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《《Business+Models》.pdf
Long Range Planning 43 (2010) 172e194 /locate/lrp
Business Models, Business
Strategy and Innovation
David J. Teece
Whenever a business enterprise is established, it either explicitly or implicitly employs
a particular business model that describes the design or architecture of the value creation,
delivery, and capture mechanisms it employs. The essence of a business model is in de-
fining the manner by which the enterprise delivers value to customers, entices customers
to pay for value, and converts those payments to profit. It thus reflects management’s
hypothesis about what customers want, how they want it, and how the enterprise can
organize to best meet those needs, get paid for doing so, and make a profit. The purpose
of this article is to understand the significance of business models and explore their
connections with business strategy, innovation management, and economic theory.
2009 Published by Elsevier Ltd.
Introduction
Developments in the global economy have changed the traditional balance between customer and
supplier. New communications and computing technology, and the establishment of reasonably
open global trading regimes, mean that customers have more choices, variegated customer needs
can find expression, and supply alternatives are more transparent. Businesses therefore need to
be more customer-centric, especially since technology has evolved to allow the lower cost provision
of information and customer solutions. These developments in turn require businesses to re-eval-
uate the value propositions they present to customers e in many sectors, the supply side driven
logic of the industrial era has become no longer viable.
This new environment has also amplified the need to consider not only how to address customer
needs more astutely, but also how to capture value from providing new products and services.
Without a well-developed business m
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