Business model vs. value chain

Business model innovation due to regulatory changes, technology changes, sustainability, a balance between globalisation and hyper localisation et al remained in focus over the last decade. Global macroeconomic factors, embracing new ways of working due to the COVID-19 pandemic, capturing growth markets, better product and service offerings etc. are other key motivations to relook at business models. A business model forms a central artefact that a firm can share with the external world, can be fast to complete, provides a holistic business view, focus on value proposition and provides a structure for ideation.

A winning business model creates a virtuous cycle of value creation and value capture; and is tested in tandem with the business models of competitors and partners of the firm. For example, Boeing 747 enjoyed a monopoly in the market. Airbus has realigned its business model with Airbus 380 and was successful in competing in small and medium category commercial carriers as well. This business model not only boosted Airbus’ profitability but dented Boeing’s business model. Boeing’s effort to come up with a stretch of 747 dented the market share of the 747 lines itself.

A value chain model focuses on customer experience by shaping products and services more viable and desirable for customers and how to generate savings for customers by focusing on the critical path of product and service design through to sales and marketing of the same.

A business model captures executive decisions and choices to make the business viable whereas a value chain model makes better customer and savings.