Understanding Business Models and Business Model Risks

Abstract

This paper develops a business model framework by integrating common substances and features among the various business model definitions in the literature. The model consists of four basic and interrelated elements: the exchange model, the organizational model, the resource model, and the financial model. The objective is to make business model descriptions more coherent with major perspectives on strategic management as well as more conducive to entrepreneurial practice. The paper also introduces a general structure to describe business model risks, which incorporates risks to the value of market, firm's share of that value and the competitive sustainability at the model element, relationship and system levels. We hope that the business model framework and risk structure become useful tools for business model design and evaluation.