When is a Business Model not a Business Model? When it's Really a Value Delivery Architecture!

Everybody finds Osterwalder & Pigneur's "Business Model Generation" book attractive. It's visual, it has great content, it appears to be crowd-funded and designed. It has great illustrative examples and tools within it. What's not to like?

But there is a dark problem at the heart of the construct we know as "Business Model" (BM) and it really hit me a few days ago when listening to a presentation researching what different Business Schools thought their BMs actually were. It turned out that very few of the Business Schools approached actually understood what the term meant, and when it was explained in terms of O&P's nine-box, 4-space model, they found it difficult to apply to their institution. The comment was made that subsequently, many of these Higher Education (HE) institutions were in the process of being "down-sized" and it was suggested that perhaps the failure to understand BMs as a construct and apply it to themselves, may have been the source of their financial problems (that they might have been more business-like in their approach to running themselves).

It suddenly hit me that the phrase "Business Model" has been misunderstood and been taken literally to mean a "model of a business" when the words don't actually match what O&P have offered within their methodology; and because their content is so beautifully designed, no-one has noticed this problem or if they have, they have assumed that it doesn't matter as a minor issue of semantics.

What has actually happened is that people hearing the phrase "Business Model" have assumed that it is a model of a business, when what has been popularised via O&P has actually been what I would provisionally call a "Value Delivery Architecture" that explains how the value within a Value Proposition will or could be delivered and maintained, profitably. In other words, O&P's BM might be more accurately described as the model of the business architecture required to deliver the value propositions offered by each product or service. It is not a model of a business.

Thus the confusion when the HE business academics in the research exercise were asked about their BM. The only way you can use the O&P BM architecture is around each product and service and not for an assembly of products and services. 

Hence, they should have asked the business schools to populate a portfolio of their products and services, identifying niche, premium, licensed and commodity, and then got them to construct the BM (or more usefully the VDAs) for each. They might have learnt something interesting about the way that business education is becoming a media business where the iTunes Value Delivery Architecture plus digital disruption is creating a new global business HE market for the iTunes generation.


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