This document discusses frameworks for classifying business models. It proposes using a cladistics classification approach to develop taxonomies of business model archetypes. This involves determining relevant characteristics of business models, analyzing relationships between archetypes based on shared characteristics, and mapping the results in a cladogram or phylogenetic tree. The document provides an example cladogram mapping the evolution of key business model archetypes in the video game industry from 1969 to present. It also discusses analyzing archetypes according to their position in an industry's value chain and developing business model portfolios based on value chain integration strategies.

1. Integrating Taxonomies
with Typologies
A BUSINESS MODEL CLASSIFICATION FRAMEWORK

2. Explore

3. Understand

4. On Classification
“Science is the systematic classification of experience”
― George Henry Lewes, Physical Basis of Mind
“We classify things for the purpose of doing something to them. Any classification which does
not assist manipulation is worse than useless.”
― Randolph Bourne

5. What is Classification
“classification ( or systematics ) is the discipline that focuses on the systematic arrangement of
subjects ( or objects) into groups according to their similarities, promoting knowledge
representation and advancement”
Peneder, M., 2001. Industry classifications: Aim, scope and techniques. Technical report,
Austrian Institute of Economic Research.

6. Classification objective
Promotes systematic understanding of the underlying subjects, or objects
Formal representation of the corresponding scientific knowledge
Provides a starting point for new scientific enquiries
Acts as a communication framework
There is no “perfect” classification system

7. Classification Methods
Classification
Process
Typology (Deductive) Taxonomy (Inductive)
Traditional
Name of Types
Place units of
interest into
types
Monothetic
Groups
Theoretical
Name of Types
Select
Characters of
interest
Place units of
interest into
types
Theoretic
Define Classification
Theory
Define Universe of
Characters
Selected Characters
Based on Theory
Place Units into types
based on data analysis
Numerical
Define Universe of
Characters
Selected Characters
Given Equal Weight
Polythetic Groups
Business Model Classification Framework

8. The unit of analysis
Taxonomies: economic activities of businesses and industries
Typologies: internally consistent structures, forms, and frameworks of organizations
◦ Archetypes: Types of entities produced by typologies within a given context
New unit of analysis: The Business Model (mostly Typologies)

9. Empirically-driven Taxonomies
First attempts used first-order, second-order and higher-order products to classify businesses.
Which is equivalent to consumer, intermediary goods, and raw materials, respectively.
Krabbe, J., 1988. Menger’s valuation of nature: An atomistic and “organistic” approach. Journal
of Economic Studies 15 (3/4), 55–63.

10. Empirically-driven Taxonomies
cut-off taxonomies:
based on discriminatory dimensions to limit the classification process within a predetermined
set of characteristics aligned with given theoretical assumptions
clustering:
homogeneity among groups emerges mainly through numerical and statistical methods.
phyletic classification:
based on the assumption that entities can be classified according to how recently they share a
common ancestor.

11. Theoretically driven typologies
Advantage:
Typologies promote more abstract and inclusive frameworks owing to their improved
adaptability to diverse units of analysis
Criticism:
◦ necessarily heuristic
◦ lack of empirical validation
◦ simple tautologies

12. Business Model
Definition:
A business model elaborates “how a firm delivers value to customers and converts payments
to profits”
Zott, C., Amit, R., Massa, L., 2011. The business model: recent developments and future
researchh. Journal of Management 37 (4), 1019–1042
“ ... a system of interdependent activities that transcends the focal firm and spans its
boundaries”
Chesbrough, H., Rosenbloom, R. S., 2002. The role of the business model in capturing value from
innovation: evidence from xerox corporation’s technology spin-off companies. Industrial and
corporate change 11 (3), 529–555.

13. The Business Model Archetype
Definition:
“...configurations that are context specific and are identified through an array of organizational
features”
Short J. C., Payne G. T., Ketchen D. J. 2008. Research on configurations: past accomplishments
and future challenges. Journal of Management 34: 1053–1079.
Focused industries characterized by disruptive technological progress and/or high growth rates,
such as biotechnology and pharmaceuticals, information and telecommunication, and e-
businesses.

14. The Business Model Archetype
Challenges:
subjectivity with regard to the range of characteristics,
subjectivity to the classification theory
Goal:
Develop a classification framework the bridges the gap between typologies and taxonomies and
is applicable to different contexts:
◦ Array of classification characteristics that captures organisational diversity
◦ Robust classification theory

15. Theoretical background
Principles of Evolution:
◦ Variation
◦ Replication
◦ Retention
Business Model Evolution:
◦ Business Model Innovation
◦ Business Model Imitation
◦ Path dependency / Inertia
Resilience
Competitive Advantage
• IP regime,
• complexity of the activity
system,
• key resource accessibility,
uncertainty of expected
profitability, and
• the cannibalization of
potential imitators'
activities.
path dependencies emerge and
direct the decision process
occurring within an
organization towards a
bounded number of alternative
solutions, with lock-in effects
taking place in many cases

16. Operational Taxonomic Unit
Definition:
“... the unit (department, branch, plant, etc.) that could stand by itself as an autonomous
organization without adding major kinds of activities not now performed by the unit”
Warriner, C. K., 1979. Empirical taxonomy of organizations: problematics in their development.
In: Roundtable Discussion, Annual Meeting of the American Sociological Association, Boston.
We employ the Business Model Archetype as the main operational taxonomic unit
◦ The BMAs are not a priori constructed. They emerge from the empirically based taxonomic process of
cladistics classification.

17. Cladistics Classification
Consists of 5 steps:
◦ classification theory (evolution, common ancestry);
◦ determining the universe of characters (business model component analysis);
◦ character selection based on theory (mining for characters);
◦ placing the taxonomic units into types based on the data analysis (rule of parsimony); and
◦ creating the phylogenetic groups (cladogram).

18. Cladistics Classification of BMAs
Value Creation
Value Capture
1. Key Resources
2. Key Partners
4. Key Activities
5. Value Proposition
6. Customer Relationships
7. Customer Segments
8. Channels
9. Cost Structure
10. Revenue Streams
11. Strategy
Business Model Canvas +
UniverseofCharacters
ArrayofClassificationCharacteristics
…
BM Archetype 1
BM Archetype 2
BM Archetype 3
BM Archetype 4
BM Archetype N
Mining for Characters Mining for “Species”
Rule of Parsimony
Rule of Phylogeny
Conceptual
Cladogram
Character and
Species Conflicts
NOT resolved
Character and
Species Conflicts
resolved
Factual
Cladogram

19. The Cladogram
ArcadeGamesManufacturing
Publishing
FreemiumPublishing
ConsoleManufacturing
ConsoleManufacturingsale-at-a-loss
IndependentDeveloping
Third-PartyDeveloping
CrowdfundedDeveloping
Second-partyDeveloping
WhiteLabelDeveloping
1.1 1.2 1.3
-1.2
1.4 1.5
9.1
6.16.22.1
4.3
-1.1 3.3 3.4 3.5
3.65.1
10.1
10.2
5.3
9.2
4.4-1.1-1.3
9.4
3.7
2.3
8.2
10.3
-10.39.5
8.3 2.5
2.4
10.4
10.5
3.8
3.9
8.4
9.6
Ad-network
OpenPlatform
9.115.21.6
1.7
Applied-gamesDeveloping
1.81.92.8
3.10
B
C
D
E
H
F G
8.1
-2.4
9.3
9.9
9.8
2.2
2.7
4.5
9.7
-
9.3
4.1
4.2
6.3 6.4 -1.4
-1.37.2
4.6
2.6
-8.3
-2.7
3.1
3.2
7.1
7.3
10.6
9.10
A 1969: Syzygy
Arcade-games Manufacturing
In-house Developing
B 1972: Atari
Console Manufacturing
C 1979: Activision
Third-party Developing
D 1982: Electronic Arts
Publishing
E 1994: Sony
CM – Sales at-a-loss
H 2012: Double Fine Productions
Crowdfunded Developing
F 2000: Onlive
Ad-network
F 2011: Gaikai
Open Platform

20. A 1969: Syzygy
Arcade-games Manufacturing
In-house Developing
ElectronicManufacturing
ArcadeGamesManufacturing
A
B 1972: Atari
Console Manufacturing
B
ConsoleManufacturing
D 1982: Electronic Arts
Publishing
D
Publishing
FreemiumPublishing
E
1994: Sony
CM – Sales at-a-loss
E
ConsoleManufacturing
C
1979: Activision
Third-party Developing
C
IndependentDeveloping
Third-PartyDeveloping
Second-partyDeveloping
WhiteLabelDeveloping
F
2000: Onlive
Ad-network
F
Ad-network
G
2011: Gaikai
Open Platform
OpenPlatform
G
H
2012: Double Fine
Productions
Crowdfunded Developing
H
CrowdfundedDeveloping
Applied-gamesDeveloping

21. The Cladogram
ArcadeGamesManufacturing
Publishing
FreemiumPublishing
ConsoleManufacturing
ConsoleManufacturingsale-at-a-loss
IndependentDeveloping
Third-PartyDeveloping
CrowdfundedDeveloping
Second-partyDeveloping
WhiteLabelDeveloping
1.1 1.2 1.3
-1.2
1.4 1.5
9.1
6.16.22.1
4.3
-1.1 3.3 3.4 3.5
3.65.1
10.1
10.2
5.3
9.2
4.4-1.1-1.3
9.4
3.7
2.3
8.2
10.3
-10.39.5
8.3 2.5
2.4
10.4
10.5
3.8
3.9
8.4
9.6
Ad-network
OpenPlatform
9.115.21.6
1.7
Applied-gamesDeveloping
1.81.92.8
3.10
B
C
D
E
H
F G
8.1
-2.4
9.3
9.9
9.8
2.2
2.7
4.5
9.7
-
9.3
4.1
4.2
6.3 6.4 -1.4
-1.37.2
4.6
2.6
-8.3
-2.7
3.1
3.2
7.1
7.3
10.6
9.10
A 1969: Syzygy
Arcade-games Manufacturing
In-house Developing
B 1972: Atari
Console Manufacturing
C 1979: Activision
Third-party Developing
D 1982: Electronic Arts
Publishing
E 1994: Sony
CM – Sales at-a-loss
H 2012: Double Fine Productions
Crowdfunded Developing
F 2000: Onlive
Ad-network
F 2011: Gaikai
Open Platform

22. The Value
Chain and the
Archetypes

23. Business Model Typology
…
BM Archetype 1
BM Archetype 2
BM Archetype 3
BM Archetype 4
BM Archetype N
Business Model
Archetypes
Link 1
Link 2
Link 3
Link 4
Link K
…
IndustrialValueChain
Characters of Interest:
Position on the Industrial Value
Chain
BM Portfolio 1
BM Portfolio 2
BM Portfolio Z
Business Model Typology
ValueChainIntegration
…

24. Business Model Portfolios
Business Model Portfolio Value-chain integration Strategic Dimension
Publishing Publishing Hit-driven strategy (+
Freemium Publishing)
Publishing
Distribution
Hit-driven strategy
Revenue maximisation
Publishing + 3rd-Party Developing Publishing
Development
Distribution
Hit-driven Strategy
Revenue maximisation
Risk-minimisation
(IP-portfolio creation via incubation or
acquisition)
3rd-Party Developing
+ Crowdfunding
Development
Distribution
Product Differentiation
Cost minimisation
Funding access
Exit strategy
Maintain Creative Independence
2nd-Party Developing+
3rd-Party Developing +
Publishing
Development
Distribution
Publishing
Risk minimisation
Price and availability
competition

25. Concluding Remarks
Economic organizations are required to operate in exponentially increasing complex,
heterogeneous, and dynamic environments.
Companies are required to react effectively and to adjust their business model accordingly.
A useful first step in this direction is the development of a classification system that is necessary
for information storage and retrieval.
The development of such a system is required to bridge the gap between empirically driven
taxonomies and theoretically driven typologies.
The study presented in this paper introduces a business model classification framework that
bridges that gap.
Improve our understanding of complex business model structures