Business Models 101: Creating, Delivering, and Capturing Value

A business model is a story about how an organization creates, delivers, and captures value. Therefore, before any organization begins thinking about business model innovation it must start by understanding how the organization currently creates, delivers, and captures value. Business models are designed to create value for a customer or end user. Understanding value through the lens of one's customers is the best way to create a compelling value proposition. The value proposition should be short, easily understood, and consistently shared by stakeholders both in and out of the company. The next element of business model story is about how the organization actually delivers the value it has promised to the market. According to the chapter organization charts do not show how teams form across functions to implement the core processes of the operation. An operating model depicts core capabilities necessary to deliver value and how they are linked to each other. A shared operating model picture also sends a clear signal to the organization on how departments and functions are expected to collaborate with a shared purpose for value delivery. Company's revenue sources and pricing in business models, plays an important role in determining how a business model captures value.