What Is A Business Model? Definition, Explanation & 30+ Examples. Part 2.

7. Business Model Canvas Alternatives

7.1 The Flourishing Business Canvas

The Flourishing Business Model Canvas

The Canadian researchers deconstructed the Business Model Canvas and re-assembled it by adding dimensions of sustainability thinking. They argue that the 9 building blocks of the Business Model Canvas help a company to “do well” but in order to “do good”, 5 more questions are required.

In order for a company to do “well” and “good”, only five more questions were added to the existing 9 of the business model canvas which resulted in the 16 new building blocks of the Flourishing Business Model Canvas that takes respect of the economy, society and environment. The building blocks are valued co-creation and co-destruction, relationships, channels, stakeholders, ecosystem actors, needs, partnerships, governance, resources, activities, biophysical stocks, ecosystem services, goals, benefits and costs.

7.2 Fluid Minds Framework For A Successful Business

The BMF sets the focus on a company’s values, therefore it depicts the value proposition for the customer, but as well the architecture and the value chain. Unlike other BMF it as well shows the internal values of the company. In each building block except the revenue model, the BMF explores different aspects of the value creation.

7.3 Business Model Navigator

The Business Model Navigator framework focuses on answering four associated questions:

• who is the target customer?
• what do you offer to the customer?
• how is the value proposition created?
• why does the business model generate profit?

7.4 The Lean Startup Canvas

Lean Startup vs Business Model Canvas

One of the reasons for the success of the business model canvas is that it provides a framework and structure to guide though.t –7

Many entrepreneurs have struggled with the Business Model Canvas because assumes that an organisation exists. For this reason, Ash Maurya created the Lean Startup Canvas. The Lean Canvas promises an actionable and entrepreneur-focused business plan. It focuses on problems, solutions, key metrics and competitive advantages.

For more details take a look at how to use the Lean Startup Canvas.

7.5 Moonfish Circular Business Model

This business model tool is based on Osterwalder & Pigneur’s Business Model Canvas and the Ellen MacArthur Foundation’s Circular Economy System Diagram. It shows different cycles of maintenance, reselling, remanufacturing and recycling. The framework takes after the infinity symbol, in order to emphasize the ongoing process of circular business (it never ends). The smaller cycles require less time, money and energy. The value of the Circular Economy is embedded in each of the four cycles.

8. What Is Business Model Innnovation?

Business model innovation is a concept used to find new ways to generate value and profits by transforming its capabilities. There is no generally accepted definition of business model innovation which makes it hard to analyse and measure 8

The easy way to think of Business model innovation is as a process and as an outcome.

8.1 Business Model Innovation Process

In times of change learners inherit the earth; while the learned find themselves beautifully equipped to deal with a world that no longer exists.

Eric Hoffer

The average life of a S&P 500 company has fallen from almost 60 years old in the 1950s to less than 20 years currently.

Source: Academia.edu

Emerging technologies empower entrepreneurs to create new business models that disrupt markets. For established firms, the implications are dramatic. Either adapt or die. Large organisations are being attacked on all sides as startups create new business models that unbundle their value chain.

Business model innovation is focused on enhancing advantage and value creation by making simultaneous and mutually supportive changes both to an organization’s value proposition to customers and to its underlying operating model. At the operating model level, the focus is on how to drive profitability, competitive advantage, and value creation through decisions on how to deliver the value proposition:

• Where to play along the value chain
• What cost model is needed to ensure attractive returns
• What organizational structure and capabilities are essential to success

The process of business model innovation is focused on how firms can transform from their existing business model into a new business model. This is not the same as merely creating a new product or service, although that may be a part of the process.

The business innovation process involves making strategic choices based on the analysis of markets and internal capabilities.

Opportunities that can be explored are:

• White space growth opportunities – identifying entirely new customer opportunity with a completely new business model that changes the competitive landscape. E.g. Mars moving into pet foods and then buying pet hospitals.
• Generate value through new ideas – develop transformative innovative business models that fulfil the jobs customers need to get done more effectively, efficiently and profitably.
• Successfully enter emerging markets – re-conceiving business models that recognize the unique unmet needs of consumers in these markets, profitably and efficiently. E.g. Go Pro as part of the growth in portable drones and cameras.
• Create new systems, rules, and metrics – harness new ways to organize and launch a new venture with an innovative business model.

Unlike other types of innovation, changes to the business model require changes to the fundamental principles that underpin how the business operates. However, most innovation is incremental, such as product innovation, where technology enhancements are routinely included in product updates as a way of increasing performance or reducing costs.

Business model innovation transforms how value is created, delivered and captured by reinventing the dominant logic of the business.

Essentially it can be broken down into four easy to understand stages which have been adapted from the Lean Startup and his follow up book The Startup Way.

#1. Customer Discovery – Identify a customer segment with a problem and work set out assumptions that underpin their problem.

• Profile customer and segments
• Define their characteristics – demographics, psychographics and behaviours.
• Set out a clear problem statement
• Define the jobs to be done – outcome, pains and gains.

See the persona canvas for more details on how to do this.

#2. Problem and Solution Fit – Develop a solution to their problem that they would pay, is profitable and sustainable.

• Identify how to solve the problem the customer faces.
• Produce a clear value proposition.
• Pain killers – how you solve the primary pain.
• Gain creators – the extra value your solution provides compared to alternatives.
• The costs associated with your solution.
• What is an unfair advantage?

#3. Product Market Fit – Verify channels through which the customer can be reached for sales and delivery of the solution.

• Identify how your target customer will become aware of your solution.
• How you will communicate the brand and position the solution compared to the competition.
• How you will deliver the overall customer experience – including post-purchase support and retention tactics.
• Identify the cost of acquisition and customer lifetime value.

#4. Structure and Scale – resource and structure to support the scaling of operations.

• Resources needed – people, time, money
• Set out key processes
• Protection of intellectual property to practice idea
• Partners to sustain and grow model

Business model innovation processes can be approached in any number of different ways as long as sound business principles remain intact. These sound business principles are framed by four core business principles:

• Customer Value Proposition: Create new and unique value for the customer;
• Profit Model: Make a profit
• Key Resources: Secure the resources required to deliver the customer value proposition; and
• Key Processes: Identify the core business processes required to deliver the value proposition.

Think of these four areas as a picture frame for the business model innovation process, where it’s up to the company to paint the picture within the frame.

8.2 Business Model Innovation Outcomes

Business model innovation describes a fundamental change in how a company delivers value to its customers, whether that’s through the development of new revenue streams or distribution channels.

There are lots of case studies and examples of how new entrants have challenged and often superseded existing companies as a result of an innovative business model.

Most of the research points to business model innovation as providing:

• improvements in corporate profits 9
• improvements in growth and market share.
• improvements in operational efficiency and effectiveness and customer lock-in.
• cost reduction and strategic flexibility.
• rapidly exploit new market and product/service opportunities.
• move from fixed to variable costs.

9. Why Business Model Innovation Is Important

Organizations that are locked into a dominant business model are in danger of having a similar fate as Kodak. The company once successful company was a giant in its time accounting for 90 percent of film and 85 percent of camera sales. However, Kodak viewed itself as untouchable. Moreover, it viewed its core business as being in the film and chemical business.

It’s hard to believe now that their own engineer, Steven Sasson, created the first digital camera! Executives were nervous that digital cameras would cannibalize their existing product and main revenue stream. So they ignored the business opportunity. As a result, competitors quickly seized market share and Kodak was later forced to file for bankruptcy.

Many failed business model innovations involve the pursuit of opportunities that appear to be consistent with the firms current business model.

In contrast, companies like Uber, Airbnb and Xiaomi have been able to dominate their respective industries because of their unique business models.

The Economist Intelligence Unit (2012) surveyed more than 4,000 senior executives worldwide on the subject of innovation. The findings highlighted that executives expect new business models to provide a long-term advantage, not new products and services.

10. Why Digital Business Models Are Game Changers

Digital Business Model Transformation

Technologies used to be local e.g. a server used to be based in a company and enable file sharing around the building. Even then there were problems with sharing data across departments as they used different proprietary software.

Fast forward to today and cloud computing, global infrastructures (AWS, Google…), modular digital building blocks and easy inter-connectivity via API’s have unleashed an unbelievable number of new business models.

10.1 How Does Digital Change Business Models?

This is the area of my doctoral research and something I’m obviously passionate about.

First of all, let’s explore some of the digital business models that exist today and how digital technologies enable them. I’ll also illustrate this with some examples.

Consider how digital technologies change systems, structures, activities, as well as processes. As an example, digital channels change the way to the market, which subsequently affects how you create value for your customers.

Example 1: Retail channel. Online retailers, such as Alibaba and Amazon, have changed how people source or buy products. Many retailers have not been able to adapt and have gone bankrupt as a result, including big names such as former retail giants such as Toys‘R’Us, Claire’s, and RadioShack and many more.

Example 2: Mass Customization: Digital technologies allow consumers to design and customizing products, perform last-mile distribution activities through technologies such as 3D printing.

Example 3: Digital Assistants: AI-based technologies, like Amazon’s Echo and Google Home, are fundamentally shifting how consumers search, interact and use product and services.

Example 4: Industry 4. Sensors, AI, robotics and other automation technologies converge to transform businesses across the value chain.

10.2 Some Useful Ways To Think About Digital Business Models

10.2.1 MALLEABLE (PRODUCE IT, CHANGE IT, DISTRIBUTE IT)

New digital business models will challenge incumbent firms as they are burdened by their legacy business model and the related difficulties in transforming to a new business logic.

Typically incumbents are forced to deal with conflicts and trade-offs between existing and new ways of doing business10

10.2 Digital Trends And Digital Business Model Innovation

10.3 How To Discover Digital Business Models

There are four phases for innovating new digital business models: discovery, development, diffusion and evaluation of impact.

1. identifying existing products and services;
2. deconstructing business models; and
3. discovering new configurations.

10.3.1. Identify Existing Products And Services

First, products and services from within the target market must be identified and defined from the customer’s perspective. Offerings that match a customer need to be understood. Then products and services recorded that have similar business models; it is more important to capture the variety of options for designing business models than to achieve an exhaustive market overview. As digital innovations are often enhancements of non-digital products and services, non-digital counterparts must be included.

10.3.2. Deconstruct The Business Models

Second, the business model components of the products and services identified must be decomposed by applying the taxonomy-building methodology 12

Common characteristics of the selected products and services are identified and grouped into dimensions. Finally, the resulting taxonomy is visualized as a matrix listing several dimensions of a problem and the variety of possible values for solution.

10.3.3. Discover New Configurations

The resulting matrix then can be used to spot commonalities and differences between business models. The most important commonality relates to the value proposition because it reveals which offerings compete for the same customers.

11. How Many Types Of Business Models Are There?

See my next article for the ultimate list of business model types and examples for a full list of examples and how to harness the power of these types to create innovative new business models. For now, I’ve listed them as most others do, but there is a far better way to think about business models – I’ll show you soon.

The number of business models available to any business is shifting because of digital technologies. Of course, there are examples and some cases of types of business models and I list this in the example.

There are some broadly-based business models that have labels. The problem though is that often these labels, e.g. subscription model, don’t really define the success and performance of a business.

Many businesses incorporate multiple business model labels. As an example, Spotify:

• A multi-sided platform.
• Uses subscription services.
• Offer peer-to-peer connectivity.
• Freemium model
• Advertising

Business Model Examples

11.1 Types Of Business Model (A – Z)

1. Advertisement – most media publications online, e.g. Forbes, generate revenue from advertisements on their site.
2. Affiliate Marketing Business Model – is used by many software companies, manufacturers and eCommerce sites (including Amazon). An affiliate promotes a product or service to their audience and upon purchase receive a commission.
3. Agency based Business Model – this is where companies outsource parts of their business to agents who undertake the service on their behalf. Examples include advertising agencies such as BBDO, TBWA as well as outsourced events, direct sales, telesales…
4. Aggregator Business Model – is where the company aggregates providers within a niche and then sells their services under its own brand. The money is earned as commissions. Examples – Uber, Airbnb, Oyo.
5. Attention Merchant Business Model – is based on the principle of ‘grabbing’ attention, usually online, and then using this to monetize the business. Examples include the rise of influencers where they have become a brand in their own right and monetize the attention through sponsorships and affiliate payments.
6. Blockchain – The Blockchain is an immutable, decentralized, digital ledger. The blockchain can cut out middlemen such as banks and provide peer-to-peer transactions. The blockchain opens up lots of new business model opportunities because of the decentralized approach. Models based on blockchain are not owned or monitored by a single entity. Rather, they work on peer-to-peer interactions and record everything on a digital decentralized ledger.
7. Brick-and-mortar – bricks and mortar refer to physical buildings either owned, rented or leased. Many businesses such as hotel chains have large amounts of capital tied up in physical properties. Also retailers, restaurants and many other businesses.
8. Bricks-and-clicks – bricks and clicks are a blend of physical channels and online. Typically, many retailers have moved online. Grocers – Tesco, Walmart as well as fashion brands – Apple, Ted Baker operate both physical stores as selling their goods online. Interesting that Amazon, which started online is now opened up a physical store which could be a major threat to many retailers.
9. Cash Business Machine Model – This is where the timing of payments to suppliers is much longer than when a business collects money from its customers. In other words, the company gets the money in first before needing to pay for the goods it sold. As an example, Amazon takes 82 before after receiving goods before it pays suppliers, but on average an item will be sold within 36 days from stock.
10. Consulting Business Model – consulting is a major business sector with companies such as Accenture, McKinsey, Deloitte, Bain and many others. These companies focus on specialist skills and knowledge, often within industry verticals. Their help organizations navigate change, develop strategy, manage mergers and acquisitions and many other services.
11. Crowdsourcing – involves getting the ‘crowd’ often the public to help contribute to a project. There are different types of crowdsourcing platforms – some are for social causes and others purely focused on helping startups. Companies that rely on crowdfunds are Wikipedia. There are lots of other crowdfunding tools that entrepreneurs can use.
12. Data Licencing / Data Selling – companies like Twitter and Facebook license access to their platform to third parties. Other businesses work on licensing include companies that create license their patents to companies that then use the intellectual property in a manufacturing process.
13. Direct sale business model – direct sales are most often associated with business-to-business environments where the purchase of services and complex products runs from thousands to millions of dollars. Salespeople are a vital part of customer acquisition and further development of customer relationships.
14. Direct to Customer Business Models – the consumer goods industry is based on distribution and sals of products to consumers, as opposed to businesses. However, companies like Hp were disrupted in the laptop and home PC market when Dell sold directly to consumers. Hp had traditionally based it business on selling to consumers through large retail stores.
15. Distributor – there are hundreds of distributors that act in most part as middlemen. As technology has advanced the role of many distributors has changed. In fact, Alibaba now provides a direct connection between suppliers and sellers and has cut out the need for many distributors. Many businesses outsource their distribution to specialists (often called logistics companies).
16. Dropshipping – is an e-commerce business model where an online store is set up to sell products from other companies. However, no stock is ever purchased. Instead, once the order is placed it is sent to the manufacturer, or distributor, who then fulfils the order. An example of this is Aliexpress – a part of the Alibaba group.
17. E-Commerce Business model – eCommerce business model is an up-gradation of the traditional brick-and-mortar business model. It focuses on selling products by creating a web-store on the internet.
18. Educational Niche business model – The ease of producing courses has prompted lots of entrepreneurs to set up online courses within niche markets to educate others. Online platforms, like Udemy, have also created marketplaces for online educators
19. Franchising Business Model – the franchise market is huge. A franchise operation creates a business and which then acts as the blueprint for operation. This blueprint then is purchased or rented. The original business then acts as the marketing and sales part of the operation to help its franchisees develop and grow. Examples are McDonalds, Papa John’s, Starbucks and Pizzahut.
20. Freemium Business Model – a lot of businesses know that you are more likely to buy if you try their products. Usually, this is for software as a service (SaaS) businesses who offer a cut down version of the features so you can get to see if it is a good fit for your needs. Example: Canva.
21. Hidden Revenue Business Model – as the name suggests this business model relates to hidden ways the business makes money, or so you think. Examples are Google and Facebook who both base their business model entirely on advertising revenue. Every time the customer views or clicks on an ad they charge the business who is advertising.
22. Instant News Business Model – Twitter as a social network is used to track news much more so that Facebook. It is more ‘in the moment’. Other platforms such as InShorts also capitalize on this and hence create a different value proposition and model.
23. Manufacturer – manufacturers make finished products from raw materials. They then sell either directly to the customers or sell it to third parties. Car manufacturers produce cars and also sell cars through car dealerships.
24. Network Marketing – or multi-level marketing involves a pyramid structured network of people who sell a company’s products. The model runs on a commission basis where the participants are remunerated when. Network marketing business model works on direct marketing and direct selling philosophy where there are no retail shops but the offerings are marketed to the target market directly by the participants. The market is tapped by making more and more people part of the pyramid structure where they make money by selling more goods and getting more people on board.
25. Online Marketplace – Online marketplaces aggregate different sellers into one platform who then compete with each other to provide the same product/service at competitive prices. The marketplace builds its brand over different factors like trust, free and/or on-time home delivery, quality sellers, etc. and earns commission on every sale carried on its platform. Examples – Amazon, Alibaba.
26. Multi-Brand Business Models – Companies these days want to serve all categories of people. To save this purpose companies need to have all sorts of brands which resonate with all categories of customers. Not everybody would afford Puma Shoes, for example, hence many retail outlets have started to keep multiple brands in the same store so that the users can have a choice and the retailers can have a business. Lifestyle and Pantaloons are few other examples which follow multi-brand business model strategy.
27. Multi-Sided Platform Business Model – These types of Business Models act as invisible middlemen who ensure smoother transactions in interactions among buyers and sellers. One of the best examples would be LinkedIn. The business social network is an undoubted market leader in its platform which allows job seekers and companies to interact “socially” in a “business sense.”
28. Nickel-and-dime – In this model, the basic product provided to the customers is very cost-sensitive and hence priced as low as possible. For every other service that comes with it, a certain amount is charged. Examples – All low-cost air carriers.
29. On-Demand subscription-based Business Model –
30. One for One Business Model – The best example would be TOMS shoes which give out one pair to the kids around the world cannot afford them for every pair of shoes sold. This move has made the company very profitable and sustainable over a long time is it improves the brand image in the minds of people. The nonprofit side of the business is excellent for revenue generation.
31. Peer to Peer Business Model – A P2P economy is a decentralized internet-based economy where two parties interact directly with each other to buy or sell goods or to conduct a transaction without the intervention of any third party. A P2P catalyst is a platform where these users meet. Examples of P2P platforms are Craigslist, OLX, Airbnb etc.
32. Privacy as Business Model – Privacy has become the biggest need in recent times and with the evolution of technology. With Google and Facebook gathering uses data the concerned is legitimate for all the people about their privacy. In this respect, many of the businesses are started evolving which allow users to control privacy better than popular businesses. Free sample over Google privacy concerns, a search engine like duckduckgo have started evolving which allows users to control the data and private navigation. Duckduckgo makes money via associations and by sales of local keywords. Does privacy has become a business model for duckduckgo.
33. Razor and Blade revenue Business Model – In Razor and Blade business model, the company makes the customer product loyal and sells the related accessories at a premium price. This can be compared to the razor and blade, where razor is a onetime purchase but the blade is a constant purchase and thus company ensures a constant stream of revenue by pricing the blade at a premium.
34. Retailer – A retailer sells directly to the public after purchasing the products from a distributor or wholesaler. Examples  – Amazon, Tesco.
35. Reversed Razor and Blade revenue business model – As the name suggests this is the type of business model that is exactly opposite to the other one mentioned. Apple charges very high on its physical products why it gives out the music on iTunes for apps on Appstore for a very low cost which is a constant purchase. So in the case of Apple, the one-time purchase is more expensive than the regular purchases which are in fact Reversed Razor and Blade business model. This is one of the strategies that helped Apple grow and become a trillion dollar company.
36. SAAS, IAAS, PAAS – Many companies have started offering their software, platform, and infrastructure as a service. The ‘as a service’ business model works on the principle of pay as you go where the customer pays for his usage of such software, platform, and infrastructure; he pays for what and how many features he has used and not for what he hasn’t.
37. Subscription-based Business Model – Suppose there is a course for $10 and you sell that course to 10 people, you will earn $100 for one month. Next month you will have to come up with new buyers for the course without which there would be no revenue. Instead of this course is converted into a subscription-based business model, the course sections can be given to students for $3 per month. This way with 10 subscribers you have $30 fixed revenue for subsequent months and as users keep on adding the revenue keeps on growing. Amazon Prime and Netflix run a similar business model.
38. User-generated Content Business Model – These types of Business models work entirely on user content. People come on these websites to know about information and that information is provided by other people themselves. The best example is Quora which is termed as Social QnA site. The concept comes from Wikipedia where users use their knowledge to edit certain articles and share their talent for others to read. Blogs are another example of the user-generated content business model.

12. Summary And Actionable Points

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