Business ModelInnovationCustomer Value PropositionCompetitive StrategiesValue Chain ManagementMarket SegmentationGrowth StrategiesRevenue ModelEconomic Value AddedInnovation Ten3 Business e-Coach at Ten3 Business e-Coach at

Ten3 Micro-course

Business Success 360







Business Model: Converting Innovation To Economic Value

Six Components of the Business Model

According to Henry Chesbrough and Richard S. Rosenbloom

1.Value Proposition - a description of the customer problem, the solution that addresses the problem, and the value of this solution from the customer's perspective.

2.Market Segment - the group to target, recognizing that different market segments have different needs. Sometimes the potential of an innovation is unlocked only when a different market segment is targeted.

3.Value Chain Structure - the firm's position and activities in the value chain and how the firm will capture part of the value that it creates in the chain.

4.Revenue Generation and Margins - how revenue is generated (sales, leasing, subscription, support, etc.), the cost structure, and target profit margins.

5.Position in the Value Network - identification of competitors, complementors, and any network effects that can be utilized to deliver more value to the customer.

6.Competitive Strategy - how the company will attempt to develop a sustainable competitive advantage and use it to improve the enterprise's competitive position in the market.

Business Model vs. Revenue Model

A Business Model is the umbrella term used to describe the method position in the value chain, customer selection, products, pricing of doing business.

A Revenue Model lays-out the process by which a company actually makes money by specifying how it is going to charge for the services provided.

New Business Model

Traditional corporations are overstructured, overcontrolled, and overmanaged, but underled. Today, top managers should rather concentrate of that handful of real managerial leadership tasks that will bring success in the future. Thus, a new business model is emerging, a model where most of key missions of the organization are distributed to the myriad individual pieces and unity comes from the vigor of people and the free flow of knowledge.