In 2004, Alexander Osterwalder published his PhD thesis on Business Model Ontology, which gave a thorough review of business models up to that point and integrated this in a conceptual model [1]. A simplification of that model forms the basis of the business model template defined by Strategyzer[1], the company that Osterwalder created with his thesis supervisor Yves Pigneur [2].

Since then a few more templates for business models have been proposed. Henry Chesbrough published a useful structure that can be used in developing business models for new technology [3] and Mark Johnson published a structure for transforming your business model [4]. These newer business model templates attribute more importance to the value network of a company, and to its profit model. This corresponds to the greater role that networks and venture capital play today in making decisions about business models.

In this blog I describe a new business model template that incorporates these recent developments. We refer to this template as the TVE business model template. The detailed analysis can be found in a white paper which is accessible online free of charge.

The TVE business model template

A business model is a conceptual model of how a business creates, delivers and captures value. In any business model template, we can expect the four elements of this definition to appear: value, value creation, value delivery, value capture. In the TVE template, we have split value creation into two aspects, namely the value creation logic and value creation technology. Here is the template:

The value proposition describes the offering to the customer. The offering specified here can be a product or a service, and it may list a core and complementing products or services. For example, the offering may be a high-pressure air compressor, complemented with integration and maintenance services.

A value proposition may describe customer segments, customer goals (jobs to be done), and the unique selling points. A competitive analysis may list alternative offerings available to the customer, and the differentiators of your offering with respect to those alternatives.

The offering is created using a value creation logic. For products this is a Porter value chain, for services it is the problem-solving cycle, and for platforms is ecosystem enabling logic. See the blog on value creation logics for more information.

A value creation logic lists the top-level activities that contribute to the value proposition. Today, organizations may outsource some of these value creation activities in addition to outsourcing supporting activities such as infrastructure management or HRM.  This results in a value network where each partner contributes to the value offered to the customer. The value network shows how value is delivered to the stakeholders in the model.

The profit model of the TVE template shows how value is captured. We model the value network quantitatively using e3value. This includes the definition of the pricing model and testing market assumptions using quantitative simulation.

Value is created using technology. The technology part of the template lists the technology needed to create value as well as technology needed to participate in the value network, such as opportunities for data sharing, coordination process requirements, and channels used for communication with partners, suppliers, customers and other ecosystem actors.

The Netflix business model

As an example, here is the business model of Netflix. A more detailed version has been presented in an earlier briefing supported by a freely white paper.

Bibliography

[1] A. Osterwalder, “The Business Model Ontology: A Proposition in a Design Science Approach,” Université de Lausanne, 2004.
[2] A. Osterwalder and Y. Pigneur, “Business Model Generation,” Wiley, 2010.
[3] H. Chesbrough, Open Innovation. The New Imperative for Creating and Profiting from Technology, Harvard Business Review Press, 2006.
[4] M. Johnson, Reinvent Your Business Model. How to Seize the White Space for Transformative Growth, Harvard Business Review Press, 2018.

[1] https://www.strategyzer.com/