Business Models

 One-Sided Business Model

I refer to business models with a single direction for the monetary flow, and a single direction for product and service refinement as One-Sided Business Models. Involved actors form a value chain and activities early in the value chain are called "upstream", whereas "downstream" refers to later parts of the same value chain. The monetary flow in One-Sided Business Models flows from downstream actors to upstream actors, while digital and physical products and services are refined in the opposite direction. Value propositions are formed towards downstream actors and revenues can come from the closest actor in the chain and/or from actors further downstream.

The sophistication of value propositions can vary from the smallest technology or commodity component of a large system, to full concepts with developed brands.

I have never seen the term one-sided business model been used, as it has been the default for traditional business models. It has been described in numerous articles and books, and allmost all management literature focus on models with single directions for monetary flow, and single directions for product and service refinement. 

Mobile phone operator example

To give a concrete, and simplified example, let's take a mobile phone operator. With a One-Sided Business Model, users pay for a mobile phone and services often with a subscription based and/or utility based business model. Direct services such as air time, text and video messages, email and internet access, is combined with larger concepts such as being part of an exclusive group or having constant access to online-platforms, automatic back-up, remote-erase of memory, file-storage, news, weather, games, music, movies etc. No matter the service, the user is the source of revenues for the mobile phone operator.

Two-Sided Business Model

When the refinement of products and services, or the monetary flow has two directions, I refer to it as Two-Sided Business Models. The concept of a value chain and terms such as upstream and downstream is not as clear as in One-Sided Business Models. Development can be made by what is in One-Sided Business Models referred to as downstream actors and monetary flow can come from actors referred to as upstream.
To explain the increased complexity and non-linear value creation, the term value network has been used in the literature. Actors in the value network can have multiple roles; the end-user being a co-developer, the supplier being a customer for end-user data etc.

In Two-Sided Business Models complex revenue and profit sharing models are sometimes used to compensate different actors contributing to the value creation.

When a company using a One-Sided Business Model, realize that it has valuable assets for upstream actors, a Two-Sided Business Model can be very disruptive for an industry characterized by One-Sided Business Models. As an example, when Ryan Air started to charge remote air-ports for bringing passengers, and take percentage on sales from external service providers, while lowering the price of tickets for the passengers to almost 0, the traditional airlines had trouble competing on low cost fairs with One-Sided Business Models.

Mobile phone operator example
In the One-Sided Business Models example, mobile phone operators charged its users for different services. Using a Two-Sided Business Model the operator could for example extract value from the immense amount of data from its users, from companies within the value network that would benefit from the data. Advertisers, brand-owners, developers of applications, content or games, could benefit from the user-data and be willing to pay for it. If Google, as an example, got the data from the operator on where the user is when entering Google Maps using a mobile phone, or who the user last talked to, or who it has in its contact list, maps and adverting could be personalized instantly and probably finance free access to different services, with Google sharing advertising revenues with the mobile phone operator.

Horizontal Business Model

When the refinement of products and services, or the monetary flow, comes from competing companies I refer to it as a Horizontal Business Model. It can be in either competing or non-competing fields within the industry in which the companies compete.

When companies decide or are forced to create cross-company standards, technology and IPRs are often licensed between competing companies. Owners of important parts in the standardized technology generates revenues from competing companies in exchange for its assets.

At times companies decide to share costs and risks with competitors to develop something together, where some companies contribute more than others. An interesting example is the Toyota-Citroën-Peugeot collaboration to develop small environmentally friendly cars.

Sometimes companies with unique assets, decide not to enter into new business areas and instead let other competing or non-competing companies use its assets. An interesting example is P&G's joint-venture with Clorox, one of its worst competitors. The joint-venture is based on P&G's plastic film technology discovered through diaper research applicable for plastic wrapping and Clorox's established brand GLAD. P&G had the option to launch its own brand and enter into consumer food wrapping products, head to head against Clorox's established GLAD products but decided that a joint-venture would be a better strategy. According to P&G, total Glad sales have doubled in the four years since the joint venture was formed.

Mobile phone operator example
In the Two-Sided Business Models example, mobile phone operators charged advertisers, brand-owners, developers of applications, content or games, instead of only charging end-users as in One-Sided Business Models. Traditionally the mobile phone operators have wanted to provide everything themselves or through own portals, seeing other application or content developers as competitors. Using a Horizontal Business Model, the mobile phone operators with a developed or in-licensed application or service, could provide it to own users and competitors to increase the speed of adoption to get critical mass, more user-data, and generate small revenues from many sources instead of larger revenues from less.

Multi-Layer Business Model

When the refinement of products and services, or the monetary flow comes from different industries I refer to it as Multi-Layer Business Models.

Cross-industry technology, IPR and brand licensing is common Multi-Layer Business Models in which a company in- or out-license assets to a company in another industry in return for upfront payments, royalties, shares in a joint-venture etc.

An interesting example is how companies are pushed into cross-industry collaboration and the use of Multi-Layer Business Models through technology development. The convergence in mobile devices where cameras, calendars, music and movie players, payment services, transport tickets etc. are all being integrated into single hand-held devices, where no company can do everything themselves, will open up for new interesting Multi-Layer Business Models.

Mobile phone operator example
In the Two-Sided Business Models example, mobile phone operators charged advertisers, brand-owners, developers of applications, content or games, instead of only charging end-users as in One-Sided Business Models. In the Horizontal Business Models example, competitors were charged for developed or in-licensed applications and services. With a Multi-Layer Business Model, different industries that would benefit from for example user-data could be approached. Value propositions towards other industries could be to provide restaurants and store owners with information on where different user-groups hang out, provide companies, governments and tourist information companies with information such as when users arrive at new destinations. Also, as described above, the convergence in mobile services open up for new cross-industry services such as movie rentals, photo printing, tickets to concerts or transportation, banking services etc.

https://bit.ly/3BMdCXL