Exploring value as the foundation of value proposition design

Purpose: Business models define the activity system that an organization employs to create and capture value. As such, business models are essentially the application of strategic management. The term business model, however, suffers from definitional ambiguity which makes the construction of effective business models problematic. We argue that this ambiguity is largely due to a lack of clarity around value. This paper seeks to provide clarity around value and in doing so aid in the development of effective business models. Design/methodology/approach: Theoretical paper that deconstructs value into use value and exchange value and develops these concepts. Findings: We deconstruct value into use value and exchange value to explain the micro-conditions of value creation and capture. In doing so, we also provide an explanation of how VRIN and non-VRIN resources can be traded for gain as well as opening up greater strategic options for managers in their development of business models. Originality/value: Despite the ubiquity of business models, their micro-conditions are largely assumed and therefore lack theoretical rigour. This paper aims to address this issue via deconstructing value and in doing so explain how value is created and captured. Keywords: business models, value, rent appropriation, competitive advantage, resource-based view