Understanding Business Model Fundamentals

Understanding Business Models

This post attempts to answer the following 3 basic questions on business models: What is a business model? Why do we need to study business models? How to describe a business model?

Business model is a term that is very loosely used in our day-to-day conversations. Business managers often use this term, without a complete understanding of it. When they use the term business model, they are either referring to the revenue model or the operating model. But, business model is much more than that. Before we start discussing business models, let us discuss what a model is and why do we build models.

A model is a simplified version of something. It is the scaled representation of a real object. The real object can be much larger or smaller than the model representation. Models are often discussed in the field of architecture, where we build models for buildings and…

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