2.01 What is a Business Model, Really?

The terms "business model" and “business model innovation” sounds like something a management consultant would conjure up. But I encourage you to suspend your initial scepticism. The concepts have helped professionals in sectors imagine new and better ways of operating. We anticipate it will be an increasingly important tool in higher education in coming years. 

So, what is a business model, anyway?

A business model refers to the way in which an organisation fulfils its mission; how it creates, markets and pays for the goods and services it creates for stakeholders – whether these stakeholders are families using food banks, banks buying enterprise technology, or students pursuing degrees.

Some professionals believe that the concept of business models has no relevance to higher education or that it shouldn’t; that its use implies that higher education is a business, or that it should be more business-like. But every organisation necessarily has a business model, whether it’s IBM, Greenpeace, or the University of Toronto; the concept is merely a tool for analysing how different types of organisations operate. 

All business models share a standard set of elements, such as sources of revenue, a process for acquiring the resources it needs to operate, and a focus on a particular market segment. The different ways organisations go about fulfilling these core elements of business models constitutes the basis of their unique business model. 

Defining your organisation’s business model, then, involves answering questions about how you operate and for whom, including: 
- Why do your stakeholders turn to your organisation? What value do you offer them?
- Who are your key partners that make it possible to deliver this value? 
- What are the essential resources you draw from to fulfil your purpose? 

The “Business Model Canvas, first developed by Alexander Osterwalder at the University of Lausanne, is an especially useful tool for capturing the elements of a business model and for imagining how changes to its components can produce different outcomes.