Business Model vs Operating Model

Business Model vs Operating Model

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In today’s article, we are going to discuss the difference between a business model and an operating model. It really does not matter how someone defines the terms like business model or operating model. We are going to define the business model and operating model by using some different terms in order to develop some more definitions. According to us, an operating model is considered a part of a business model because the business model is the larger concept. The operating model is the main engine in the center of the business model that helps the business model to work. Let’s dive a bit deeper into the business model and operating model.

Business Model vs Operating Model

What is a Business Model?

 A business model is basically an essential way in which a company plans how to make money. The business model is considered a strategy that is used by a company to create revenue and capture value.

What are the key components of the business model? :

There are many different types of business model that tell us the few key components but that is worth exploring in more detail and the detail is as follows:

First key component:

 The first one is that a business model defines what a company sells. This can be a product or any service and may be both products and services.

Let’s elaborate it with an example:

 Let us go into detail by using an example for a better understanding of yours. For example, a company like Amazon sells a wide variety of products while at the same time, another company like Netflix sells a streaming service. So, the key parts of the business model are the products or services that a company sells.  

Second key component:

The second key component of the business model is that a business model defines that who a company sells to. This can be a specific industry or a certain geographic region. The most important and essential part of developing a successful business model is a better understanding of the target market.

Let’s go into detail with the help of an Example:

 For example, the main target of some companies like Tesla is to sell electric cars to customers who are environmentally- conscious and a company like IBM prioritizes businesses to sell technology solutions.  

Third key component:

 The third one among the key components of the business model is that a business model defines that how a company makes money. There are several ways through which any company can make money. It can be through subscriptions, sales, advertisements or other means.

Example of this key component of business model:

  For example, there are many companies that make money through a subscription-based model including

Spotify, while some companies like Facebook make money through advertising.  

What is the Operating model? :

Now, this is the turn to talk about the operating model. Operating model is a term that defines how a company produces and delivers its products or services. The operating model is basically the ‘how’ of the operation of any company.

Example of Operating model:

 Let us explain it thoroughly with the help of an example to give you a better understanding. Let’s say that a company wants to sell the high- quality tea to consumers, this is the business model of the company. The operating model will include things like supply chain management, production processes, and customer service. Essentially, the operating model is the way in which a company executes its business model.  

Conclusion:

 In summary, we can say that the business model is the ‘what’ of the operation of a company while the operating model is the ‘how’ of the company’s operation. The business model defines how a company makes money while the operating model defines how a company creates and delivers value to the customers. Both are crucial segments for the overall strategy of a company and both can have an important and significant impact on the success of the company.  

Ali

With an extensive background spanning six years in the field of content writing, he has cultivated a wealth of expertise, particularly in the realms of Automobile Business, Real Estate, and various other domains. His current portfolio includes notable contributions to renowned platforms such as Showroomex.com, Alphapmm.com, Fnconsultancy.com, FastExpressCarRental.com, and GlobalMarket.buzz.

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