The Case for Viewing Business Models as Abstractions of Strategy

Abstract

This paper examines in detail the meaning of two frequently used terms, namely, “business model” and “strategy”. It is argued that as used by leading thinkers these two terms might reasonably be interpreted as being roughly equivalent in meaning. However, we argue that the term “business model” can serve another distinct and potentially useful role. In this role, a business model is viewed as an abstraction of a firm’s Porter-1996 strategy. It outlines the essential details of a firm’s value proposition for its various stakeholders and the activity system the firm uses to create and deliver value to its customers. However, unlike strategy, business models do not consider a firm’s competitive positioning; they potentially apply to many firms. Such abstractions, it is argued, attracted the attention of many researchers because they are useful for evaluating alternative possible future ways of building profitable businesses.