The business model is a collection of elements that represents one way in which an enterprise makes (or intends to make) money. It is a combination of factors, not a single element, that together represent each of the key interactions that the enterprise will have with its environment.
Those interactions are illustrated in the diagram below. (Click the image to enlarge it). See Business Model Elements for the definitions of each of these elements.
Special Note: The notion of representing a business model as a stand-alone element in a business motivation model is derived from the work of Dr. Alexander Osterwalder. However, the EBMM 1.0 did not adopt his generic model for the relationships between elements. This area is up for discussion, and we welcome contributions and ideas.
The elements of the business model come together to create a single entity within the overall motivation model called the ‘business model.’ The other parts of the motivation model then interact with the business model, to either react to it, provide insight on it, or attempt to improve it.
The following diagram shows each of the elements of the model above deriving from a supertype called Business Model Element. The business model is composed of business model elements. (click the image to enlarge it).
One key concept, illustrated in the diagram above, is the notion of an Enterprise. The EBMM differentiates between an Enterprise and a Company. An Enterprise is a collection of one or more business models that describe how various entities come together to provide value and make money. A company represents a legal entity that contains business units that may interact in one or more enterprise.
The distinction between an enterprise and a company has nothing to do with the size of either one. Small enterprises may have 10 employees, and a large company may have tens of thousands.
The difference has to do with the way that the value-adding potential of an enterprise is understood in the context of business units. A business unit is a part of a company. Companies tend to be hierarchical in nature and they are nearly always legal entities. A company can be a plaintiff in a lawsuit, a party to an agreement, and a creditor to a loan. An enterprise is none of those things.
An enterprise is basically an abstract notion that describes a set of business models that come together, often in an ownership structure that owns many companies. For example, Microsoft is both an enterprise (with many business models) and an ownership structure. Microsoft owns many companies around the world, with each company chartered to do business in some specific legal context. For example, Microsoft owns a subsidiary company, Microsoft KK, that does business in Japan.
An enterprise does not have to have a single ownership structure that manages all of its resources. For example, it would be valid to describe the Apache Software Foundation as a company, but to describe the entire Apache enterprise would require the inclusion of resources that are outside of the control of the Apache foundation: specifically including open source developers. The business model includes these resources, and describes the business partners and customers of Apache. The company itself is quite small.