According to Osterwalder and Pigneur (2010), a business model is utilized to demonstrate the rationalization of the methods an organization utilizes to create, capture and deliver value. The business model serves as a blueprint for strategy implementation through the processes, structures and systems of the organization; accordingly, nine building blocks can be utilized to describe the logic behind the company’s intentions to make profit (Osterwalder & Pigneur, 2010). The nine building blocks named by Osterwalder and Pigneur (2010) are customer segments, value propositions, channels, customer relationships, revenue stream, key resources, key activities, key partnerships and cost structure. These building blocks are used to describe the: imperative groups of organizations or people that will be served, value created by services and products within a defined segment of customers, communication and capacity with which value will be delivered, relationship types within the specific segments, cash generated in customer segments, assets that are critical to a successful business model, critical functions that must be carried out by the company to ensure a successful business model, network of partners and suppliers make the model work, and costs that are required for business model operations (Osterwalder & Pigneur, 2010).
Each block of the business model continues to “build” upon the previous block to create a business model that will effectively and efficiently generate value. An effective model will not compromise the desired culture of the business; rather, they will complement one another (Osterwalder & Pigneur, 2010). All businesses are founded on customers; therefore, a profitable customer base is crucial to the survival of any company (Osterwalder & Pigneur, 2010). The business model must make the decision of which customer segments to ignore and which ones to serve; consequently, the business model is then designed to encompass the customer’s specific needs (Osterwalder & Pigneur, 2010). By identifying and focusing on specific customer segments, the customer’s needs are being satisfied, while value is being created for the company (Osterwalder & Pigneur, 2010).
A business model is a representation of the governance, structure and content of transactions, designed in such a way that value is created by exploiting business opportunities; therefore, they are frequently considered in a structural context (Mason & Mouzas, 2012). According to Mason and Mouzas (2012), a business model is flexible, and should be developed as such. Flexibility is necessary to meet the ever changing needs and demands of the modern customer; in turn, this will promote adaptability which will allow the business to cultivate innovation (Mason & Mouzas, 2012). Maintaining flexibility will allow innovative responses when customer demands fluctuate (Mason & Mouzas, 2012).
According to Baden-Fuller and Haefliger (2013), the business model can be defined as the...