Business models: Formal description and economic optimisation

This paper picks up on established concerns that the concept of a business model is underdetermined and lacking formalisation in the current academic literature. Matrix methods may usefully be deployed to characterise the architecture of resources, costs, and revenues that a business uses to create and deliver value to customers that defines its business model. Systematisation of this technique would support a taxonomical approach to empirical studies of business models. Generalisation of this matrix approach provides a formal linkage between business models, strategy, and value creation using the Hamiltonian economics associated with the Maximum Principle. Factor analysis permits the endogenous identification of critical resource combinations in the business model that underpins resource-based views of strategy, resolving the tautological impasse identified by Priem and Butler (2001).