A System Perspective on Business Models

Jucun Liu, Purdue University

Abstract

The business model concept was first introduced in the early 1990s alongside the boom of the Internet. Although the Internet bubble has burst, the popularity of the business model concept continues to increase. It is being used more and more often by not just people in business management, but also the general population, as people, for example, talk about a successful start-up. Although it has become part of the vernacular today, the business model concept itself is lacking in theoretical roots. Thus, a gap exists regarding the business model concept. Its usefulness in practice has been proven in numerous business cases, yet academia remains divided on the definition and appropriate means to use the concept. A thorough literature review reveals that the concept of a business model has been framed in various ways, ranging from the strategic logic of a company to the activities a company performs. This misalignment creates barriers for the advancement of this body of knowledge in both research and practice. Researchers have thus called for a clearer and more operational definition of the concept. With this goal in mind, this qualitative study sought to advance business model understanding by proposing a business model conceptualization that: 1) Is robust in its theoretical roots and informs the critical characteristics of a business model, 2) Highlights potential means to resolve the debate over the definition of a business model through examination of its broad range of conceptualizations and uses, and, 3) Guides business model design through a robust exploration of design options for users interested in business model development. To achieve this goal, a three-stream study was conducted. The first stream focused on creating a business model construct that is rooted in advanced system theory and on proposing a related business model framework. This objective was achieved through a combination of scholarship of integration and thematic analysis. A resilient complex adaptive system (RCAS) perspective was taken to proactively construct a business model conceptualization. To fully understand an RCAS, a literature review was carried out on the notion of systems. Theories from general system theory (GST) to an RCAS were examined to form a full understanding of these foundational concepts. The resulting construct was employed as the underlying structure of a business model framework. To create a set of functions that a business model should include, an extensive literature review was conducted on 150 business model research articles. Thematic analysis was employed to analyze words and phrases used by authors to describe the critical components of a business model, and then aggregate these views into a set of mutually supportive functions that represent the essence of a business model. Eight functions, termed “elemental functions”, centered on value were defined. These elemental functions are able to capture all components identified in the studied literature and collectively display required RCAS characteristics. This RCAS business model framework lays the foundation for a unified landscape of business model conceptualization and acts as a potential universal language in this body of knowledge. The developed framework also serves as the basis for the subsequent lines of work detailed below, and grounds both further research and application.

Degree

Ph.D.

Advisors

Tong, Purdue University.

Subject Area

Business administration

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