The Real Value of Business Models

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The real value of “e-business models”

Stephen Chen
Visiting Fellow, National Graduate School of Management, Australian National University, Canberra, Australia (stephen.chen@anu.edu.au)

O

ne of the factors most commonly cited when Internet firms succeed is the “business model.” Much of the success of such e-commerce pioneers as Dell, Amazon, and eBay has been attributed to their novel Internet business models. And one of the first questions in assessing any new e-commerce venture during the Internet boom was likely to be, “What’s the business model?” Conversely, when high-profile businesses like Boo.com have failed, this too has often been blamed on the model. Post-crash, however, the sentiment has changed and the question increasingly being asked now is, “Hasn’t that model been tried and failed?” Many in the e-business investment community commonly assume that none of the following are profitable: e-tail, portals, and marketplace models; advertising-based models; B2C models; and pure Internet, or pure-play, models.

New e-technologies such as
mobile Internet phones and
interactive television are widely
predicted to generate a wealth of
opportunities through the creation of
new e-business models. At the same time,
numerous high-profile Internet ventures have
gone belly-up and millions of investors around the world have been caught out. A focus on the successes can give the impression that an ingenious business model is all that is needed to create a thriving e-firm. But do these models really matter? What can we learn by examining the Internet failures, or the problems inherent in each model? What are the real key factors determining the survival or failure of e-firms?

However, despite the frequency of these statements in the business press, little research has been done to examine their validity. In retrospect, it is easy to blame all e-business failures on a flawed model, but identifying what makes a good model is more difficult. Although...
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