Business Models--Nature and Benefits

by Ramon Casadesus-Masanell & John Heilbron

Overview — The authors propose a concept of the "business model" as a set of decisions enforced by the authority of the firm. They then consider how these decisions could be used to the firm's benefit, and propose a new strategic role for the business model: a means of negotiating for a portion of "ambivalent value" (value produced by the interaction of two firms that does not necessarily accrue to either). This work will help managers clarify the organizational determinants of negotiation outcomes.

Author Abstract

This paper considers the nature of the business model and its strategic relevance to negotiations. We elaborate a definition of the business model as decisions enforced by the authority of the firm; this definition builds on the analytical success of previous approaches while enabling the analysis of business models through the analysis of individual firm choices. We situate negotiation outcomes within the strategy literature by considering "ambivalent value," value produced by the interaction of two firms that does not necessarily accrue to either. The extent of "ambivalent value" is unclear, but its persistence despite changing structural features of the market promises to help sustain superior profits in the long run. We conclude with an exploration of ways in which a firm's business model may impact negotiation outcomes. Several of the proposed pathways work intuitively through the intrinsic characteristics of agents (motivation, personality, etc.) negotiating on behalf of the firm; others operate independently of these characteristics.