Short description of framework: A framework illustrating how value is created and captured by an organization through the decisions made and the resulting consequences, illustrated in causal loops.
Main strengths: The framework captures what an organization is trying to do, key values the management wants to create, and the incentives for suppliers, partners, and customers. It also illustrates if management is stringent in its decisions and if different choices results in consequences that reinforce each other or not.
Background
Casadesus-Masanell and Ricart based their framework on the four major categories common to most business model definitions uncovered by Shafer, Smith and Linder in their article The Power of Business Models, from 2005.
Framework details
Casadesus-Masanell and Ricart define the business model as (i) the set choices and (ii) the set of consequences derirved from those choices. They distinguish between three different types of choices: policies, assets, and governance. Consequences are classified into flexible and rigid.
- Assets (Choices) Choices regarding tangible resources such as manufacturing facilities.
- Governance (Choices) Choices regarding the structure of contractual arrangements that confer decision rights regarding policies or assets.
- Flexible (Consequences) Consequences that are sensitive to the choices that generate it
- Rigid (Consequences) Consequences that does not change rapidly with the choices that generate it.
Example using the framework
In the example below Casadesus-Masanell and Ricart illustrates the business model of Ryanair using bold and underlined to indicate choices, with rigid consequences in boxes, and flexible consequences in plain text.
Tools for using the framework:
- Gliffy and other diagram software
Related publications of interest:
- Linder, J., & Cantrell, S. (2000). Changing business models: Surveying the landscape. Accenture Institute for Strategic Change
- Casadesus-Masanell, R., & Ricart, J. E. (2007). Competing through Business Models. Working paper.
- Casadesus-Masanell, R., & Ricart, J. (2010). From Strategy to Business Models and onto Tactics. Long Range Planning .
- Seelos, C. (2010). Theorizing and Strategizing with Models: Generative Models of Business Models. Working paper . Barcelona, Spain.
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