A business model represents how a company intends to create value. At the center of a business model is the product or the set of products that produce customer benefit. A business model requires from a company to describe its approach to revenue generation. Revenue is a function of the product price and the amount of customers buying the products. The company further needs to specify on which markets its wants to operate and to define how it plans to market its products, i.e. how to reach the customers and inform them about the products by help of marketing or branding. In the business model, the company also defines the channels for selling the products or set of products.

At their core, business model concepts address one fundamental question: How does a particular company function as a value-creating system?

The purpose of a business model concept is not to describe a company in detail, but to make the logic of how its business creates, delivers, and captures value explicit, discussable, and designable.

Business model concepts provide a common language across functions such as strategy, marketing, operations, finance, and innovation. They enable stakeholders with different perspectives to discuss the same organization using a shared structure, reducing misunderstandings and siloed thinking.

These frameworks reveal the cause–effect relationships within a business by showing how:

• internal capabilities and governance enable offerings,
• offerings are delivered to markets and customers,
• revenues and financial outcomes are generated,
• external actors and constraints influence performance.

This visibility is critical because many assumptions about “how the business works” otherwise remain implicit.

Business model concepts help identify:

• strengths and weaknesses,
• inconsistencies between value creation and value capture,
• hidden cost drivers,
• dependency risks (e.g. suppliers, partners, capital),
• misalignment between market needs and internal capabilities.

They provide a structured way to ask the right questions.

Notably, the most well known and most widely applied business model concept is the

Business Model Canvas (BMC)

The canvas is structured around nine interconnected building blocks that together explain how a business operates. These blocks cover the customer side of the business, the internal infrastructure required to deliver value, and the financial logic that sustains the organization.

At the center of the canvas is the value proposition, which explains what products or services are offered and why customers find them valuable. This value proposition is linked to customer segments, which define the groups of customers the organization aims to serve, and to channels and customer relationships, which describe how the value is communicated, delivered, and maintained over time.

On the operational side, the canvas includes key resources, key activities, and key partnerships. Together, these elements describe the assets, actions, and external collaborations required to create and deliver the value proposition efficiently.

The financial dimension of the Business Model Canvas is represented by revenue streams and the cost structure. These elements explain how the organization generates income from customers and what costs are incurred in operating the business model.

The Business Model Canvas is designed as a lean, pragmatic, and highly accessible tool. Its primary strength lies in simplicity. By organizing a business model into nine tightly defined building blocks on a single page, it enables fast understanding, discussion, and iteration. The BMC places strong emphasis on the customer-facing logic of a business: value propositions, customer segments, channels, relationships, and revenue streams. Internal aspects such as resources, activities, and partners are included, but mainly to support the customer and revenue logic. As a result, the BMC is especially well suited for start-ups, innovation projects, early-stage ventures, and workshops, where speed, simplification, and experimentation are valued higher than completeness.

The Business Model Components Map (BMCM) has been designed as a map that displays the most relevant components of a business model in an orderly manner. All components are grouped in four areas:

1. Value Origination:

   Value origination represents the starting point of the business model and explains how value is created at its source inside the organization. It captures the internal logic, governance, and conditions that enable a company to develop offerings and prepare them for the market.

   • Products with Customer Benefit & Pricing is the central origination component because it defines what the company brings into existence as an offering and why it matters. Here, value originates through product ideas, innovation, concept development, and product management across lifecycles. Pricing sits directly inside this component because the moment the company sets a pricing logic—whether value-based, cost-based, market-based, algorithmic, subscription, or freemium—it is already shaping how value can later be captured and sustained.

   • Operations & Functions describe how product ideas are turned into reliable and scalable outputs. This component ensures that the value chain functions smoothly, from production and manufacturing to inventory management and fulfillment. Operational processes, quality management, and optimization activities make value creation efficient and repeatable. Supporting and control functions ensure coordination, compliance, and stability across the organization, enabling products and services to be delivered consistently.

   • Resources & Asset Use explain the foundation on which value origination rests. Assets such as infrastructure, technology, data, human skills, intellectual property, and financial resources only create value when they are actively deployed. This component shows how tangible and intangible assets are mobilized to support innovation, production, and organizational performance. Effective use of resources determines productivity, adaptability, and the company’s ability to scale or innovate.

   • Company Management, Organization, & Culture integrate all elements of value origination. Leadership, vision, organizational design, decision-making structures, and cultural norms determine how effectively resources, operations, and governance requirements are aligned. This component ensures coherence, adaptability, and long-term orientation.

   • Cost Management supplements Company Management by controlling the economic foundation of value creation. It ensures that products, operations, and organizational structures are designed within sustainable cost boundaries. Cost transparency and efficiency protect the viability of the business model from the outset.

   • Environment, Society, & Governance belong to value origination because they define the framework conditions under which value creation is legitimate and possible. Regulatory requirements, societal expectations, ethical standards, sustainability considerations, and governance structures influence how products are designed, how operations are organized, and which strategic options are feasible.

   • Owners & Capital shape value origination by defining financial constraints, objectives, and strategic priorities. Ownership structure, capital availability, investment horizons, risk tolerance, and return expectations influence which products are developed, how aggressively the company grows, and how resources are allocated.

2. Value Proposition & Delivery:

   Value proposition and delivery focus on how internally created value is shaped into a compelling offer and brought to customers in a way that builds trust and long-term relationships.

   • Markets & Customers define where and for whom value is created. This component explains market selection, segmentation, customer needs, purchasing behavior, and geographic or cultural context. It anchors the business model in real demand and ensures that value creation is market-relevant.

   • Branding & Marketing connect the company’s internal capabilities to external perception. This component explains how the company positions itself, differentiates its offerings, and communicates meaning to the market. Branding expresses values, promises, and identity, while marketing ensures visibility and recognition. Together, they shape expectations and influence how customers interpret the value proposition.

   • Sales & Channels describe how the value proposition physically and digitally reaches customers. This component explains how customers are acquired, how relationships are initiated, and how transactions take place. Different channels and sales approaches determine market reach, accessibility, and customer convenience. Sales and channels translate interest into actual demand and ensure that value is delivered at the right place, time, and format.

   • Customer Service represents the relational side of value delivery. It explains how the company supports customers before, during, and after the purchase. By managing the customer journey and ensuring satisfaction, this component turns one-time transactions into ongoing relationships. Customer service strengthens loyalty, retention, and advocacy, extending value delivery beyond the initial sale.

A Business Model is working if it eventually creates value and this value creation allows the business model to become self-sustained. The company that employs the business model is not burning equity and doomed to fail.