specific internal changes. Although earlier contributions linking studies to established theories such as the resource-based view, transaction cost economics, activity systems perspective, dynamic capabilities and practice theory have proven to be vital in advancing the literature, developing a theory that elaborates on the antecedents, consequences and different facets of business model innovation is still needed ( Sorescu et al. , 2011 ). Theory can be advanced by depicting the mechanisms of business model innovation through the integration of both internal and external perspectives. Also, we call for more empirical work to uncover these mechanisms and provide managers with the necessary insights to carry out business model innovation.

7. Conclusions

The aim of this review was to explore how firms approach business model innovation. The current literature suggests that business model innovation approaches can either be evolutionary or revolutionary. However, the evidence reviewed points to a more complex picture beyond the simple binary approach, in that, firms can explore alternative business models through experimentation, open and disruptive innovations. Moreover, the evidence highlights further complexity to these approaches as we find that they are in fact a spectrum of various degrees of innovation ranging from modifying a single element, altering multiple elements simultaneously, to changing the interactions between elements of the business model innovation framework. This framework was developed as a navigation map for managers and researchers interested in how to change existing business models. It highlights the key areas of innovation, namely, value proposition, operational value, human capital and financial value. Researchers interested in this area can explore and examine the different paths firms can undertake to change their business models. Although this review pinpoints the different avenues for firm to undertake business model innovation, the mechanisms by which firms can change their business models and the external factors associated with such change remain underexplored.

The evolution of business model literature (pre-2000 to 2016)

Business model innovation framework

Previous reviews of business model literature

Reviewed papers and their subject fields

Source of our sample

Business model innovation areas and elements

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Further reading

Weill , P. , Malone , T.W. and Apel , T.G. ( 2011 ), “ The business models investors prefer ”, MIT Sloan Management Review , Vol. 52 No. 4 , pp. 17 - 19 .

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Importance of business models to the process of project management Essay

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Introduction

Defining business model, the process of project management, the relationship of business model and project management process, integrating business model and project management, importance of strategy and tactic, business model and innovation, business model and efficiency.

For a very long time, the general consensus was that business models and project management were separate disciplines. Here, the value of project management in an organization was the ability to offer the most effective and efficient way of conducting a project. Not much consideration was required by the management to understand if the project offered value to the firm through the business model.

But, these mindsets have changed since the current organizations have experienced rapid changes in technology and global competition. This problem is heightened by the continued use of the classical business models with basis on the principles of scale, labor, control, and structure (Johnson, 2006, p.4).

Such models are losing popularity because they cannot enhance the relationship between corporate strategy and techniques to implement it.

Today’s business requires actual delivery of value to customers, which gives reason for firms to address complex economic, social and business dilemmas as organic programs. This is where the importance of business modeling in project management has been suggested to fill the need.

Strategic project management emphasizes the integration of project management processes with business models to provide an all encompassing package. However, the importance of the business model is still doubtful. In an attempt to clear this doubt, this paper will evaluate the concept of business model in project management process and the emerging importance.

A very general idea of what constitutes business model can be attained from the definition of Magretta (2002, p.7) that business models are stories that try to explain how a business enterprises work. She asserts that a good business model answers two fundamental questions: who is the business customer and what does he value?

How can we deliver that value to the customer at the most appropriate cost? This means that the notion of a business model simply means the logic through which an enterprise earns money. Therefore, this definition brings about two principal questions that business models should respond to, one pertaining to the value a customer gets and the other to the firm’s ability to get value while serving the customer.

Amit and Zott (2001, p.500) present a narrowed but precise definition of business model as it focuses on e-business. They review how several theories have contributed to the issue of business modeling. These include; value chain analysis, virtual markets, resource-based viewpoint of the business, Schumpeterian innovation, transaction cost economics, dynamic capabilities, and strategic networks.

These authors realize that the theories contribute elements to the idea, but none per se can explain completely the idea of business models. After analyzing a sample of European and US e-business models they define the model as that which shows structure, content, and control of transactions designed to bring value by exploiting business opportunities arising.

Transaction content refers to both the information or products exchanges and to the capabilities and resources necessary. Transaction structure refers to all parties involved, their connections, and how they chose to work. Transaction governance refers to the control of the flow of products, resources, and information, the organizational culture, and the enticement to the parties.

Project management process involve organizing and leading a team of capable individuals in planning and executing a sequence of related activities that should be accomplished within a specified period of time and with a limited budget(Johnson, 2006, p.5). Due to the nature of the process, coordinating all the activities demands a process approach.

Frequently, development projects involve unexplored field, assumptions must be listed, assessed, as well as developing risk and contingency plans. The process also requires the close monitoring of the limited budget, schedule, and scope in order to deliver goals under the anticipated quality.

All these elements must be managed in a clear and systematic manner while initiating plans to indentify the responsibilities and resources necessary.

Moreover, there is the complexity of projects that call for a different approach as well as new ways in order to manage the limited resources and create value for all stakeholders.

This complexity is managed by de-constructing the project into manageable interrelated sections or processes, through the separation of the project into various process that the manager can better control the consequence and manage the challenges encountered.

Managing a project is a matter of identifying the strategies and tactics necessary in the system approach in order to deal with the various elements of that project. The strategies and tactics includes a holistic viewpoint of project situation, and the understanding that the project comprise of a sequence of interacting components operating to accomplish a goal so as to achieve the desired benefits.

The important thing is to indentify the process that entail the whole project management framework which assist in understanding the fundamental structure necessary for proper management of the project. This is achieved by identifying the most significant components that require careful and close analysis.

Business model is a function of project management and forms the platform for the integration of the various components of the process. While business model is the logic of the enterprise, the way it functions and creates value for customers, project management process refers to the planning, organizing, and controlling resources to successfully complete specific project objectives that facilitate the value creation for stakeholders.

Therefore, project management is both a strategy and tactic to facilitate the creation of value for stakeholders as described by the business model the organization is engaged in.

Having introduced the idea of projects management and business model, we can employ the generic two-stage framework to relate and integrate them. The figure below shows that business model is related to project management. As a strategy project management refers to the contingent plan of actions that determine the business model to use.

The related actions or the strategy are choices such as policies, structures, and assets that comprise the raw materials of business model. Thus project management entails the designing and redesigning of business models to allow a firm to achieve its goals.

Project management is a reflection of the realized business model. As a tactic, project management means the courses of actions that occur within the bounds defined by the business model.

Consistence with the idea of a strategy being a plan of action design to attain a particular objective, it can be referred to as the plan as to the kind of business model to use. It is a layout of committed alternatives made by management that lead to the creation of valuable and unique position which involves a different layout of activities. Strategy is not exactly the activity system, but the development of the system.

It is an elevated choice that has insightful implications on competitive outcomes. Therefore, the selection of a business model responds to the specifications of the subsequent strategy. Project management processes of a firm strategy define the elements to be considered when determining the most appropriate business model.

Tactics on the other hand play an important role in determining the level of value creation and capturing by organizations. In most cases, they echo the strategy though their characterization is influenced more by the business model used.

When project management process is viewed as a tactic, it means the efforts put by the firm to achieve particular goals when the most important elements of a strategy have been identified and considered as a priority.

At the heart of any business activity and the design of new projects, lies the idea of innovation which means the use of the existing resources in a different way, to perform new things, irrespective of whether the resources increase or not (Zotti & Amit, 2007, p.186).

This Schumpeterian reasoning of innovation through the recombination of resources is in harmony with project management in organizations that depend on new technologies to conduct their business.

The essence of business model design is to conceptualize and adopt new approaches of performing economic exchanges that can be attained, for instance, by connecting project participants that were previously unconnected, by linking the participants in new ways, and/or by designing new projects mechanisms.

Innovation through business model may complement projects to innovate products and services, production methods, marketing or distribution. An innovative business model applied to project management either creates a new market or innovate projects in existing markets (Dutton et al, 2004, p.33).

Therefore, a business model may serve to exploit the opportunity to create projects as well as be part of the process of developing the opportunity. The organizational leaders as the designers can create opportunities, for instance, by collecting new information and engaging communication technologies to facilitate project management in new ways.

Innovation through the business model may give rise to project rents. The rents may accrue the stakeholders between introduction of an innovation and the time it diffuses. Despite the perceived positive primary effect of business model on the success of a project, project rents may amass to all stakeholders.

Therefore, in order to envisage the overall effect of a business model on the success of a project, it is important to consider the effect of the model on the ability of the project to correct the value generated by the business model. This ability is determined by factors such as the ability to control information and the ability of the participants to take cohesive action.

When the availability of resources is high, business model will matter more to project success than when the resources are scarce. In periods of high resource philanthropy, project managers can more easily coordinate and negotiate with resource holders and demonstrate the benefits of their innovative business model.

Thus, organizations have easier access to the necessary resources in supporting and implementing their innovative projects driven by their business model. This means that, in environments described by high resources, the benefits derived from the business model are emphasized.

Organizations with innovation-centered business models are dignified to take the merit of the greater enthusiasm of stakeholders to facilitate a project. Therefore, business models are more associated with the success of project management process when resources are in plenty that during periods of scarcity.

Another way for organizations to create value is to imitate the existing organizations, offerings, and/or business models. This means that organizations may choose to replicate rather than create new ones–to do the same as other organizations but in a more efficient manner (Zott, 2003, p.119). To investigate the success implications of business models, we develop on project cost perspective.

This is effectual because the perspective refers to development of economic projects just like the business model make. Exchange qualities such as information irregularity and complexity, determine that projects will be organized into hierarchies in manners that reduce project costs and ensure success.

Researchers have generally emphasized on the importance of aligning business endeavors with appropriate structure of governance (Silverman, 2001, p.484). The studies reveal the importance of the direct relationship between good project management and organization performance.

Through business models especially those centered on efficiency, any organization can achieve efficiencies in their project management processes. Focusing on the use of business model to reduce project costs, this reduction can result from the reduction of complexity, uncertainty, and communication irregularity.

Business models have assisted organizations such as Amazon to pursue logistic projects that reduce cost and increase efficiency (Dutton et al, 2004, p.34). Other efficiency-bases business models have facilitated in increasing reliabilities and simplicity of projects, streamline the exchange of information, reduce costs, speed up projects, and provide scalability.

Similar to innovation, the overall effect of the business model on efficiency on project management process can be predicted by considering the effect of the model on the firm’s ability to correct the value generated by the business model. This ability is dependent on the organization’s ability to control information and ability of the participants to take unified action.

As noted earlier, such business model aims to minimize project costs, for instance through reducing complexity and linking participants deeply. These efficiency attributes are likely to reduce the cost of project management process while enhancing the efficiency of the process.

Business models centered on efficiency are particularly important during tough economic periods. When resources are not readily available for project management process to take place, the business models assumes greater significance as a differentiating factor for the organizations that during resource munificence.

During tough periods, organizations spend less and cost savings becomes very important in steering value creation. Generally, in tough economic environments most organization will halt most of their projects due to funding issues. However, for those employing business models based on efficiency, it is likely that the benefits derived from reduced costs are accentuated in favor of project management process.

Business model is that which shows structure, content, and control of transactions designed to bring value by exploiting business opportunities arising. On the other hand, project management process involve organizing and leading a team of capable individuals in planning and executing a sequence of related activities that should be accomplished within a specified period of time and with a limited budget.

The importance of business model in project management is revealed when project management is viewed as a strategy or/and tactic. Business model enhances innovativeness in project management processes as well as increasing efficiency that lead to cost reduction even during the time of resource scarcity.

Amit, R & Zott, C. 2001. Value creation in e-Business. Strategic Management Journal , 22, pp.493-520. Dutton, W., Kahin, B., O’Callaghan, R. & Wyckoff, A. 2004. Transforming Enterprise. Boston, MA: MIT Press.

Johnson, A. S. 2006. Project management and business processes: a look at strategy, structure, processes and projects. Retrieved from: https://pmworldlibrary.net/

Magretta, J. 2002. Why business models matter. Harvard Business Review, pp.1-8.

Silverman, B. 2001. Blackwell Companion to Organizations , London, UK: Blackwell Publishers.

Zott, C. & Amit, R. 2007. Business model design and the performance of entrepreneurial firms. Organization Science , 18 (2), pp.181-199.

Zott, C. & Amit, R. 2010. Business model design: an activity system perspective. Long Range Planning , 43, pp.216-226.

Zott, C. 2003. Dynamic capabilities and the emergence of intra-industry differential firm performance:Insights from a simulation study. Strategic Management Journal, 24, pp.97-125.

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Business Essay Examples

13 Business Essay Examples for Students

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Published on: May 1, 2023

Last updated on: Jan 30, 2024

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Are you struggling to figure out the structure, research, or data required to make your essay stand out? Or frustrated by the lack of inspiration and ideas for your essay?

But don't give up yet! We have a powerful solution that will make your essay writing a breeze. Our list of business essay examples is here to help! 

We have compiled expertly written business essay examples that will illustrate how to write a striking business essay.

With our examples, you'll be able to see how to structure your essay and generate creative ideas for your topic. And our tips will help you make the most of these examples.

So, let's dive in and get ready to learn!

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What is a Business Essay?

A business essay is a type of academic writing that focuses on business-related topics and issues. These essays can cover a wide range of topics such as marketing, finance, management, entrepreneurship, and more.

The importance of business essay lies in presenting a well-researched and informed analysis. To do this effectively, writers need to conduct extensive research and analysis on the topic at hand.

Referring to examples of business essays can help you gain insight into the structure, tone, and content of a well-written essay.

Business Essay Examples For Students

Here is a list of business writing examples

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Short Essay About Business

College Essay About Starting A Business

Types of Business Essay with Examples

When it comes to business essay writing, there are several different types that you might encounter. 

Here's a brief overview of each type, including their characteristics and an example of each.

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Case Studies

A case study is an in-depth analysis of a specific business situation or problem. It involves extensive research and data analysis to provide recommendations.

Case studies often showcase the application of theory to real-world business scenarios.

Research Papers

Research papers involve a more academic approach to business writing. They typically require an extensive literature review, data analysis, and original research. 

Business research papers aim to contribute new knowledge to the field of business. These often involve a hypothesis or research question.

Argumentative Essays

Argumentative business essays aim to persuade the reader to adopt a particular point of view or take a specific action. They present an argument and use evidence and logic to support their claims. 

Argumentative essays can address various business topics such as management practices, ethical issues, or market trends.

White Papers

A white paper is a document that provides a detailed explanation of a particular issue or problem, often with recommendations or solutions. 

White papers are typically used to educate stakeholders about a specific topic. These are often used in the business-to-business (B2B) context.

Comparative Essays 

Comparative business essays compare and contrast two or more topics or ideas. They typically analyze the similarities and differences between the topics to evaluate their pros and cons. 

Comparative essays can focus on various aspects such as products, companies, markets, or strategies.

How to Structure Your Business Essays

As you begin writing your business essay, it's important to structure it in a clear and organized way. 

Here's a step-by-step guide with business essay samples to help you do just that:

Executive Summary

The executive summary is a brief overview of your entire essay. It should summarize your main points and highlight your recommendations. 

This section should be written after completing the essay, as it gives a clear picture of what the essay covers. 

Here is how you start a business essay sample:

Introduction

The introduction sets the stage for the rest of the essay. It should introduce the topic, provide background information, and explain the purpose of the essay. 

Here is a business essay introduction example:

Industry Analysis

In this section, you'll conduct a thorough analysis of the industry in which the business operates. You should examine factors such as competition, market trends, and customer behavior. 

Here is a sample industry analysis

Key Issues or Problems

This section should identify the main issues or problems faced by the business. You should provide evidence to support your claims and analyze the impact of these issues. 

Here is an example paragraph:

Solutions or Recommendation

Here, you'll provide solutions or recommendations to address the issues identified in the previous section. Your solutions should be well-supported and feasible. 

For instance:

Implementation Plan

For this part, you'll outline a plan for implementing the solutions or recommendations you've proposed. This is sort of a description of the business model you suggest. 

This section should be detailed and include specific action steps. 

For example:

Finally, you'll wrap up your essay by summarizing your main points and reiterating your recommendations. 

This section should be clear, concise, and impactful. 

By following this structure, your business essay will be well-organized, coherent, and easy to follow for your readers.

Tips for Using Business Essay Examples Effectively

Now that you have quite a few business essay examples at hand, you should know how to use them effectively:

• Use them as a guide, not a template : While it's great to learn from examples, you should never copy them outright. Instead, use them as a starting point for your own research and writing.
• Analyze the strengths and weaknesses of the essay : Take note of what works well in the example essay, as well as any areas that could be improved. This will help you understand how to make your own essay even better.
• Use them to inform your own research and writing : Pay attention to the research methods, sources, and evidence used in the example essay. This can give you ideas for your own research and help you strengthen your arguments.
• Avoid plagiarism and ensure proper citation: Whenever you use ideas or information from an example, make sure to cite your sources. This will help you avoid plagiarism and maintain academic integrity.

You now have a plenty of business essay examples on different topics to help you get started!

By following our tips and studying the sample essays, you can confidently write your own essays that are clear, concise, and impactful. 

However, if you still find yourself struggling with your business essays, just reach out to our professional business essay writing service . 

We have the best online essay writing service and are ready to provide you a high-quality business. Our writing service has subject specialist writers who can tackle any business essay topic.  

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Why You Need Sustainability in Your Business Strategy

• 06 Nov 2019

In today’s ever-evolving world, debating whether to incorporate sustainability into your business strategy is no longer an option. Considering a values-driven approach when developing business strategies can be vital to long-term success.

Before getting into why sustainability is essential to successful business strategies, it's important to define what sustainability in business is.

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What Is Sustainability in Business?

In short, sustainability in business refers to the effect companies have on the environment or society.

A sustainable business strategy aims to positively impact one or both of those areas, thereby helping address some of the world’s most pressing problems.

Some of the global issues that sustainable business strategies help to address include:

• Climate change
• Income inequality
• Depletion of natural resources
• Human rights issues
• Fair working conditions
• Racial injustice
• Gender inequality

Although it may sound like it, sustainability in business is not purely altruistic. As Harvard Business School Professor Rebecca Henderson notes in the online course Sustainable Business Strategy , you can't use business to do good in the world if you're not doing well financially. Doing well and doing good are intertwined, and successful business strategies include both.

Many of today’s firms have adopted the triple bottom line , which suggests that organizations should focus on more than just profits, or the “bottom-line,” and also measure their environmental and social impact. These focuses can be referred to as “the three Ps,”: people, planet, and profit. Quite often, this sustainable approach to business ultimately boosts business performance.

Why Is Sustainability Important?

In addition to driving social and environmental change, sustainability initiatives can contribute to an organization's overall success. It may seem counterintuitive that spending more money on sustainable business practices can boost a company’s profitability, but studies show that the most sustainable companies are also the most profitable.

Environmental, social, and governance (ESG) metrics are often used to determine how ethical and sustainable an organization is. According to McKinsey , companies with high ESG ratings consistently outperform the market in both the medium and long term. While sustainability strategies might be an investment in the short term, they can lead to long-term benefits.

Benefits of Sustainability in Business

1. you’ll protect your brand and mitigate risks.

Ending up on the front page because of a scandal is a CEO’s worst nightmare. Not only do improper practices damage an organization’s reputation and cost it customers, but dealing with a public relations disaster can divert valuable human and financial resources from the core business.

You don’t want to become the company that allowed an oil spill or forced employees to work in unsafe conditions. By instituting a sustainable strategy that protects the environment and your workers, you also protect yourself from any damaging incidents.

2. Being Purpose-Driven Is a Competitive Advantage

Sustainability doesn't detract from business goals, and infusing your company with purpose can help attract a motivated, skilled workforce that drives financial success . In a Facebook Live discussion , Henderson noted a recent study showing that 89 percent of executives believe an organization with shared purpose will have greater employee satisfaction. Additionally, 85 percent say they're more likely to recommend a company with strong purpose to others.

Making your company an organization that does good in the world—rather than just a place that provides a paycheck—can be a competitive advantage when attracting the best talent.

Related : HBS Professor Explores the Impact Purpose Can Have on Your Organization

3. There's a Growing Market for Sustainable Goods

A 2019 study found that 73 percent of global consumers are willing to change their consumption habits to lessen their negative impact on the environment, and sustainable product sales have grown by nearly 20 percent since 2014. Millennials in particular are more willing to pay more for products that contain sustainable ingredients or products that have social responsibility claims. If your organization commits to sustainable products and practices, it could gain market share by converting sustainability-minded customers and increasing sales.

4. Cooperative Action Can Drive Change

As an individual, it can feel overwhelming, isolating, or simply impossible to effect change in a meaningful way. That’s not the case when the most innovative, successful, and powerful companies are collaborating to solve some of the world’s most pressing problems. While governments struggle to address public goods problems, purpose-driven companies working together to address these issues have experienced great success.

For example, palm oil is cheap, versatile, and found in about half of all packaged products, including soap, lipstick, and ice cream. But palm oil production has resulted in record greenhouse gas emissions and contributed to climate change.

In light of this, consumer goods producer Unilever committed to only using palm oil from certified sustainable sources in 2008. The organization cooperated with its competitors—as well as governments, NGOs, and indigenous peoples’ organizations—to lead an industry-wide adoption of sustainable palm oil. As a result, Unilever continues to be a thriving organization, and the world has reaped the environmental benefits of sustainable palm oil harvesting practices.

The Value of Sustainability

Sustainability doesn’t mean sacrificing profits or putting success on the backburner. Instead, it has become a crucial element to any organization’s successful strategy. A business that doesn't factor in sustainability risks is less successful in several measures, including profitability, growth, and employee retention.

By integrating sustainability into your business strategy , you can find success because, rather than in spite, of sustainability.

Do you want to take a more values-driven approach to business? Explore our three-week online course Sustainable Business Strategy and learn how organizations can succeed financially while also playing a role in solving some of the world’s most pressing problems.

This post was upated on March 22, 2021. It was originally published on November 6, 2019.

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Essays on Business Model

We found 30 free papers on business model, essay examples, costco wholesale corporation: mission, business model, and strategy.

Business Model

Corporation

In 2008, Costco achieved sales of around $71 billion. These sales were spread across its 544 warehouses located in different states, Puerto Rico, Canada, the United Kingdom, Taiwan, Japan, Korea, and Mexico. Among these warehouses, over 50 stores had annual sales exceeding $200 million. Notably, two stores even surpassed $300 million in sales. On average,…

Business Model Canvas Zillow Sample

The internet’s ability to supply entree to information has improved existent estate communications and concern ( Aalberts and Townsend. 2002 ) . Business theoretical accounts represent the concern logic of companies. They are executed by company web sites and are of import to the success of companies. E-business theoretical accounts represent the principle of how…

Cork’D Business Model: Building a Social Network for Wine Lovers

Business Process

Do you like the business model and do you think that Cork’d has a real opportunity that will make them money? Cork’d business model is focused on getting more users to sign in for free. For me this is a weakness for the company because it reduces the sources of revenue. At the same time…

Huckleberry Finn: A Good Role Model

Huckleberry Finn

“The Adventures of Huckleberry Finn” gives a ocular expression at the clip in which the writer Samuel Clemens lived. He explains how he felt about his life through the eyes of a immature male child named Huckleberry Finn. Huckleberry Finn has many escapades that teach him life lessons we can larn from today. Although there…

Kathmandu Sample Assignment

Online Shopping

Founded in 1987 as a small specialist outdoor retailer in Melbourne, Katmandu now operates in Australia, New Zealand and also the UK with a network of about 130 stores and an online shop. The company strives to provide quality, functional, and stylish products with technical attributes. Its products inspire customers to travel, explore the outdoors,…

Dell Operations Strategy

Information Technology

The global and industry issues companies face, combined with the current turbulent financial and economic environment, are challenging even the best companies to remain focused on their core capabilities, customers and markets. To be successful in an uncertain environment, a company must make the right choices that enable it to develop distinctive capabilities and remain…

Strategies to Fight Low-Cost Rivals by Nirmalya Kumar

Consumers desire the advantages that your new offerings would bring and are willing to pay for them. By reducing the cost of the benefits you plan to provide, you can attract more customers. HP’s restructuring has decreased Dell’s cost advantage from 20% to 10%. Customers have shown appreciation for additional benefits such as instant delivery…

Porters 5 forces for Flipkart

Threat of New Entrants : Industry seems to have very high potential but is at its nascent stage. Lots of scope of growth in the future Many small players might enter to explore the market High capital investment is required as it is still in the nascent stage. Would not be much of a deterrent…

Interfaceraise Case Study

Sustainability

1. What is InterfaceRAISE’s value proposition? InterfaceRAISE’s value proposition is that Interface’s firsthand experience in implementing sustainable strategies, practices and culture will accelerate other companies’ leanings and performance in this area. InterfaceRAISE will be a credible peer-to-peer consultancy in this field due to Interface’s reputation as a successful pioneer in sustainable manufacturing. Interface have a…

How to design a winning Business Model? Sample

Value proposition

Because of the economic lag in developed economic systems and the mature markets more and more companies are encouraged to come in in emerging markets. We can detect an increasing force per unit area for MNE to come in in emerging economic systems by aiming in-between and low Base of the Pyramid. The taking companies…

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Exchange Rate Models are Better than You Think, and Why They Didn't Work in the Old Days

Exchange-rate models fit very well for the U.S. dollar in the 21st century. A “standard” model that includes real interest rates and a measure of expected inflation for the U.S. and the foreign country, the U.S. comprehensive trade balance, and measures of global risk and liquidity demand is well-supported in the data for the U.S. against other G10 currencies. The monetary and non-monetary variables play equally important roles in explaining exchange rate movements. In the 1970s – early 1990s, the fit of the model was poor but the fit (as measured by t- and F-statistics, and R-squareds) has increased almost monotonically to the present day. We make the case that it is better monetary policy (inflation targeting) that has led to the improvement, as the scope for self-fulfilling expectations has disappeared. We provide a variety of evidence that links changes in monetary policy to the performance of the exchange-rate model.

The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.

MARC RIS BibTeΧ

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In addition to working papers , the NBER disseminates affiliates’ latest findings through a range of free periodicals — the NBER Reporter , the NBER Digest , the Bulletin on Retirement and Disability , the Bulletin on Health , and the Bulletin on Entrepreneurship  — as well as online conference reports , video lectures , and interviews .

Persistent Effects of the Paycheck Protection Program and the PPPLF on Small Business Lending

Mark Spiegel

Lora Dufresne

Download PDF (875 KB)

2024-26 | August 13, 2024

Using bank-level U.S. Call Report data, we examine the longer-term effects of the Paycheck Protection Program (PPP) and the PPP Liquidity Facility on small business (SME) lending. Our sample runs through the end of 2023H1, by which time almost all PPP loans were forgiven or repaid. To identify a causal impact of program participation, we instrument based on historical bank relationships with the Small Business Administration and the Federal Reserve discount window prior to the onset of the pandemic. Elevated bank participation in both programs was positively associated with a substantial cumulative increase in small business lending growth. However, we find a negative impact of both programs during the final year of our sample, suggesting that the increase may not prove permanent. Our results are driven by the small and medium-sized banks in our sample, which are not stress-tested and hence not included in Y-14 banking data, illustrating the importance of considering small and medium-sized banks in evaluating the performance of SME lending programs.

Suggested citation:

Dufresne, Lora and Mark M. Spiegel. 2024. “Persistent Effects of The Paycheck Protection Program and the PPPLF On Small Business Lending.” Federal Reserve Bank of San Francisco Working Paper 2024-26. https://doi.org/10.24148/wp2024-26

Download appendix  (pdf, 222 kb)

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How Companies Can Take a Global Approach to AI Ethics

• Swanand Deodhar,
• Favour Borokini,

Ideas about right and wrong can differ from one cultural context to the next. Corporate AI governance must reflect this.

Many efforts to build an AI ethics program miss an important fact: ethics differ from one cultural context to the next. Ideas about right and wrong in one culture may not translate to a fundamentally different context, and even when there is alignment, there may well be important differences in the ethical reasoning at work — cultural norms, religious tradition, etc. — that need to be taken into account. Because AI and related data regulations are rarely uniform across geographies, compliance can be difficult. To address this problem, companies need to develop a contextual global AI ethics model that prioritizes collaboration with local teams and stakeholders and devolves decision-making authority to those local teams. This is particularly necessary if their operations span several geographies.

Getting the AI ethics policy right is a high-stakes affair for an organization. Well-published instances of gender biases in hiring algorithms or job search results may diminish the company’s reputation, pit the company against regulations , and even attract hefty government fines . Sensing such threats, organizations are increasingly creating dedicated structures and processes to inculcate AI ethics proactively. Some companies have moved further along this road, creating institutional frameworks for AI ethics .

• SD Swanand Deodhar is an associate professor at the Indian Institute of Management Ahmedabad. His engaged research in topics such as digital platforms and digital transformation is rooted in deep collaboration with practice.  His work has appeared in journals of global repute and reference, such as  MIS Quarterly ,  Information Systems Research , and  Journal of International Business . You can follow him on LinkedIn .
• FB Favour Borokini is a PhD student with the Horizon Centre for Doctoral Training, hosted at the Faculty of Computer Science at the University of Nottingham. Her research interest is in the ethical framework that addresses harm in immersive environments. She holds a Law degree from the University of Benin, Nigeria, and is a member of the Nigerian bar. She has successfully leveraged her legal background to investigate issues such as the impact of technology on human rights, particularly women’s rights, the impact of AI on African women, and the experiences of African women working in AI across various sectors.
• Ben Waber is a visiting scientist at the MIT Media Lab and a senior visiting researcher at Ritsumeikan University. His research and commercial work is focused on the relationship between management, AI, and organizational outcomes. He is also the author of the book  People Analytics . Follow him on Mastodon: @[email protected].

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