As a survivor of one of Canada's most recognized business schools, I have to admit that I've grown weary of looking at diagrams that purport to give insight into complex business situations but really are just another quickly passing management fad. That's why when I saw Peter Rip's business model diagram I regained some respect for the technique. Rip is a SIlicon Valley VC and author of the in-depth VC blog, "EarlyStageVC."

Here is how Rip introduces the topic of business models:

The term "business model" has bothered me for a long time. I have always found it to be a glib method of characterizing a company's relationship with its various constituencies, e.g., customers, suppliers, competitors, etc. The problem isn't really the concept. The problem is that it’s a complex, multidimensional structure that doesn't really lend itself to a summary sentence, at least not if you really want to understand the business. Yet it one of those economic terms that has entered the popular lexicon as the rise of business schools in the 1970s and 1980s mainstreamed "businessperson" as a profession (like engineer, doctor, or lawyer).

What are the key elements of a comprehensive business model? Here is Rip's diagram:


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