Business Models as Models
Drawing on research undertaken in the history and philosophy of science, with particular reference to the extensive literature which discusses the use of models in biology and economics, we explore the question ‘Are Business Models useful?’ We point out that they act as various forms of model: to provide means to describe and classify businesses; to operate as sites for scientific investigation; and to act as recipes for creative managers. We argue that studying business models as models is rewarding in that it enables us to see how they embody multiple and mediating roles. We illustrate our ideas with reference to practices in the real world and to academic analyses, especially in this Long Range Planning Special Issue on Business Models.
Introduction
Does the idea of business models matter? The term has become widely used in
board rooms, by managers in organisations, by consultants, by commentators of
business, and even on radio and television programmes aimed at the general
public. Indeed, it is more widely used nowadays than almost any other concept
in strategy: when people are asked ‘what is strategy’? most give an answer that
includes the words business model. The ubiquity of the term and the plethora of
its uses suggest that business models are profoundly important to the world of
work e yet man-agement academics rarely put the concept centre stage,
preferring their established stresses on such concepts as competitive
advantage, core capabilities, routines and resources. Public perception of its
usefulness seems to fly against this academic reluctance (in main-stream
journals and texts) to acknowledge the term, its uses and its consequences.
This article suggests answers to the
questions ‘Why is the concept of business models useful’? and ‘Who uses them,
for what, and how?’ We have sought answers that take seriously the ways in
which business models function as models in various different forms, and
brought into the management field insights drawn from writing and first hand
research by historians and philosophers of science who have probed how models
are used in disciplines beyond the management arena. Models, mod-elling and
their discussion have a long history - particularly in biology and economics –
that pre-dates the arrival of the business model concept in management
thinking. We mobilize our thoughts in three sections:
The first compares scale models and role models to explain how the notion
of business models enables us to classify businesses in a taxonomy or a
typology. Although management scholars have long sought to classify their
world, we argue that using the business model notion - and business models
themselves - as classifying devices provide valuable ways to expand our
under-standing of business phenomena and the development of ideal types.
The second section compares business models with the model organisms of
biology and the mathematical models of economics to show how business models
form instruments of scientific enquiry. This section is more strikingly novel
to management academics, for it looks at the biology analogy in a new light:
not that of an evolutionary theory of the firm (e.g. Nelson and Winter), but of
the use of the methodology of the life sciences.1
The third section suggests that specific business models function like
recipes: as practical models of technology that are ready for copying, but also
open for variation and innovation. Here we move back to a more comfortable
arena for management scholar-teacher-practitioners, but also one that opens up
perspectives for further development.
Taken together, these three sections reveal how models, and modelling
generally, and the use of business models in particular, already play a central
role in progressing management thinking.
Business models as descriptions of ‘kinds’
in a taxonomy
One role of business
models is to provide a set of generic level descriptors of how a firm
orga-nises itself to create and distribute value in a profitable manner. This
definition is manifest in many different ways and forms, and Table 1 shows
a few examples of how writers is this issue approach business model definition.2
The table also provides a column showing how these writers make use of the many
different notions of ‘model’ we discuss and analyse in this article. These
(and, of course, many other) articles share a common feature ethey describe
typical kinds of organisations and behaviours by firms (or perhaps units within
multi-business firms) in such a way that we can label different kinds of behaviour
and then classify individual firms accord-ingly. Thus, the general idea of
business models is intimately linked with notions of taxonomies and ‘kinds’.
When business models come up in business discussions, they are often linked
with the names of firms, each understood to epitomise a particular form of
behaviour. These are existing firms, whose behaviour has been observed and is
often given in a ‘nutshell’ description alongside their name. Some prefer the
use of the name alone - the ‘McDonalds business model’ or the ‘South West
Air-lines business model’; others prefer the counterpart brief description - ‘the
franchising model’ or the ‘low cost airline model’, because it is the real
business example. This naming and labelling in-vokes two different ideas of
models that have the long-standing, common, senses of scale models, and role
models. Scale models offer representations or short-hand descriptions of things
that are in the world, while role models offer ideal cases to be admired - in
these respects at least, the notion of business models resonates with our
experience of models, from the arts and sciences to ordinary, everyday life.
A replica scale model of a tractor or a fire engine is a scaled-down
version of a real thing, cap-turing only certain details of its style or
mechanism; a model ship in a bottle has a similar character. They are small,
simplified, and only describe some aspects of the real object: they might be
de-scribed as ‘nutshell’ models, for it is not just an issue of scale, but of
picking out the elements that seem most important to represent the object being
modelled. Such models are very different from the role of a Chanel dress as a
model for the mass market to copy, or Beckham’s legendary ability to ‘bend’ the
flight of a ball acting as a ‘role’ model for young soccer players. These
models do not offer scaled-down versions or generic descriptions: they are what
they are, and play only an exemplary role. Thus, scale models are copies of
things; role models are models to be copied. In busi-ness models, the two
notions come together: the organisations named above and in Table 1 have exemplary status: real examples which give life to the short-hand descriptions - as Google is to the internet business model.
Table 1. What is a business model?
|
Authors |
Definition |
Focus
of analysis includes |
Notion
of Model |
Examples
include |
|
|
|
|
|
|
|
Teece |
How a firm delivers value to customers |
Situates
the business model concept. |
Kinds
and Types; |
Swift
meat packers, Sea Land |
|
|
and converts payment into profits |
Relates
business model innovation |
Role
Models |
containers,
Netflix online DVD rental |
|
|
|
to
technical innovation. |
|
|
|
Zott
& Amit |
. a system of interdependent |
Emphasizes
interdependencies beyond |
Kinds
and Types |
Ebay,
Inditex (Zara), First Data corp, |
|
|
activities that transcends the |
firm
boundaries. Good design |
|
FriCSo
(start up in lubrication) |
|
|
focal firm and spans its boundaries. |
requires:
Content (what), Structure (links) |
|
|
|
|
|
and
Governance (who does what). |
|
|
|
Williamson |
. cost innovation business model offers |
How low
cost business models |
Role
Models to |
Shanghai
Zhenhua Port |
|
|
advantages in radically new ways |
from
China (and India) work. |
follow |
Machinery,
Haier refrigeration, |
|
|
meaning more for less. |
|
|
Nano
car- Tata |
|
Gambardella |
Business model is a mechanism |
Business
model innovation |
Scale
Models |
Many
references including |
|
&
McGahan |
for turning ideas into revenue at |
in high
technology sectors that allows |
or
short-hand |
Google,
Apple, Ideo, Yogitech + |
|
|
reasonable cost |
small
firms to capitalise on their ideas. |
descriptions |
biotech
start-ups |
|
Itami
& |
. business model is a profit |
Puts
learning centre stage, |
Role
Models and |
Toyota
and Google |
|
Noshino |
model, a business delivery |
classification
by firm systems |
Model
Organisms |
|
|
|
system and a learning system |
|
|
|
|
Yunus, |
A value system plus a value constellation |
A
social business model that lies |
Role
Models |
Grameen
Bank + Telenor, |
|
Moingeon
& |
|
between
for profit and charity |
|
Veoila
and Danone collaborations |
|
Lehmann- |
|
|
|
|
|
Ortega |
|
|
|
|
|
Casadesus
& |
The logic of the firm, the way it operates |
Interfaces
between business model, |
Models
capable of |
Ryan
Air |
|
Ricart |
and how it creates value
for its stakeholder |
strategy
and tactics |
manipulation |
Telmore/TDC |
|
Demil
& |
The way activities and
resources are used to |
Dynamics
of business model |
Model
Organisms |
Arsenal
FC |
|
Lecoq |
ensure sustainability and growth |
change
over time |
|
|
|
Sabatier, |
Cross roads of competence and |
Portfolios
of business models |
Recipes |
French
biotech firms |
|
Rousselle
& |
consumer needs |
|
|
|
|
Mangematin |
|
|
|
|
|
|
|
|
|
|
|
Sources: See text. |
|
|
|
|
scale models are copies of things; role models
are models to be copied. In business models, the two notions come together
We leave go of the
exemplary notion of model for the moment and its possibilities for copying
(al-though we come back to it later) to explore how models understood as scaled
down short-hand ac-counts lead to descriptions of kinds: taxonomy and
classification. The real world of firms is made up of very many enterprises
that behave and are organised in very different, individualistic ways. In
contrast, theories of firm behaviour tend to be very general, such as the economists’
theory that firms act as if they aim to maximise profits, or the institutional
theory in management that firms mimic other firms to gain legitimacy (even
though this may not maximise their profits).3 Business models operate at an
intermediate level between these two poles. Management scholars generate
descriptions of firm behaviours that capture their salient features: like scale
models, these business model descriptions are neither so general that they fail
to distinguish the main differences between firms, nor are they so absolutely
particular that they cover every last detail of contract and activity. Scholars
recognise that firms e for all sorts of reasons - do not all behave the same:
but nor are they all completely different, for if they were, every firm would
appear to have a different business model. This ‘in-between’ quality is the
first sense of what we mean by a ‘generic level’, but it is intimately linked
with the second sense that lurks in the idea of business models - that there are
generic kinds of behaviour which are distinctly dif-ferent. And it is these
generic kinds of behaviour - that form the set of known business models at any
point in time - that enable scholars to classify individual firms that they
study into groups according to those described kinds. So, this classificatory
function of the business model concept depends on these short-hand
descriptions, these scale-models.
The virtues of
descriptions at a level that characterise and label ‘kinds’, and so enable us
to classify further individual observed examples into one of those kinds, is
most evident in the field of biology. Knowing that something is an animal is
often not very helpful, as we usually need to know what kind of animal it is.
We can describe the characteristic differences between insects and mammals -
taken as a whole - and make those descriptions useful for classifying things
from the living world into these (and other) natural kinds. We can go down a
level of detail and still this relationship - between description of kinds and
classification - works well to sort spiders from flies, distinguish mosquitoes
from houseflies, and recognise the difference between the sting-ing wasp and
the benign hover fly. And while biologists who work on fruit flies do - for certain
purposes - want to sort their specimens by eye colour or genetic detail, for
other purposes such a highly detailed level of description is not needed.
Different dimensions and levels of description serve different purposes; but
the notion of ‘kinds’ is critical to the successful characterization of similarity
and the definition of difference. Like the kinds of natural history, the role
of business models as descriptors supports a classificatory function to
distinguish and sort firms, because the descriptions they generate reveal kinds
of business behaviour. This points us to the other sense of generic that is
relevant here - as referring to ‘genera’ or classes: to ‘kinds’ of things.
This root notion
of generic is nicely compatible with how economic historians have described and
categorized the cohorts of firms that characterised the new ways of organising
economic activity that marked particular historical eras (as illustrated in
Table 2). Interestingly, these are not modern labels, but the contemporary
labels given by the actual participants in those economies, suggesting that the
notion of business model (if not its label) has long antecedents. In mediaeval
times, goods were manufactured by members of guilds: the business model was one
of single workshops, small-scale production, of craft skills used to produce
single item goods with guaranteed-quality outputs and high value-added per
piece. The first industrial revolution in the late 18th and early 19th
centuries saw the development of the ‘factory system’ in Europe.
In this new
business model, firms arranged their innovative manufacturing processes inside
factories, with division and specialisation of labour, and with mass production
but of a heterogeneous collection of goods (such as a variety of textiles) with
low costs and low prices. (Such changes, as for other revolutions in business
models, typically came with different learning systems and different inter-firm
relations.) While the innovators of the guild system are surely lost in the
mists of time, we know quite a lot about the innovators of the factory system,
for they built ‘model factories’ in ‘model communities’ (such as the textile
mills and associated settlements of New Lanark in the UK and Lowell in the USA)
that offered a new formula for firm success that others flooded to copy. In the
second industrial revolution of the late 19th/early 20th century, the ‘American
system of manufactures’ replaced scarce labour with extensive cap-ital in the
form of machines (such as the Ford moving production line) that made
homogeneous goods, at low cost for the mass consumer (Singer sewing machines as
well as Model T Fords).4 Arguably another industrial revolution is underway
now, in the ‘Chinese system of manufacturing’ - Williamson alerts us (again in
this issue) to a new breed of emerging market players who have moved from
applying their labour cost advantage to technologically backward processes,
towards a new business model offering much higher technology at low cost,
coupled with un-matched choice of products. Citing its use in exemplar firms
such as Haier (white goods) and Shanghai Zhenzua (port machinery), he warns
this new base of competition in manufacturing will leave few places for more
traditional rivals to hide.5
Of course many
other business model taxonomies could be constructed - indeed, each business
model definition will focus on different characteristics and so is likely to
produce a different set of classes and so possibilities for classification (as
we can see in Table 1). For those concerned with taxonomy in management - as in
biology - there is no fixed number of labelled boxes, rather a set of kinds
which may grow or change over time as ideas and knowledge about things in the
world develop. For example, the models of industrial economics developed in the
early half of the last century characterised types of firms according to their
number in an industry and their competitive behaviour on the basis of pricing,
whereas now (according to game the-ory) industrial behaviour is more likely to
be characterised by a firm’s strategic possibilities and choices, which
provides quite a different taxonomy.6 Each different way of sorting - based on
new ideas, new empirics, or even new business experiences - may reveal
different aspects to be of importance and so different elements to be analysed,
just as Darwin’s tree of life revealed different connections and was used for
different purposes to our modern genetic tree of life. In-deed, the current
debates amongst biologists and philosophers about the implications of the revolution
in genetic information hinge on rethinking the kinds of things that there are
in the world, and how they relate to each other.7
different ways of sorting
[firms]- based on new ideas, new empirics, or new business experiences [mean]
different aspects [become] important so different elements have to be analysed
Building a
taxonomy of business-model classes is not a straightforward task (as Lambert
shows for e-business models), and nor is the subsequent process of classifying
businesses into those classes. These projects, and their problems, have been
well rehearsed in earlier literatures in management, as they have in other
fields in which taxonomy and classifications are dominant activities.8 They are
worthwhile activities however, for the possibilities they give us for not only
defining but also for exploring characteristic similarities and differences and
the relationships between classes, as well as for developing understanding,
explanation, prediction and intervention. As both Crombie and Hacking note,
taxonomy is one of the classic means of acquiring scientific knowledge.9 But
while it is of course very useful to be able to recognise different kinds of
firm behaviour, and be able to classify or sort firms into those different
generic types, some further way of characterising business models as models is
needed in order to understand the many other roles they can e and do e play,
both for academics and for managers.
This brings us to
a broader question about what sort of things business models are. It may help
here to begin here with the difference between taxonomy and typology as a
preliminary to under-standing the difference between kinds and types. The usual
way to differentiate them is to think of a taxonomy as being the classes (or
kinds) of things observed in the world, and as being developed from empirical
work, bottom up. A typology is usually understood as delineating types of
things (or events) where the types are decided theoretically or conceptually by
the scientist, top down (see Table 3).10
However, Max Weber’s ‘ideal types’ - a highly influential notion in modern social sciences - are a bit of both. For Weber, ideal types are generalisations constructed from the facts of experience, yet they create abstract concepts that he described as ‘pure fictions’. So ideal refers here not to the notion of perfection, but to the adjectival form of ‘idea’ - and type refers not to a classificatory kind we meet in the world, but to a ‘mental construct’. The ‘ideal type’ notion is powerfully useful because, as he explained, it mediates between our ideas and theories on the one hand, and the things in the world we want to describe and explain in immediately practical ways:
The ideal type
concept will help to develop our skill in imputation in research: it is no
‘hypothesis’ but it offers guidance to the construction of hypotheses. It is
not a description of reality but it aims to give unambiguous means of
expression to such a description.11
This notion of
ideal types and typologies fits particularly neatly into the management
literature, for we can go back to some classic examples in the history of the
field that have particular relevance to this discussion of business models. The
1960s Aston Studies programme, led by Derek Pugh, developed labels and accounts
of types of organisational behaviour (rather than of business models).12 His
re-search process involved empirical description and measurement along various
broad dimensional categories of organisational behaviour, descriptive
statistical work to abstract patterns of those particular characteristics from
the mass of those observations, and analytical statistical work to draw out the
con-nections between these patterns, from which he conceptualised and labelled
characteristic types of organisations. This sounds very Weberian in its
combination of empirical analysis of kinds turning into conceptual ideal types,
and of taxonomic work leading to a typology, and indeed Pugh related his work
directly to Weber’s mode of research and substantive work on organisations.
Business models have the characteristics and
fulfil the roles of ideal types: they are based on both observation and
theorizing. But what empirical and conceptual scientific work goes into
establishing them?
Business models,
too, might be understood as ideal types, for they seem to have the characteristics
and fulfil the roles that Weber associated with such types: they are based on
both observation and theorizing. But if so, what kind of scientific work -
empirical and conceptual - goes into establishing business models? They are
certainly not isolated by inference from any large statistical study, as Pugh’s
were: instead we argue that business models are produced by model work: that
is, scholars investigate, with some considerable depth of scientific research,
particular examples that form our set of business model exemplar cases. These
scientific enquiries by management scholars provide an empirically and
conceptually grounded account of each case to establish the full portraits
associated with their ideal types, to accompany the shorthand (nutshell)
descriptions by which they are known (the scale model). This is what we mean by
‘model work’, a term that relies on the notion of scientific models, and the
way models are used in the sciences. This mode of research contrasts with
Pugh’s process of data collection, extraction of patterns, correlation of
patterns, and attribution of labels. His statistical work to construct a
typology of organisations is replaced in the business model literature with
model work in the construction of a typology of business models (see again
Table 3). But, so far, we do not have enough explanation of what is involved in
scientific research with models to support the claim that it is this kind of
work which turns particular cases and short-hand business model descriptions
into something as rich and as useful as an ‘ideal type’.13
Business models as model organisms for investigation
So we turn our
attention to consider what kind of a scientific model a business model is, and
what kind of work is done with it. It is not always obvious why a particular
kind of business model is successful. For example, what elements are the real
keys to the success of South West’s low cost airline model or Google’s internet
model, which details have to be exactly so to make it work, and which are
irrelevant and just happen to be present in the particular firm that is
studied, rather than true of all firms of that type?14 Recent commentaries from
the history and philosophy of science on the many kinds of models that inhabit
the sciences, and on the ways models are used by scientists and for what
purposes, throw some interesting light on these questions.15 In both biology
and economics, as in management, models are used to address and help solve one
basic problem - lack of knowledge. All three fields have grand theories, and
lots of detailed studies, but sometimes lack a way to fit general ideas to the
descriptions of events and objects of life in order to understand them. This is
where models come in. Economic models are usually mathematical objects (often
quite small) which are taken to represent various relationships in the economy
as a whole, or the economic behaviour of firms or people. In biology we also
find a different kind of model, the so-called ‘model organism’: real life
objects such as the fruit fly, the laboratory mouse, the zebrafish, the C.
elegans worm, the Arabidopsis plant, and so forth, chosen to represent
different kinds of life.16 These two very different kinds of models
nevertheless function for those sciences in rather similar ways, ways which may
illuminate the use of business models in management science.
The economist and
the biologist both use their models as valuable and sophisticated instruments
to enable them to gain more knowledge about their worlds. In both fields,
models need to be in-vestigated to provide a full understanding of how the
model works and to know and understand its qualities. These investigations
involve various forms of manipulation or experiment. Economists experiment with
mathematical models to learn about the behaviour of the made-up world
repre-sented in their model, to analyse its properties and to see what
limitations if offers. They experiment by varying elements in the model in
response to different ‘what if’ questions that come from their theories or from
real world events (What pricing rules should monopolies follow? What should a
government’s reactions be to a financial crisis, or a firm’s to doubled oil
prices? How would con-sumers’ behaviour change if they paid for carbon usage?)
and then reasoning mathematically with their model to come up with their
answers.
Similarly,
biologists experiment with their model organisms to learn how they work, but
here the experiments are ‘real’ laboratory experiments. By intensive study of a
few kinds of organism (a worm, a fish, a plant, a yeast, a mammal, an insect,
etc.) the community of biologists study how life is lived in these different
forms. They learn what behaviour is specific to each form, and what is general
and shared between them, which processes and elements can usefully be compared
and which not, and what makes them special and what does not.17 For both groups
of scientists, models are the place where they figure out how their particular
kinds of ‘things’ of the world work. They check these model findings against
their theories, and also against behaviour in the world, to see how far the
findings match the characteristics of the real world that their models pur-port
to represent. Research via their models can yield insights into the grand
theories, or the small-est details of behaviour, or help develop ideas about
mechanisms that operate at some middle level. For both economists and
biologists, the model object must be manipulable, or experimentable e for models
must offer the kinds of descriptions that can be reasoned with, the kind of
resources that can be investigated to answer questions (as Morgan explains in
detail).18
When we look
carefully at how business models are used by their communities, we find a
variety of activities going on which we suggest makes them more similar to the
model organisms of biology than to the mathematical models of economists. We
have already seen how the academic uses busi-ness models to describe and give
labels to how firms operate in various different generic ways, and then to
classify firms according to which kind of business model they employ. But we
also want to know why and how each model is successful as a business, why it is
profitable. At that point, the particular business models we study take on
aspects of the model organisms of biology. Indeed, one could argue that the
exemplar case business models (such as McDonalds) are to management what the
model organisms are to biology: real-life examples to study.19
exemplar case business models (like McDonalds) are to management what model organisms are to biology: real-life examples to study
But biologists also use model organisms to learn about life more generally. For them, the model they investigate is not just any mouse: it is ‘the lab. Mouse’ - a particular strain bred to a standardized form, and then investigated in exhaustive detail, by many different teams and methods, to ask and answer many different questions about that life form. But biologists also use a model organism to make inferences about other life in the same class, and in the more general class. Thus lab. mice are not just representative of mice, but also representative for their general class: mammals. The difference between ‘of’ and ‘for’ is relevant for our story.20 Since a model organism acts as a type representative for the bigger, general class/kind of which it is a member - lab. mice stand in for mammals, zebrafish for fish, fruit flies for insects, etc. - investigating any one of these particular representatives provides in-formation that may be relevant for the wider class. The same process of inference from the individual exemplar to the wider class goes on in business model research, which is why our opening discussion of taxonomy and of the classifying function of business models was so important.
In an analogical sense, a high street McDonalds can be thought of as a lab. mouse - as a standardized representative of McDonalds as a company. But also McDonalds (as a business) may be taken as a representative for a genre of firms that practice a similar kind of business model - ‘business format franchising’ - where a company designs a system to deliver a product/service (as McDonalds delivers hamburgers) and offers knowledge of the system on a fee-related-to-success basis. Business format franchising has become ubiquitous in food outlets, hotels, coffee bars, and in many consumer and small business services. And, while each business format franchise system is different, McDonalds remains the benchmark to which people refer, either centrally or tangentially, when analysing this particular business model: it is the model for business format franchising.
In the same way as biologists focus their study on a set of model organisms, business scholars repeatedly study the same organisations: South-West Airlines, Google, Disney, Toyota etc., to understand exactly how that kind of business model works, both in theory and in practice. This intensity of study creates a depth of understanding and provides an analytical account of each exemplar case, involving theorizing, concept formation, and a fully developed appreciation of its prac-tical details. It is this kind of model work, and the knowledge it produces, that turns the example into the exemplar case - something like an ideal type. It is these firms - a widely recognised set, often part of the teaching curriculum as well as the research laboratory - that form the model organisms of management. Each firm is studied not just for its own sake as an exemplar, but as the ‘type’ against which other firms following the same generic business model can be measured and com-pared.21 And of course, each exemplar can also be contrasted with firms practising a different model, i.e. members of a different class.
Thus, business models form the ‘stuff’ of many different kinds of enquiry, by both academics and firm participants, and these model investigations into business models take a number of forms. Some use a schema, or a mathematical model, which can be analysed and investigated. Others use the firm itself e the model organism. Both sorts of models of the firm - the first-hand real or-ganism and the various kinds of second-hand accounts of it - can be investigated to learn about the business model. For example, the academics’ Casadesus and Ricart build a representation of Ryanair’s business model, identifying inter-relationships and causal ‘feedback loops’ between particular aspects of its choices and consequences.22 In contrast, business men and women use their own firm as their model for experimentation, to consider how changing the way its business model is organized or competes can influence its possibility of success, as Magretta was among the first to record.23
Of course thought experiments or simulations and other business model manipulations are only possible when the model is (like those of economics) simple enough to work through (or where the implications of a likely change can be programmed into it), but yet complicated enough to capture sufficient content of the firm’s arrangements to make the experiment meaningful. For investigations into the exemplar cases, management academics gain some of the advantages of complexity and realism of real life firms, without of necessity, having a full account of everything involved in the specific firm. Here is where in-depth case study investigations of the exemplary business are so valuable.24 For the managers’ real-world firm experiments, the business model is more like the biological model organism - an incredibly complicated set of arrangements where every slight change in one bit is likely to alter all the other relationships. Here e as with biologists - managers experimenting with the business model are undertaking a real life experiment subject to all the unknowns that involves.
Table 4 shows some of the ways in which such experiments have broadened and deepened our understanding of business models. The accounts provided in this issue show that some of this work is via thought experiments, some via experiments on schematic models, and some involves managers experimenting on their firms in the real world. And some experiments take place in the context of transforming an existing business, while for others the context is one of exploring to build a new business.25
The most important difference from both economics and biology occurs when managers experiment on their own firm, for they know lots about the elements and relations involved because they are part of it. Managers have tacit ‘insider’ knowledge that the academic does not have, and which may not be part of any business model account or description. This inside knowledge is surely the most unusual thing about business models as models, and what distinguishes them from the models of other scientific disciplines: that the subject of the model or experiment - the firm or business and its people - is a knowing part of the model, and of experiments with it. This makes business models performative in a particularly reflexive way.26 The experiments by these managers are on their own firm and involve their own behaviour. For them, and for the people in the firm, their business model is not just a description of how they go on, but offers a model in the ideal sense, in depicting how they want to be in the future, a model to strive for, an ideal outcome. The specific business model a firm adopts offers a point of identification which may be essential to rally its participants, particularly if radical change in the model is planned. After all, such experiments amount to changing the model organism - something not to be undertaken lightly.27
Models are used to demonstrate a technology.
[like recipes] they give advice about how to do something so the results come
out right
not all cooks can make all recipes work e
and different combinations (ways to make and bake the cake) can create success
Business models are not
recipes or scientific models or scale and role models.
they play any - or all - these roles, often at the same time