Clarifying Business Models: Origins, Present, and Future of the Concept

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Communications of the Association for Information Systems (Volume 16, 2005) 1-25



Alexander Osterwalder University of Lausanne and Yves Pigneur University of Lausanne Christopher L. Tucci Swiss Federal Institute of Technology

ABSTRACT This paper aims to clarify the concept of business models, its usages, and its roles in the Information Systems domain. A review of the literature shows a broad diversity of understandings, usages, and places in the firm. The paper identifies the terminology or ontology used to describe a business model, and compares this terminology with previous work. Then the general usages, roles and potential of the concept are outlined. Finally, the connection between the business model concept and Information Systems is described in the form of eight propositions to be analyzed in future work. Keywords: business models, business model concept I. INTRODUCTION Following an article in CAIS discussing the relationship between strategy and business models [Seddon, Lewis et al. 2004] we believe that some clarifications need to be discussed in the domain of business models. Admittedly, the topic of business models led to a lot of publications by journalists, business people, consultants and academics. It is discussed in various different domains, such as e-business, information systems, strategy, and management [Pateli and Giaglis 2003]. Yet, despite all the ink spilt and words spoken, business models are still relatively poorly understood [Linder and Cantrell 2000], particularly as a research area. For example, a survey we conducted with members of the IS community on the ISWORLD mailing list shows that there is a divergence of understanding among people and particularly between business-oriented and technology oriented ones. We asked the participants for their definitions of what they understand to be a business model (Table 1). From 62 respondents we received 54 definitions. For 44 Clarifying Business Models: Origins, Present, and Future of the Concept by A. Ostenwalder, Y. Pigneur, and C.L. Tucci


Communications of the Association for Information Systems (Volume 15, 2005) 1-25

definitions we could distinguish between a more value/customer-oriented approach (55%), similar to the understanding of a business model outlined in this paper and a more activity/role-related approach, which we understand as the more established field of enterprise models (45%). From a company perspective, the former approach is more outward looking, while the latter is more inward looking. These results show that a discussion of the meaning, but also usage of the business model concept, particularly among and between the business and IS domain is timely. Table 1. Business Model Survey Number of businessoriented respondents 17 8 25 Number of technologyoriented respondents 7 12 19 Total respondents 24 20 44

Value/customer-oriented business model definition Activity/role-oriented business model definition (EM) Number of respondents

The literature shows that the topic of business models is often discussed superficially and frequently without any understanding of its roots, its role, and its potential. Thus, this paper aims to shed some light on the origins, the present, and the future of the business model concept, particularly in the Information Systems domain. To do so, we first discuss the concept by itself and then trace the possible areas of contribution, notably in IS, of this relatively young research topic. In this paper we describe the business model's place in the firm as the blueprint of how a company does business. It is the translation of strategic issues, such as strategic positioning and strategic goals into a conceptual model that explicitly states how the business functions. The business model serves as a building plan that allows designing and realizing the business...
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