The Evolution of the Business Model

In their book Business Model Generation, Alexander Osterwalder & Yves Pigneur define a business model as “the rationale of how an organization creates, delivers and captures value.” Even more succinctly, a business model defines what a business does and how it makes money.

In the not so distant past, the pace of business was slower and the business models utilized were simpler. Manufacturers produced a product and sold it for a profit, establishing a positive reputation over time to ensure ongoing loyalty from customers. Retailers operated stores and shops where they sold the goods demanded by locals. Service providers sold their time and expertise to solve problems---fixing a broken pipe, drafting a needed contract or resolving a challenging tax issue.

Fast forward to today and business has changed considerably. Competition is often global. Markets can be difficult to define. Potential clients are seemingly everywhere---and nowhere, at the same time. Consumer behavior shifts in weeks and months, not in years or decades. As a result, savvy business professionals have developed new business models to create, deliver and capture value.

While traditional business models (manufacturer, retailer, franchiser, distributor, service provider, broker) still exist and often thrive, it is important for business owners and executives to understand new and evolving business models---to broaden your understanding and enable you to capitalize on new opportunities.

To help with this, I’ll be exploring four (relatively) modern business models in the next few weeks. These business models are multi-sided platforms, freemium and technology enabled services .