What is a Business Model?

An Enterprise Architect needs to understand the business model of the enterprise in which they are involved. The business model will often constrain what type of systems will be built and how they will be used. For example, an airline which offers low fares, frequent flights, no food and operates only point to point will have quite different IT needs than a full service airline that uses hubs, manages a complex logistics chain and offers air miles to their customers.

A good business model is the cornerstone of a successful enterprise. The business model answers the question, who is the customer, what does the customer value and is willing to pay for and how is money made from that customer?

The most powerful business models create whole new demand because they produce value in a way that no other business does. The source of value is either in the product itself, or the way in which the product is built or delivered to the customer.

For example, the Local Area Network created whole new categories of demand. It was a new product when it first became available and created demand for something that hadn't existed before.

On the other hand, companies like Walmart take an existing product set and revolutionize the way in which the product is delivered. Walmart makes money by among other things, running a highly efficient supply chain.

A company that is introducing a new business model, usually does not have the time to optimize all the elements of that model, they need to act fast to head off competitors. This means they need to build IT infrastructure that works fast, but may not be very good architecturally. The EA needs to recognize this and get a solution that satisfies the immediate needs without becoming an albatross at a later time.

In most cases, the Enterprise Architect will be asked to incrementally improve the operation of the business model. For example, a system that was created quickly in a prior era to address an immediate business opportuinity, may now be a serious drag on productivity. The EA needs to recognize this and replace an imperfect system with a much better one.