An energy company's integration of a $2 billion firm it had acquired was smooth because much of the back end was outsourced, says consultant Jane C. Linder.

It has become fashionable to discuss business models, but there is much confusion about what business models are and how they can be used. In fact, business models can serve a positive and powerful role in corporate management. Although authors have offered definitions of "business model," none appears to be generally accepted. This lack of consensus may, in part, be attributed to interest in the concept from a wide range of disciplines, all of which have found a connection to the term. To help managers better understand business models, this paper reviews the extant literature and identifies and classifies the components of business models cited therein. Components were classified into four primary categories: strategic choices, the value network, creating value, and capturing value. Offers a definition of "business model" that integrates and synthesizes earlier work. Based on the proposed definition, the case contrasts business models with strategy. Also, discusses four problems associated with business models.

This is an MIT Sloan Management Review article. Executives began outsourcing substantial portions of their operations more than a decade ago to offload activities they declared to be noncore to cut costs and improve strategic focus. Today, however, companies are looking outside for help for more fundamental reasons--to facilitate rapid organizational change, to launch new strategies, and to reshape company boundaries. In doing so, they are engaging in transformational outsourcing: partnering with another company to achieve a rapid, substantial, and sustainable improvement in enterprise-level performance. On the basis of research on 20 companies that have attempted the practice, the author identifies four broad organizational categories that can benefit from transformational outsourcing. Start-ups such as TiVo, for example, need partners to scale up rapidly. "Crouching tigers" such as Family Christian Stores are being stymied by a deficiency in some key capability from meeting their strategic aspirations. "Fallen angels"--such as BP in the mid-1990s--settle into the wrong performance trajectory and need strong action to change their tack. And organizations on the edge of survival--as Britain's National Savings and Investments was several years ago--need transformational outsourcing to become "born again."

U.S. trade policy is mired in obsolete assumptions about the practices and principles of global economics. It is stuck in a time when the United States could assume sole responsibility for the world trading order. Business and government leaders must acknowledge that there are five different economic systems operating in the world today--centrally planned, mixed, developing, plan-driven, and rule-driven--only one of which corresponds to the traditional U.S. model. The United States needs to embrace "tailored trade"--negotiating with different countries differently, according to their economic systems. The result would be a more practical and flexible approach to trade--one that would not only serve U.S. interests but also correspond to the world as it really is.