B U S I N E S S M O D E L S , R E V E N U E M O D E L S , A N D B U S I N E S S P R O C E S S E S

A business model is a set of processes that combine to yield a profit. In the first wave of
electronic commerce, many investors sought out start-up companies with appealing business
models. A good business model was expected to lead to rapid sales growth and market
dominance. The idea that the key to success was simply to copy the business model of
a successful dot-com business led the way to many business failures, some of them quite
dramatic.
In the wake of the dot-com debacle that ended the first wave of electronic commerce,
many business researchers analyzed the efficacy of the business model approach and
began to question the advisability of focusing great attention on a company’s business
model. One of the main critics, Harvard Business School professor Michael Porter, argued
that business models not only did not matter, they probably did not exist. (You can read
more about Porter’s criticisms of the business model approach in the articles cited in the
For Further Study and Research section at the end of this chapter.)
It has become clear to many companies that copying or adapting someone else’s business
model is neither an easy nor wise road map to success. Instead, companies should
examine the elements of their business; that is, they should identify business processes that
they can streamline, enhance, or replace with processes driven by Internet technologies.
Companies and investors do still use the idea of a revenue model, which is a specific collection
of business processes used to identify customers, market to those customers, and
generate sales to those customers. The revenue model idea is helpful for classifying revenue generating
activities for communication and analysis purposes. The details of revenue
models that are used on the Web.