Grid Business Models

A business model (BM) establishes a framework for the transformation of economic inputs (e.g. resources and technological knowhow) into economic outputs (e.g. goods and services) required by customers in a market (Chesbrough and Rosenbloom 2002). In simpler terms, a business model describes the way the business expects to make money by interacting with customers and other players in the market. Such a model can also be thought of as a mediator between technology development and value creation. The ultimate role of the business model is to ensure that the technological core delivers value to the customer. In order to achieve this, a number of factors and functions must be analysed and specified, such as the value proposition of the new product, the target market, the potential value chain for the delivery of the product or service, an estimation of the cost-structure, and profit potential (Peterovic et al. 2001, Weill and Vitale 2001). A well articulated BM is the foundation of the company’s business plan. The business plan serves as a decision-support tool and includes the additional level of detail that needs to be identified and proved (as well as can be prior to execution) in order for the business to attract money from potential investors. It specifies measurable goals, the reasons why they are believed to be attainable, and the plan for reaching those goals (Siegel et al. 1993, Wikipedia 2009a). It may also include background information about the company and a marketing plan. As it becomes apparent, both are to a great extent related and equally important; without a good business model, a business plan cannot be brought to effect and vice versa.