DisruptiveInnovation.Org - Key Concepts

Business Model

A business model includes the creation of some product or service that satisfies customers, as well as the resources and processes necessary to deliver that product or service profitably. The potential of a product or service to satisfy customers is called a value proposition. A company must assemble resources, such as property, machines, people, brands and capital, with the intent to deliver on the value proposition. These resources are then assembled into repeatable patterns or set ways of creating the product or service. In order for a company to become profitable, it must create the product or service in such a way that revenues outweigh costs. The value proposition and profit formula in a business model define the priorities of a company, and what resources and processes it chooses to invest in. The priorities of a company are strongly influenced by customers, who must be satisfied to maintain revenues, and investors, who expect the company to become increasingly profitable.