Business Model

There is no clear definition of the business model in the research or business community. The term "business model" is currently used to describe the various business processes, including strategy. The quantitative business model, which has existed from the inception of business and commerce, states that revenue minus cost equals profits. The three variables in the model, revenues, costs, and profits, are critical for the company's survival. That's why we should include the three elements of the quantitative business model in developing a conceptual business model. 

The simplified framework for developing a business model is a three-step process. In the three-step process, all participants' profit motives are considered critical for the success of the business process. The simple process for designing a business model would help small and large businesses improve the business model creation processes to generate more value for both the customers and the companies. 

This approach is slightly different from the explanation of the business model by the researchers in the past. The primary goal of businesses is to make long-term profits by offering products or services to potential customers. In other words, companies create products or deliver services to solve the customers' problems and make profits.

A simplified business model explains the business process using the three elements of the quantitative business model. The simplified business model development starts with three basic questions: (1) How will revenues be generated? (2) How will the costs and expenses be managed? (3) How will profits be generated? The process for developing a business model is the same for small, medium, and large-sized businesses. In the simplified business model, the business's profit motives all the participants are considered in each step to ensure the company's success. The profit motives in the model include monetary, psychological, and social profits. 

In the three-step framework, creativity and innovation are critical for the revenue generation, cost management, and profit generation processes. In the simplified framework, all of the functions of a business, such as marketing, financial operations, operational management, human resources, and technology, are critical for the success of the business process. The following chart shows the three-step involve in creating a Business Model for a digital company connecting passengers to a vehicle owner-operator.

In the above model, the assumption is that the start-up is interested in competing with the taxi service segment of the transportation industry by offering an alternative solution to customers. The above matrix can be used to build an effective business model that incorporates the business participants' profit motives. The three-step framework will help businesses create a business model, analyze an existing model, or formulating a particular business strategy. Furthermore, the framework is practical because managers could easily measure the performance by using quantitative analytical tools.