Social Innovation and Social Entrepreneurship by Luis Portales

Author:Luis Portales
Language: eng
Format: epub
ISBN: 9783030134563
Publisher: Springer International Publishing

7.3 Definition and Understanding of the Business Model Concept

The concept of business model does not have an agreed definition. Its study identifies the central elements that must be known and identified during its construction, analysis, and development. These elements are related to the generation of wealth, the strategy, and the operation that a company has at the moment of being operating in the market.

The simplest way to define business model is on the part of wealth generation understood as the statement about how a company makes money and maintains its flow of profits over time (Morris, Schindehutte, & Allen, 2005). This statement should include the business logic of the company, that is, not only how it makes money, but also what it offers, to whom it offers and how it can be achieved (Osterwalder, 2004). In summary, the business model is as a conceptual and holistic tool that allows us to understand the way in which the elements that make up the company interact through their different strategies, in such a way that they allow the company to create, provide, and capture value, exploiting market opportunities (Aldana Fariñas, Ibarra Santa Ana, & Loewenstein Reyes, 2011; Osterwalder & Pigneur, 2010).

The business model organizes and complements the components of the strategy and execution of the business (Fig. 7.1). At a strategic level, the business model includes the orientation and the path that will guide the company in its implementation (Seelos & Mair, 2007). It includes making decisions from a general perspective to achieve the vision proposed by the entrepreneur or leader that leads to the generation of profits by offering or selling of a good or service (Zott, Amit, & Massa, 2011). At the level of execution or operation, the business model represents an architectural configuration, focusing on the internal processes and the design of the infrastructure that allows companies to create value and carry out their operation (Morris et al., 2005).

Fig. 7.1Business components

(Source Author with information of Osterwalder 2004)

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