3. Business Model Design

To design, means to architecture an activity system by which firms do business and capture the essence of the BM. Teece defines some key elements of a BM design: it must capture value from innovation, deliver and capture value from customers at the same time. This must be an "art" as "[T]he chances of good design are greater if entrepreneurs and managers have a deep understanding of user needs, consider multiple alternatives, analyze the value chain thoroughly so as to understand just how to deliver what the customer wants in a cost-effective and timely fashion, adopt a neutrality or relative efficiency perspective to outsourcing decisions, and are good listeners and fast learners".

To design a BM, a company must do a careful strategic analysis to assure that it will lead the company to commercial success, since the lack of analysis may lead the company to failing. To address a market opportunity, the firm's managers may need to span across the firm and its boundaries to craft the best design. Sometimes, it may be necessary for managers to expand their perspectives to find an appropriate BM that enables the company to capture the value from technology.

According to Amit and Zoot and Zoot and Amit, a BM has three main components: content, structure, and governance.

  • Content is related to how information and goods are exchanged, and to the required resources and capabilities to enable exchanges. It represents the selection of activities that are performed.
  • Structure is related to the network size and the ways in which parties are linked and exchanges are executed, to the order and timing of exchanges, to the market mechanism, and to the flexibility and adaptability of the transaction structure. It describes how the activities are linked, meaning the sequence of these activities.
  • Governance is related to the locus of control of flows of information, goods, and finances. It also includes the nature of control mechanisms, like trust ad incentives. It refers to whom performs the activities.

To create value through a BM, a firm can adopt a design theme. A design theme is a design configuration of elements or the degree to which they are structured and connected by distinct themes. According to Amit and Zoot, and Zoot and Amit, there are four design themes: novelty; lock-in; complementarities; and efficiency. To summarize the BM design, Zoot and Amit consider it as an activity system that addresses all vital issues of a business, "and give[s] managers and academics a language and a conceptual toolbox to address them and engage in insightful dialogue and creative design". To develop the investigation about BM and entry modes, the component's structure proposed by Amit and Zoot and Zoot and Amit was select as it provides a clear way to understand the concept of BM.