What is a business model?
According to Michael Rappa at DigitalEnterprise.org:
"In the most basic sense, a business model is the method of doing business by which a company can sustain itself -- that is, generate revenue. The business model spells-out how a company makes money by specifying where it is positioned in the value chain."
During the '90s, when the Internet was the boom town where coders and b-school students were panning for easy gold, the term "business model" was all the rage. In practice, however, out on the frontier where Web-based businesses operate, that definition often lacked that crucial "makes money" element. Now, as the Web has become more established, and importantly, as new thought has entered every sector of business, both online and off, as a result of the experience born of the last 15 years of commercial exploitation of the Internet, business models everywhere are undergoing greater examination as a matter of necessity.
In the current economy, a company needn't be an online grocery store to see its business model break. Last week, we witnessed the inevitable correction of the automotive industry in illuminated spectacularly by the bankruptcy of GM. The old model which was reliant on the impossibility surrounding making, marketing and selling their cars and trucks, and in recent years, even more reliant on making money through financing, is being given an overhaul at former GM holding Saturn, now owner by Roger Penske. The Detroit Free Press quotes him:
"The proposed acquisition marks the beginning of a new business model in this industry," he wrote, "a model in which the distribution side of the business controls the brand, and manufacturing is conducted by one or more sub-contractors."
This week, we'll explore current thinking about business models, take a look back at some historical changes, and try to scry what the future holds so that we aren't doomed to repeat the past. Here's what's coming up (links will go live as the items are posted):
- Wednesday, June 9 on Associated Content - The Business Model Year: Many traditionally solid businesses with traditionally solid business models have been taken a beating over the last year. We'll look back at the tumult and try to figure out who was felled by fundamental flaws, and who has the opportunity to tweak their models and come back stronger than before.
- Thursday on Helium - Business Models in Motion: We'll get an overview of business models throughout history and see some of the wrong turns that we brilliant folk of the 21st century would never, ever make ourselves. *ahem*
- Friday on Facebook - "I have stared into the abyss, and it was my business model": We'll take a look at a small business that had to stare its own business model square in the face ... and blink.
- Saturday on eHow - How to Develop Business Model that Won't Break: Hopefully, we'll be able to tell you how to do just that!
- Sunday in our own forums - your thoughts: What's your business model? Is it sustainable in the long run? Is it time to make a change?
- Monday on our inaugural podcast - our thoughts: We'll review this week's discussion on business models and talk about some of your salient comments ...
... Now make some! We want to hear from you. Have you examined or changed your business model lately? Are you nursing a new business idea and trying to figure out where your revenue will come from? Please click on the comments link and let us know!
