Four Components of a Business Model

1. What compelling reason exists for people to give you money? (or votes or donations)
2. How do you acquire what you're selling for less than it costs to sell it?
3. What structural insulation do you have from relentless commoditization and a price war?
4. How will strangers find out about the business and decide to become customers?

via Seth Godin.

Seth describes the four elements a business model needs to address. Number 1 is the value proposition; two is your financials (revenues-cost) and revenue model; three is your infrastructure management, partner network, innovation mechanisms, brand loyalty (is that structure though?); four is your customer interface and marketing efforts.

It's a break down in plain English of what other have called the Nine Business Model Building Blocks:

(via Osterwalder, Pigneur, Tucci; Clarifying Business Models: Origins, Present and Future of the Concept)

Business Models: Just a Way to Sell Stuff?

[...] the best business model in the world is also the simplest: make stuff that's insanely great.
[...]
The real problem with business model innovation is that it dilutes the incentives to make good stuff in the first place.
[...]
When you can make awesome stuff, you don't need to find "better" ways to sell it.

via Umair Haque on Harvard Business.

I usually think Umair Haque is spot on in his analyses. Although I completely agree with him that the best business model is built around having a product or service that is loved by the users, he's got it wrong when it comes to looking at business models. I'm sure he only wanted to spark a discussion when introducing his polemic argument that a business model equals 'a way to sell stuff' (in the end he's director of the Havas Media Lab, an advisory on 'business model and strategic innovation') but let's take a step back and and see what a business model actually is.

"A business model is a conceptual tool that contains a set of elements and their relationships and allows expressing the business logic of a specific firm. It is a description of the value a company offers to one or several segments of customers and of the architecture of the firm and its network of partners for creating, marketing, and delivering this value and relationship capital, to generate profitable and sustainable revenue streams." (A. Osterwalder, Clarifying business models: Origins, present, and future of the concept, worth a read!)

Clearly, a business model is more than 'selling stuff'. Innovation in business models then means to look for new ways to organize your business (intelligently allocate what you have) to be able to serve your customer in the best way you can while making some money from it (intelligently profit from the value you create).

But does that 'dilute the incentives to make good stuff in the first place'? I don't think so: a business model is at its' core about thinking about the customer and delivering a great product. But it's even more than that: it's the logic that helps a company to build an awesome business around the product it delivers.

... of course not everyone does that - but there are great examples. Look at Apple (and maybe one day Tagcrumbs as well, when we really get started).