Seddon, P. B., Lewis, G. P., Freeman, P., & Shanks, G. 2004. The case for viewing business models as an abstraction ofstrategy.

Keywords: strategy, business model, competitive advantage, eBusiness

The paper examine the meaning of “business model” and “strategy”,aiming to explain why it might be useful to use the term “businessmodel” to mean an abstraction and “strategy” to mean to mean aparticular firm’s plan

The authors argue that the terms are frequently but the meanings aremisunderstood but:

The goal with the diagram is to “suggest that it might be helpful to view the difference between a business model and a strategy as a difference in the level of abstraction”.

For the authors, the overlapping with the two concepts is so big that if there is no abstraction there would be no point in having two terms.

Regarding Strategy the main author is Porter [1996,2001]

For Business Model is Magretta [2002]

Strategy by Porter

Business Models by Magretta

The arguments are summed up in the following definition:

Conclusions

Casadesus-Masanell, R., & Ricart, J. E. 2010. From strategy to business models and onto tactics.

Integrating strategy, business model and tactics

Organized framework to integrate and relate the notions of strategy, business model and tactics.

The figure shows related but different concepts

“Strategy is a contingent plan of action as to what business model to use. The firm’s available actions for strategy are choices (…) that constitute the raw material of business models.”

“Business models are reflections of the realized strategy. “

“(…) tactics are also plans of action, which take place within the bounds drawn by the firm’s business model.”

Conceptual framework to separate and relate concepts

“a business model, we argue, is a reflection of the firm’s realized strategy.”

Strategy and business model differ when there are important contingencies

Clear distinction between strategy and tactics

Business model is about how an organization earns money

How it identifies and create value for customers

How it captures of this value as its profit in the process

“’A business model depicts the content, structure, and governance of transactions designed so as to create value trough the exploitation of business opportunities’”

Content: goods or information exchanged

Structure: parties that participate

Governance: the way flows of information, resources and goods are controlled

Parts of business models

Choices – made by management about how to operate

Consequences of the choices

Business models

choices

Policy choices

Asset choices

Governance choices

Business models

Business models often generates virtuous cycles, they are notpart of the definition but can be crucial.

Often too complex and unwieldy to represent for working withso the analyst must simplify using aggregation anddecomposition.

Tactics are residual choices

They play a crucial role in determining how much value is created and captured by firms

The tactical choices from a firm affect the value creation a value capture of other firms with which it interacts.

Business model employed by a firm determines the tactics available.

Business models and tactics are intimately related

Tactics

“(…)plan of action designed to achieve a particular goal.”

Porter states “strategy is the creation of a unique and valuable position, involving a different set of activities.”

Strategy

Strategy and Business Models

Strategy and Tactics

“In the analogy of the automobile, strategy is about changing features of the automobile such as shape, engine power, wheels, seats, etc... Tactics, however, are about what one does with the automobile, such as driving it fast or slow, or with the windows down. Reconfigurations to the car are possible, but costly, but tactical changes are usually (comparatively) easy to implement in the short term.”

A business model is a direct result of strategy, but is not, itself, strategy.

Tactical interactions has well-defined rules of play. Strategic interaction is more complex.

For every business model modification, the designer need to assess the effects that will have on tactics.

Authors conclude that the exercise of designing a new business model is close to an art.

They believe that clear definitions is a necessary condition for progress in the field.

Conclusions

Teece, D. J. 2010. Business models, business strategy and innovation.

Paper with the purpose to understand the significanceof business models and explore their connections.

A business model defines how the enterprise createsand delivers value to customers, and then convertspayments received to profits.

Business model innovation can it self be a path way tocompetitive advantage.

Business model – the theoretical foundation Despite the importance it lacks of an intellectual development

In economics textbooks business models are an unnecessarystep.

They also lack of an acceptable place in organizational andstrategic studies, and in marketing science.

Business model is about the benefit the enterprise will deliver tocustomers, how it will organize to do so, how it will capture aportion of the value that it delivers.

Develop a successful business model is insufficient by itself toassure completive advantage.

Strategy analysis is an essential step in designing a competitivelysustainable business model.

Having a differentiated architecture for an enterprise’s businessmodel is important to the establishment of competitive advantage.

But innovating will no build by itself a competitive advantage.

It is important that the business model are not easy to copycat.Three factors to prevent:

Implementing a business model with systems, processes and assetshard to replicate

Level of opacity

Incumbents in the industry may be reluctant to copycat if it involvescannibalizing or upsetting other important business relationships.

Scholars have recognized that technological innovation without acommercialization strategy is likely to lead to (self-)destruction.

Good business model design and implementation, coupled withcareful strategic analysis, are necessary for technological innovationto succeed commercially.

There are two extreme modes by which innovators can capturevalue from innovation:

The firm assumes the responsibility for the entire value chain

Outsourced business approach

In between, a mixture of the previous approaches

The creation of new organizational methods and in particular newbusiness models are of equal – if not greater – importance to society,and to the business enterprise.

The innovator will fail if he cannot offer a valuable proposition tocustomers and set up a profitable business system.

Designing a new business model requires creativity, insight, and agood deal of customer, competitor and supplier information andintelligence.

Designing a good business models is in part an art.

“Get the business model wrong, and there is almost no chance ofbusiness success e get it right, and customize it for a marketsegment and build in non-imitable dimensions, and it willcontribute to the firm’s competitive advantage.”

Conclusions

A business model describes the design r architecture of the valuecreation, delivery and capture mechanisms employed. It crystallizesabout what customers want, how they want it and what they willpay, and how an enterprise can organize to best meet customerneeds, and get paid well for doing so.

Business model must be more than a good logical way of doingbusiness, it must also be non-imitable in certain respects.

is common to see great technological achievements failcommercially because little, if any, attention has been given todesigning a business model to take them to market properly.