Derived deductively from the literature and inductively from a multiple case study research (11 cases) we define the business model as a system of key activities explaining (1) the value creation and appropriation by participants as well as (2) the deployment and accumulation of key resources (cf. figure above). Any business model can be designed by means of four ‘containers’ (participants, key resources, key activities and value) and their dynamic interaction.
Value is primarily created for customer segments and the focal organization (FO). The business model approach allows to map the total value offered to customer segments, going from the value proposition (or ‘core’ value, e.g. the bundle of products and services offered, the price, usability, customization, design, ...) to the comfort of delivery, payment facilities, customer service, ... Value for the FO is primarily financial. The revenue model (i.e. how revenue is generated), the cost structure and the margins are integrated in the business model.
If another participant (e.g. a key supplier) plays a crucial role, the business model explains how value is captured by this participant. Once the current BM has been designed, the FO can evaluate whether the value for this participant is commensurate with his (strategic) importance for the BM.
In the activity system value drivers can be specified since they enhance the value creation. The novelty driver is related to innovation in the activity system, i.e. on the level of content (novel activities), structure (novel links between activities) and governance (novel participants). Lock-in activities refer to switching costs or incentives for business model participants. Interdependencies between activities can create additional value (complementarities) or cost savings (efficiency driver).
Key resources include capabilities, assets (tangible, intangible or financial) or other resources that are deployed by any participant and are crucial to realize the business in line with the strategic choices made. In some cases we have learned that the value appropriation by a participant is accumulated in the latter’s key resources (e.g. net profit accumulating to substantial equity, co-creation sessions bringing knowhow on a higher level, confidence from customers built up through various value elements offered). In other cases the key resource accumulation is resulting directly from one or more activities instead of being the result of value appropriation.