John Mullins and Randy Komisar. Getting to Plan B

 

The book Getting to Plan B: Breaking through to a better business model, written by John Mullins and Randy Komisar, contains several important lessons, primarily for start-up entrepreneurs, on developing successful business models. Though very repetitive around a few key ideas, the book is well worth reading especially for those who want to better understand how the business model is reflected in the different financial statements. with interesting examples from: Amazon, Apple, Celtel, Costco, Dow Jones & Company, eBay, GlobalGiving, GO airlines, Google, Oberoi Hotels, Pantaloon, Patagonia, Ryanair, Shanda, Silverglide, Skype, Southwest Airlines, Toyota, Walmart, Zara and ZoomSystems.

The book in three bullet points:

The business model concept is in the book defined as the pattern of economic activity comprising of five key elements that together determines the viability of any business. The five key elements being the revenue model, the gross margin model, the operating model, the working capital model and the investment model. Companies are successful when the five elements work together.

Getting to Plan B is about the process of discovering a business model that works, with the assumption that the initial plan is most often wrong. The discovering process can be made systematic by constantly formulating different hypothesis and measurements and continuously follow up and iterate the business model into a new Plan B.

The starting point for a new business model is to learn from successful examples worth mimicking in some way and examples to which you explicitly choose to do things differently, where the ultimate judge is the customers and the cash flow generated from your business model.

A brief summary of the different chapters:

1. Don't reinvent the wheel, make it better - the concepts of analogs (successful predecessors), antilogs (predecessors that you want to differ from), and Leaps of Faith (beliefs about answers with no evidence) is covered with the key take out to learn, mix and match to create your own business model, to experiment to test different hypothesis to prove or refute them.

2. Guiding your flight progress - the concept of dashboarding (a systematic way to guide experiments and track results) is presented with examples showing that measuring of specific parameters or results increases the focus of the company's activities, and that the dashboards, including parameters and goals, need to evolve over time based on the learnings they uncover.

3. Air, food and water - the chapter, focusing on revenue models, hits home two important points: the importance of resolving customer pain or providing customer delight, and the need for actual evidence of how customers are likely to respond. To develop a revenue model questions that need to be asked are: Who will buy? What will they buy? Why will they buy? How soon, how often, and how many will they buy? With what effort and cost on your part? At what price will they buy, and on what basis will they pay?

4. Avoiding rocks and hard places - the topic for the chapter is gross margin models; the spread between the price at which products and services are sold and the cost of selling those (COGS). The key messages with the chapter are that digital technology enables gross margin models in which COGS approaches zero, that a superior gross margin model creates leverage that can be applied differently depending on strategy, and finally the fact that pricing decisions should be value-based and not cost-based.

5. Trimming the fat - is a short chapter on operating costs; all the day-to-day costs that must be incurred in addition to COGS. Key ideas are that by doing things differently in relation to other actors in the industry, operating cost can be lowered or eliminated, and by starting the analysis at the most costly or scarcest resources in the industry areas for business model innovation might occur. Another key point is that adding costs might also enhance the customers' experiences and willingness to pay premium prices, so cost cutting is not always the answer to profitability.

6. Cash is king - is according to me one of the more important chapters in the book as the balance sheet, working capital and cash management is often forgotten in business model discussions. Different industries and business models requires different amount of working capital (the cash a company needs to keep the business running) and all elements in the business model have implications for the cash generated and the cash consumed. From page 139: "Failure to earn a profit won't put you out of business, as long as you still have cash. But if you run out of cash, even if you are profitable, you'll be gone in a heartbeat"

7. It takes money to make money - focus on the investment needed to get the business started and through the period until it can generate enough cash itself, and the general goal (there are exceptions) is to find a way to get to breakeven with as little investment as possible. The authors mention some of the many trade-offs involved with external funding from different sources, but primarily focus on venture capital. The conclusions are: Less investment means giving away less of the business, less credibility lost when leaving a business model for another, and fewer sleepless nights if you've mortgaged your house.

8. Can you balance a one-legged stool? - tries to summarize, at least on a conceptual level, the different elements of the authors' definition of a business model, and their implications on one another. The conclusion is that the revenue model, gross margin model and operating model directly affect the working capital model, and these four models directly affect the investment model.

9. Getting started on discovering your Plan B - ends the book where it started with a focus on the talented and visionary entrepreneur. In the beginning of the book there were statements such as "Intuitively, as is almost always the case for committed, passionate, entrepreneurs, they felt that the answers to all five questions were yes" (p29) and in the end "dreaming your entrepreneurial dream" (p214)...

A quick comparison with some other popular books on business models:

Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengersby Osterwalder and Pigneur, atempts to introduce a standard language and format for analyzing and innovating business models based on the business model canvas. Getting to Plan B define the business model concept in financial terms and is not overlapping with this book. See my review here

Seizing the White Space: Business Model Innovation for Growth and Renewalby Mark W. Johnson, explores the circumstances when a new business model might be needed from an incumbent perspective, with several classic examples. See my review here

Open Business Models: How to Thrive in the New Innovation Landscape by Henry Chesbrough has a heavier focus on technological innovation in the context of business models and also covers the important area of Intellectual Property in relation to open business models.

The Ultimate Competitive Advantage: Secrets of Continually Developing a More Profitable Business Model by Mitchel, Coles, Golisano and Knutson, has a heavier focus on marketing with some ideas and questions relating to one-sided business models, so if you are looking to "sell more" perhaps you like this book. See my review here

The Profit Zone: How Strategic Business Design Will Lead You to Tomorrow's Profits by Slywotzky, Morrison and Andelman, has a heavier focus on profitability and the changing areas in which high profit is possible to keep, it is a quick read. See my review here

All in all, the book is somewhat repetitive and rather long for the ideas it delivers, but with many interesting examples and important chapters on gross margins, operating costs and cash flow, it is well worth reading and a good complement to other books on business models not going into the financial details.

https://bitly.ws/3gXYg

Уметь фокусироваться и фокусировать

 

Как с помощью метода сфокусированного обсуждения не потерять важное и запомнить главное  

По роду своей деятельности я изо дня в день организую дискуссии, переговоры, встречи, пишу десятки писем или коммерческих предложений. Пройдя этот путь несчетное количество раз, я привыкла опираться на четкий и универсальный инструмент – метод сфокусированного обсуждения. Хочу отметить, что применять его можно и нужно не только на работе, но и вне ее.

Зачем вообще нужны обсуждения?

Вспомните лекции, на которых вы бывали в студенческие годы. И тех преподавателей, которые в буквальном смысле ее просто читали. Как много информации оставалось в голове после окончания? И наверняка были те, которые строили лекции на вовлечении, сопровождали рассказы историями. Обычно это гораздо действеннее. Правильно организованные обсуждения как раз и нужны, чтобы информация запомнилась без лишних усилий и специального процесса «запоминания».

Почему метод работает?

С помощью метода сфокусированного обсуждения вы легко сможете доносить свои идеи и мысли до абсолютно любой аудитории. Он появился в конце 40-х годов в США и применялся для солдат, которые недавно вернулись с войны – то есть для людей, которые находятся в стрессовой ситуации, но в том случае, когда было необходимо обсуждать серьезные вопросы, и проблемы, уходя от эмоций.


Уже потом метод начал использоваться для организации различных сообществ в других странах мира, позже пришел в бизнес. 

Метод сфокусированного обсуждения универсален потому, что понятен и тем, кто любит визуализацию, и тем, кто мыслит эмоционально, и тем, кто предпочитает эмоциям логику, и тем, кто требует разложенной по полочкам информации. То есть если нужно, чтобы двое или более людей договорились и поняли что-то за короткое время – этот метод будет действительно эффективным. Кроме того, используя его в личной практике, вы научитесь проверять предоставляемую вам информацию и уберегать себя от манипуляций. Надо лишь удостовериться, что по всем уровням, о которых речь пойдет ниже, вам достаточно данных.

    

Принцип действия метода

 Метод сфокусированного обсуждения построен на вопросах. Но, разумеется не всяких, а правильных. В них и есть сила. В основе лежит воронка из четырех уровней вопросов, пройдя по которым можно разложить по полочкам любую дискуссию, перейти от поверхностного обсуждения к глубинному или даже разобрать конфликтную ситуацию. 

Этап 1: Задать открытые объективные вопросы. Что известно о проблеме? Какие есть риски? Что произойдет, если ее не решать? И т.п.
Этап 2: Проговорить эмоциональные переживания, связанные с проблемой. «Что чувствуешь?», «Почему переживаешь?», «Что вызвало улыбку?»
Этап 3: Интерпретировать на себя. «Какое значение это для тебя имеет?», «Как влияет на жизнь?».
Этап 4: Поиск решения. «Какие выводы можно сделать?», «Что можно изменить?», «Как лучше поступить?».
Только на одном из 4 уровней тот или иной участник группы в силу своих природных данных чувствует себя сильнее и комфортнее. Таким образом, используя вопросы, построенные относительно специфичного уровня восприятия, мы имеем возможность вовлечь всех и каждого в обсуждение и раскрыть самые сильные стороны отдельных участников.
При использовании ОРИП-модели также вскрываются бессознательные установки, которые в других случаях принимаются по умолчанию. Благодаря этому группа избавляется от стереотипов, а предположения и выводы становятся более осознанными, продуктивными и обоснованными.

Итак, уровень первый – факты

Уровень объективный. Например, когда вы готовите письмо, с чего стоит начать? Излагайте конкретные факты: кто, что, зачем.  Этот уровень – копилка фактических данных.

Следующий уровень – эмоции. 

Здесь сосредоточены чувства, переживания. Какой факт огорчил, что вызвало эмоции. В какой момент вы почувствовали радость.

Третий уровень – уровень интерпретаций

Задайте вопросы: Что все это значит? Какое значение имеет ситуация для жизни?

Последний уровень – принятие решений 

Какие выводы можно сделать? Какие уроки извлечь? Что бы вы посоветовали в такой ситуации? Как поступить, чтобы не попасть в какую-то ситуацию?

Метод сфокусированного обсуждения, как вы видите, предполагает по большей части открытые вопросы. Это не случайно. Так проще и быстрее можно вовлечь аудиторию, заинтересовать, заставить говорить. По опыту отмечу, если человек вслух сформулировал мысль, уже дальше он охотнее и активнее будет участвовать в дискуссии.

Возможно, обсуждение необходимо сопроводить презентацией. Тогда нужно учесть несколько тонкостей при ее подготовке и использовать в слайдах те вопросы, которые вы считаете ключевыми для всей дискуссии.

С первых же шагов надо понять, какие слова и вопросы аудитория должна запомнить. Начинайте презентацию с главных мыслей. Для этого задумайтесь: что должен запомнить человек, которому все это адресовано? Это уровень объективный.

 Что касается эмоционального уровня, то можно, например, уже в конце презентации спросить: а что вас удивило? Какие моменты презентации показались вам наиболее яркими? Какие идеи вы считаете ключевыми? Но при этом помните, что по ходу обсуждения именно на этих мыслях, словах, идеях и моментах обязательно надо сфокусировать внимание людей, вызвать у них эмоции, заставить задуматься.

 На уровне интерпретаций предложите задуматься, о чем все это было? А какой урок можно извлечь? Какие появились идеи? Какие образы были ключевыми? Если речь не о презентации, а, скажем, о письме, то здесь уместны формулировки «Исходя из представленной выше информации, мы поняли, что…». То есть предлагаете наложить информацию на ситуацию.

И, наконец, на уровне принятия решения задавайте людям вопросы о дальнейших действиях: что мы можем сделать с полученной информацией? Какой наш следующий шаг? Или если снова говорить о письме, то вполне допустимо использовать обороты вроде «Буду благодарна, если Вы сделаете вот это... Со своей стороны, я готова сделать вот это».

Обратите внимание на неоспоримый плюс метода – фокусировка. Не секрет, что сегодня человек получает информации в разы больше, чем способен переварить и осознать. Наш мозг начинает фильтровать, сортировать, ставить барьеры на часть информации, независимо от нашего желания. Как раз метод фокусированного обсуждения позволяет увидеть, услышать, выделить что-то на самом деле значимое.

Немного о том, как подготовить дискуссию по методу сфокусированного обсуждения

• Шаг 1. Определите, на чем вы хотите сфокусировать аудиторию, – буквально одной емкой фразой.

• Шаг 2. Напишите цель дискуссии – рациональную (чтобы люди что-то узнали, выучили, поняли, сделали) и эмоциональную (которая заинтересует, вовлечет, порадует, вдохновит, даст энергию, заставит задуматься).
• Шаг 3. Конкретизируйте начальную точку: то есть четко продумайте, с чего вы начнете, как введете людей в контекст ситуации, какие слова будут сказаны в самом начале.
• Шаг 4. Придумайте вопросы, которые помогут достичь обеих обозначенных целей. На этом уровне не нужно сортировать вопросы – как в мозговом штурме пишите все, касающееся темы, что придет в голову.
• Шаг 5. Выберите нужные вопросы.
• Шаг 6. Продумайте связки между вопросами, чтобы один вытекал из другого. Иначе логика дискуссии потеряется.
• Шаг 7. Мысленно представьте себе обсуждение – как будто оно уже началось. Сразу улавливайте: в какой последовательности все движется, какие могут быть подводные камни, какие вопросы из задуманных могут оказаться неуместными или слишком сложными, что еще надо предусмотреть.
• Шаг 8. Тщательно подготовьте начало: как заинтересуете людей, как пригласите их к диалогу, на чем сфокусируете, о чем надо договориться.
• Шаг 9. Тщательно подготовьте завершение – вопросы, выводы, последний фокус внимания. Тут работает всем известное правило, что более всего запоминаются начало и конец.
• Шаг 10. Перечитайте сценарий еще раз, проверьте и подсчитайте, сколько на все это потребуется времени.

Вот такие шаги позволят вам подготовить практически любое мероприятие – презентацию, переговоры, совещание, письмо, мозговой штурм, обсуждение, тренинг.  Вы увидите, что все получится намного эффективнее.

Мой коллега, наставник и ментор Билл Степлз рассказывает, что любую поступающую к нему информацию старается проверять по принципу этого метода. Особенно что касается рекламы: если на каком-то из уровней информации не хватает – значит, вами пытаются манипулировать и не дать принять взвешенное и осознанное решение.

Есть маленькая ремарка: необязательно идти строго в указанной последовательности уровней. Главное правило –  пройти их все. Все зависит от ситуации. Где-то лучше сразу отключить эмоции и начать с фактов, а где-то лучше прожить сперва рациональный уровень, чтобы успокоиться, потому что нет лучше способа пережить эмоции, чем поговорить о них.

Что я рекомендую почитать по этой теме:

1.      Саша Карепина «Искусство делового письма» - в ней автор прекрасно раскладывает, как доносить идеи письменно, чтобы быть верно понятым. Причем, речь не только о деловой переписке.
 2.      Алексей Каптерев «Мастерство презентации». Отличный рассказ о том, как правильно использовать этот инструмент и сделать его действенным.

https://bitly.ws/3gPYy

Business Model: 70+ Business Models Patterns In 2024. Part 4

  (Part 3 - https://bit.ly/4arlM7l )

Proptech, or real estate on steroids (through digital and tech)

PropTech stands for property technology, is a relatively recent movement in the real estate industry. A movement is an innovative approach that uses technology to optimize how consumers and real estate professionals interact with property. PropTech, therefore, leverages digitalization to help property managers, owners, builders, and landlords to manage their assets.

A key example of that is the Zillow business model. You can see the proptech business model type, as a way to innovate a very old industry, by automating the real estate value chain through technology.

Zillow is an online real estate marketplace, matching buyers and sellers and renters and landlords through a massive platform with personalized search and discovery experiences and simple UI for both buying/renting and selling/listing. The company makes money by charging a fee on the sales and additional services like premium agents and mortgage services for buyers.

Razor and blade model

The razor blade business model, also known as the razor-razorblade model, involves selling a product at a lower price to then selling a related product later for a profit. The razor and blade business model has been popularized by King C. Gillette, founder of the safety razor company Gillette, which sold a durable razor at cost while selling disposable blades at a premium.

Have you ever wondered why a blade costs more than a razor? This is the razor and blade revenue model in action. When a company makes its customers loyal to a product. Then that same company might leverage that product to sell related “accessories” for a premium price.

Companies like Apple, for instance, use an inverse razor and blade, business model. Apple has created platforms like the App Store and iTunes, which sell apps and songs, movies, or tv series at a convenient price. While Apple charges premium prices on its devices (iPhone, iPad, and Mac).

The logic is the same, but inverted. As consumers are locked in the Apple ecosystem, they feel compelled to buy Apple products at a premium price and with very low price elasticity.

Apple’s made over $365.8 billion in revenues in 2021, of which over $191.9 billion or over 52% of its total revenues came from the iPhone. Yet, the iPhone isn’t just a hardware product; it’s a business platform that combines hardware (iPhone), operating system (iOS), and a marketplace (the App Store). Thus, the company still makes most of its money around a single product which powers up an entrepreneurial ecosystem.

Retail business model

In contraposition, with wholesale business models, retail business models operate directly to consumers, thus selling a product at higher margins to customers.

A retail business model follows a direct-to-consumer approach, also called B2C, where the company sells directly to final customers a processed/finished product. This implies a business model that is mostly local-based, it carries higher margins, but also higher costs and distribution risks.

As a classic example of a retail business model, think of the local coffee shop or restaurant. The coffee shop owner buys a set of products in bulk from wholesalers (coffee beans, foods, drinks, etc.) thus paying these products at a low price and it sells them back in its store with a high markup.

Real-time insurance business model

A real-time insurance business model enables Tesla to build its own insurance arm, by dynamically adjusting the premiums, based on real-time driving behavior. Reduced insurance premiums hooked with the leasing arm, enable Tesla to scale its demand side of the business.

There is an underrated part of Apple’s distribution strategy, which I’ve been emphasizing for years: the subsidies. 

When you produce an expensive device, how do you make it scale? Either you lower the price for consumers, or you have someone else pay for it!

When Steve Jobs was about to launch the iPhone, he knew that marketing without distribution would not work. 

He convinced mobile carriers to subsidize the iPhone through their plans.

Indeed, in 2021, the iPhone still made over 50% of Apple’s revenues, and guess what? Most iPhones (64%) got sold through indirect/third-party distribution.

Elon Musk is a huge fan of Steve Jobs (so much so that he engaged Walter Isaacson to write his biography, just like Steve Jobs’ iconic book) and borrowed a good chunk of Apple’s playbook.

And now, he’s building two critical segments of Tesla’s business model, which will be vital in enabling a wide distribution of his cars: leasing and insurance.

In the last ten years, Tesla had to solve the supply side.

What Musk labeled “mass production hell” brought Tesla very near to bankruptcy on several occasions (in 2018, Tesla was a few days away from running out of cash!).

However, now that the company has figured that out, through the openings of the Shangai, Berlin, and Texas Gigafactories.

The coming decade will be all about enhancing the demand side.

In short, by enabling an expensive car, like a Tesla, to be potentially bought by hundreds of millions of drivers.

How is Tesla solving this?

Through the real-time insurance business model. In short, Tesla enables riders to have their safety score updated, on a monthly basis, through real-time driving behavior.

While traditional insurance has a fixed score, often based on factors that go way beyond the ability of the driver, Tesla is trying to hook again the insurance premiums based on the actual capability of the driver.

This is a key element of Tesla’s business model, because a better driving score, helps Tesla lower the insurance costs for drivers, and enables the company to also provide leases at a lower rate, thus making the Tesla affordable, for a much larger number of people!

This is the magic of a distribution strategy, built-into your business model!

Self-serving model

Dropbox generated over 90% of its revenue via its self-serve channels to convert users into paying customers through in-product prompts and notifications, time-limited free trials of paid subscription plans, email campaigns, and lifecycle marketing. Dropbox generated over $2.1 billion in revenue in 2021, with an average revenue per paying user of $133, based on 16.79 million paying users.

A self-serving model is a freemium-based model able to convert quickly and with low-cost free users in paid accounts. Dropbox’s business model is a great example of acquiring new users efficiently and at relatively low costs through three tactics: 

• Word-of-mouth referrals.
• Direct in-product referrals.
• And sharing of content.

By following the freemium model when users create a free account those same users often share and collaborate with other non-registered users. This mechanism for which free users invite other non-users creates an automatic referral mechanism.

Built-in prompts in the products instead make it possible to convert, with a low-touch and automated funnel to users in premium accounts.

Slow, fast, ultrafast fashion and real-time retail

The fashion industry has evolved very quickly since the 1980s leading to various fashion movements and enabling the development of companies that would define our times. Among these, we can break them down into slow, fast, and ultrafast fashion players.

Slow fashion is a movement in contraposition with fast fashion. Where in fast fashion it’s all about speed from design to manufacturing and distribution, in slow fashion instead quality and sustainability of the supply chain are the key elements.

The slow fashion business model developed also in contraposition with the fast fashion business model:

Fash fashion has been a phenomenon that became popular in the late 1990s, and early 2000s, as players like Zara and H&M took over the fashion industry by leveraging on shorter and shorter design-manufacturing-distribution cycles. Reducing these cycles from months to a few weeks. With just-in-time logistics, and flagship stores in iconic places in the largest cities in the world, these brands offered cheap, fashionable clothes and a wide variety of designs.

Zara epitomized that movement. From there, other forms of fast fashion developed. They moved both upward and downward the supply chain. Thus, by cutting manufacturing time on the one hand, and by also leveraging digital distribution, in place of physical stores.

This led to the development of ultra-fast fashion, led by players like Asos:

The Ultra Fashion business model is an evolution of fast fashion with a strong online twist. Indeed, where the fast-fashion retailer invests massively in logistics, and warehousing, its costs are still skewed toward operating physical retail stores. While the ultra-fast fashion retailer mainly moves its operations online, thus focusing its cost centers on logistics, warehousing, and a mobile-based digital presence.

As an offspring of the ultra-fashion trend, players like SHEIN have developed a real-time retail business model:

Real-time retail involves the instantaneous collection, analysis, and distribution of data to give consumers an integrated and personalized shopping experience. This represents a strong new trend, as a further evolution of fast fashion first (who turned the design into manufacturing in a few weeks), ultra-fast fashion later (which further shortened the cycle of design-manufacturing). Real-time retail turns fashion trends into clothes collections in a few days cycle or a maximum of one week.

SHEIN is an international B2C fast fashion eCommerce platform founded in 2008 by Chris Xu. The company improved on the ultra-fast fashion model by leveraging real-time retail, which quickly turned fashion trends in clothes’ collections through its strong digital presence and successful branding campaigns.

Space-as-a-service model

WeWork runs a membership model that gets monetized via a set of packages that include ancillary value-added products and services to enable companies to scale or shrink their workspace on-demand. WeWork defined its revenue model as space-as-a-service claimed to be more scalable than traditional commercial real estate.

While the main carrier of this model (WeWork) had massive backlashes due to its unsustainable business model. The question of whether this model will be possible in the future still holds.

True, that part of the problem is that of taking long-term leases to transform them into short-term opportunities by building services on top of them, to arbitrage on the difference.

Subscription-based business model

Subscription-based business models are built on a recurring customer base, where customers rather than own, usually have access to the product or service. The customer can have the upside of the service, without owning the good underlying it, which is maintained by the company running the subscription-based business.

Think about those two scenarios. You have a series of online courses that you sell as a one-off. You’ve sold 100 courses in one month at $100; you’d made $10,000. Next month to have the same level of revenue generation you’ll have to sell the other 100 courses.

This means you either find more students or you produce new courses. Imagine the second scenario. You have a few courses, and you make them available for a monthly subscription at $75. If you have 100 subscribers, this means that each month you’ll have $7,500 without having to find new students.

Given this example, you can understand why the subscription business model is so powerful. Today companies like Netflix, Amazon (with Prime), LinkedIn, and many others use subscription-based models to monetize part of their business. However, a subscription-based business model also needs a lot of resources.

Take Netflix. I’ll keep paying my subscription only if they will give me fresh content on a regular basis. That is why Netflix also produces series that are quite successful. Yet those series have massive production costs.

In other words, to sustain a subscription-based business model you also need a lot of the resources necessary to create new content, have awesome support or service that motivates subscribers to keep paying. The curse of the subscription business model is churn!

Surfer model: reverse-engineering the gatekeeper

In the gatekeeper model, we saw how the market got consolidated under a single middleman that, with its algorithms, could change the logic of the whole distribution pipelines for an entire industry.

Small businesses then will need to master how the gatekeeper works and aligns with its business model to reach potential customers. This is at the core of the surfer model, where the small or medium business builds a strong brand by complementing the gatekeeper’s value proposition.

For instance, for years, companies like Booking, TripAdvisor, and other vertical travel search engines have been able to build valuable companies on top of Google. Where Google couldn’t cover vertical areas, those companies complement that, by building multi-billion businesses indeed.

The same applies when you launch e-commerce on Amazon, a blog by leveraging Google, or a channel on YouTube. In all these circumstances you’re aligning your distribution model with that of the gatekeeper to reach potential customers.

Three-sided marketplace model

Uber Eats is a three-sided marketplace connecting a driver, a restaurant owner, and a customer with the Uber Eats platform at the center. The three-sided marketplace moves around three players: Restaurants pay commission on the orders to Uber Eats; Customers pay the small delivery charges, and at times, cancellation fees; Drivers earn through making reliable deliveries on time.

Uber Eats is a great example of a three-sided marketplace, where the company facilitates interactions between eaters, delivery partners, and restaurants to develop a solid marketplace.

While each of those interactions could happen independently. Uber Eats platform makes them smooth, as it provides a unique place for those players to connect and do business.

User-generated content business model

Among the 50 most popular sites in the US, Quora might be defined as a “social Q&A” site. Just like Reddit taps into users to generate content. Quora also draws on its writers to produce quality content that answers its users’ questions.

There are a few interesting aspects of Quora. First, it uses a mixture of AI combined with human intelligence. Quora allows users to write content while using advanced algorithms to make the platform scale up. Second, people writing on Quora do not get paid.

In fact, by introducing a social mechanism of ranking, Quora writers feel recognized for their work. Besides, earning the prize as Quora’s top writer might also mean the mention of popular publications.

Thus, if I had to describe the Quora business model in a couple of sentences, that would be “the social that taps into users – that aspire to become writers – to produce content, and it scales up thanks to a smart platform built on AI systems.“

In terms of monetization, Quora has received several rounds of investment and started to test text-based advertising.

User-generated AI-amplified model

TikTok is the Chinese creative social media platform driven by short-form video content enabling users to interact and generate content at scale. TikTok primarily makes money through advertising, and it generated $4.6 billion in advertising revenues in 2021, thus making it among the most popular attention-based business models or attention merchants.

For many, TikTok is just the next generation of social media. However, there is more to it. TikTok is a continuous feed, that shows short video formats, where users engage in all sorts of dances, memes, and more (for now).

Yet, what makes TikTok powerful is the curation performed by its AI. Whereas in Web 1.0 social media was all about the network. In AI-driven social apps, it’s all about engagement.

Users can find a continuous stream of hooking content in their feeds independently from their network, the AI replaces it. Yet, the AI + the network becomes an atomic weapon for growth. If the previous advertising machine is built on top of information retrieval (Google) and network (Facebook).

Those are the largest digital advertising machines as they managed to make advertising mostly invisible or at least relevant to users. What if that could be brought to the next level?

Where scaled user-generated platforms built powerful business models (Facebook, Twitter, Instagram). The web 2.0 version is the user-generated, AI amplified content that will take over with new video formats.

Unbundler model

Unbundling is a business process where a series of products or blocks inside a value chain is broken down to provide better value by removing the parts of the value chain that are less valuable to consumers and keep those that in a period in time consumers value the most.

Unbundling is the process of breaking the value chain to take over the most valuable part of it, without owning or bearing the total cost of ownership of maintaining it. In phenomena like showrooming the customer browses the physical shop, yet it buys from the online retailer, which has more competitive pricing.

Therefore, the online retailer takes all the upside, without having the downside of maintaining a physical store. A classic example is when people browse in a local store, to then buy on online e-commerce like Amazon, where they can find more competitive pricing.

Showrooming is a pattern where consumers browse in a brick-and-mortar store but they finalize the purchase online. Webrooming is the reverse process. Consumers browse the product online, but they finalize the purchase in the physical store.

The unbundler, initially, is a sort of freeloader that takes the upside of a value chain without bearing the downside. Yet the overall value chain improves as customers get the most by combining the experience from the incumbent and the unbundler (ex. the consumer browse several physical stores, then buys online as it saves money).

Vertically integrated business model

From its humble beginnings in 1961, when Leonardo Del Vecchio started as a small shop that produced components and semi-finished products for the optical industry; that shop has reached over $9 billion in net sales in 2017.

With all the major brands from the eyewear industry licensed by Luxottica (Armani, Bulgari, Chan, l, Prada, and many others) it is the largest and most vertically integrated business in the world. 

Leonardo Del Vecchio, one of the wealthiest people in Italy and among the wealthiest businessmen in the world, has built Luxottica piece by piece.

Started as a small shop producing semi-finished products for the optical industry it eventually acquired the whole supply chain, up to own retail stores across the globe. It took Leonardo Del Vecchio a few decades to build its vertically integrated business.

Yet now that is the most successful company in the optical industry. Instead of being acquired by a large American company, the Italian-based Luxottica was the one acquiring brands like Oakey (the California-based eyewear company).

Players like Warby Parker try to break down Luxottica’s vertical integrated supply chain, by initially owning only a part of the supply chain, thus having a more agile approach.

Warby Parker is a prescription and sunglasses retail company, which focuses on vertical integration to enhance the customer experience by owning the optical laboratories where lenses are developed, and by owning both physical and online stores to enable customers to choose from a variety of products. Warby Parker leverages programs like the Home-Try-On program and the “Buy a Pair, Give a Pair” to lower up long-term customer acquisition costs, incentivize recurring purchases and referrals from existing customers.

Wholesaler business model

The wholesale model is a selling model where wholesalers sell their products in bulk to a retailer at a discounted price. The retailer then on-sells the products to consumers at a higher price. In the wholesale model, a wholesaler sells products in bulk to retail outlets for onward sale. Occasionally, the wholesaler sells direct to the consumer, with supermarket giant Costco the most obvious example.

Whereas in the direct-to-consumer business models, the manufacturer goes straight to consumers. In the wholesale model, the company passes through middlemen to reach the final consumers. Usually, this type of business model implies that the wholesale company only needs to deal with certain aspects of the business (sourcing and logistics), while it won’t have to spend massive resources on other processes like distribution, and marketing, as it will primarily sell in bulks to fewer large customers.

Reverse engineer any business model

Business analysis is a research discipline that helps driving change within an organization by identifying the key elements and processes that drive value. Business analysis can also be used in Identifying new business opportunities or how to take advantage of existing business opportunities to grow your business in the marketplace.

Key takeaways

• Many believe business modeling is about copying and pasting. Instead, that is about experimentation. 
• Business models can offer valid templates that we can test, yet only when those ingredients are combined, we get a unique model, hard to replicate, that is when a competitive advantage is created.
• Business models are not business plans. While many startups consult business modeling right when it’s the time to build their pitch for investors. In reality, the business model strategy serves entrepreneurs to test their hypotheses, quickly and cheaply. So that when you have enough built-in mechanisms for sustainability within your business model, you will have enough cash at the bank to keep growing. Or perhaps the market will have proved your model to be successful, so ready to be taken to the next level.
• In an era, where technology becomes commoditized over time, business model experimentation can prove more sustainable, as harder to reverse engineer (as it comprises many building blocks that sometimes are hard to understand also to the same company rolling out the successful business model). 
• Business modeling is a continuous journey of discovery. It never ends. As a company scales or it creates options to scale, the whole business model will transform and the question of whether it will be sustainable for the next stage of growth and scalability stays open.
• There isn’t a right or wrong business model, but rather a model that will work in a certain context, and that will suddenly stop working in others. Business modeling is also a matter of life’s philosophy. The vision of founders or those who took the business from one stage to the next affects the long-term vision of the business, thus its direction in the long-run. 

Business Models Types Database

Business Model Types Database	Description	Example
Ad-Supported	In the ad-supported model the basic, entry service is offered for free and subsidized by advertising served to free accounts. An example is Spotify, which is a mixture of ad-supported and premium. The ad-supported model is used as a self-sustaining model. At the same time, free accounts are also prompted to convert to premium accounts. Therefore, in this specific case, the ad-supported model works both as a self-sustaining and freemium model.	Spotify
Affiliate	In the affiliate model, the company can generate revenues by referring to other services and products, thus gaining a commission on each sale. At the same time, the affiliation program can be used as a growth engine for the company that enables affiliates to send referral traffic to the platform. Amazon has been among the tech companies that most have enjoyed initial traction thanks to affiliations.	Amazon
Aggregator	In this business model, the aggregator becomes the middleman by removing all the other middlemen from the market. To understand more about this model and how it differentiates from platform business models, read the guide on the aggregator business model.
Agency-based	In short, Neil Patel Digital is the SEO and digital marketing agency that allows Neil Patel to monetize its traffic primarily by offering free content and free marketing tools. This is a mixture of a freemium business model, combined with an agency-based business model.	neilpatel.com
Asymmetric	In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.	Google, Facebook
Attention-Merchant	The attention-merchant main product is represented by the eyeballs of millions if not billions of users. Usually, the attention-merchant makes its core product free, and as open as possible, then it monetizes it through targeted advertising.	Google, Facebook
Barbell	In this model, a company uses a barbell approach to product and distribution. You have a core product and business where most resources are spent and the whole organization structured around. On the other end, you place bets on new products that might renew your business model and make the old irrelevant.	Alphabet Other Bets
Bidding Multi-Brand	A perfect example is a company like Grubhub, an online and mobile platform for restaurant pick-up and delivery orders. The company charges restaurants a pre-order commission and it generates revenues when diners place an order on its platform.	GrubHub
Blitzsacler	Amazon e-commerce consumer platform (here we’re not referring to Amazon AWS). Amazon’s continuous, massive, investment in growth to dominate multiple markets is a perfect example of a business model with built-in growth. This is the combination of several elements (platform’s network effects + branding power + scalable financial model).	Amazon e-commerce
Bundler	In bundling, a strong distribution power combines several products in a single offer to extract more from the market. For decades Microsoft has been able to bundle several products under the same umbrella (Office has been coupled from time to time to several other products) so the company extracts more from the market if it were selling a single product.	Microsoft
Blockchain-Based	A blockchain is a distributed ledger that relies on cryptography to handle transactions, interactions, or anything that implies an exchange between people, which is decentralized and anonymous. Companies like Steemit have built a business model around enabling user-generated content by using a blockchain protocol.	Steemit
Chain-Mixed To Franchise	This model is used to scale restaurants or food businesses while keeping a tighter grasp on the brand. The company keeps a higher percentage of chain restaurants primarily to control the customer experience, to research new products, and also develop operational efficiencies that can be passed along to franchised restaurants as best practices. Starbucks is a mix of operated vs. licensed stores. If we look at the revenue generation, company-operated stores make up 79% of the company’s revenues in 2017.	Starbucks
Cash Conversion (Financial Model)	Have ever wondered how some businesses survive, nonetheless the thin margin they have? One great example is Amazon. A company that has made low-profit margins for most of its history and yet it has been very disruptive. In reality, Amazon can get its partners to finance the business by playing on the short-term liquidity of the business, what is called a cash conversion cycle. This unlocks short-term liquidity that coupled with massive investment back in the business made of Amazon an ever-expanding company (see also Blizscaler-Mode)	Amazon
Discount-High-Quality	Leveraging on the price to gain a competitive advantage isn’t new. However, price wars are not the best way to create a sustainable business model. Instead, the supermarket chain – ALDI – has done just the opposite. One of the critical ingredients of the ALDI business model is to keep its prices low while maintaining its quality as high as possible.	ALDI
Distribution-Based	A distribution-based business model is one in which a company’s survival depends on its ability to have one or a few key distribution channels to connect to its final user or customer. Most successful companies tie their business models with a core distribution channel, which becomes the so-called cash cow, for years if not decades.	Amazon, Apple, Google, Facebook, Microsoft and counting
Direct-To-Consumer	A direct-to-consumer business model is primarily based on direct access from a brand or company to its final customers. Indeed, the more a company is able to tap into its customers without the need of an intermediary, the more this model will work in favor of the brand, which is able to control the perception of its customers via massive marketing campaigns. While this is similar to the distribution-based model. The direct-to-consumer is mostly B2C (targeting mass markets). Where instead the distribution-based can be also B2B or enterprise.	Unilever
Direct Sales	In a direct sales model, the whole company is organized around a complex salesforce able to understand the motivations that drive customers to buy. This salesforce is also able to manage complex relationships which can involve entire departments of an organization, thus generating from simple to more complex deals. Thus, direct sales can be a powerful way to develop a business if done correctly. One of the secrets to a successful direct sales strategy is the qualification of your target audience.	Apple (in part), Tesla
E-Commerce	As building up a website and e-commerce has become inexpensive, and it buries no particular cost for the traditional brick-and-mortar business, more and more small businesses join in and make the marketplace their primary source of revenues following Amazon leadership at a global scale. In fact, in many cases, brick-and-mortar stores opt to become Amazon sellers. The e-commerce industry now has other key players that go from Shopify to Etsy. And many other tech players are entering the space. Also, Google has its Google Shopping and Facebook has Facebook Shops (a branded integration with Shopify).	Amazon, Shopify, Etsy, Google Shopping, Facebook Shops
Educational-Based	Built by one of the smartest persons on earth (Stephen Wolfram), Wolfram Alpha is a computational engine, able to provide complex mathematical questions and way more advanced (at least until a few years ago) compared to any other search engine.	WolframAlpha
Family-Owned	The family-owned integrated model starts from the assumption that even if you’ve built a multi-billion dollar company you can control it in its entirety, while you also keep an agile decision-making process based on an ownership structure that keeps the control of the organization in the hands of the family.	Prada, LVMH
Feeding	As platforms arise, they create ecosystems, becoming unexplored markets. Those markets can be surfed by feeding your business model on top of that. A good example is how HyreCar feeds its business model on top of Lyft and Uber networks of drivers.	HyreCar
Freemium	Free can be a powerful weapon for growth. Many in the tech industry and more specifically in the SaaS business model use Freemium to grow their business. The freemium is a mix of free and paid services.
Feeterprise	As consumer brands showed the freemium model could be both a great go-to-market strategy and generate a continuous flow of qualified leads (however, only after the whole organization would be organized around identifying those opportunities), other B2B/Enterprise companies (those primarily selling to other companies or larger corporations) also mastered the freemium model but on a B2B/enterprise scale.	Zoom, Slack
Gatekeeper	In the gatekeeper model, the dominant company has become the main middleman between the market and millions if not billions of potential customers. In the previous era, many middlemen captured value and retained distribution power, by fragmenting the market. The gatekeeper then becomes the provider, enabler, and also the pipe for millions of small businesses.	Amazon, Google, Facebook, Spotify
Heavy-Franchised	McDonald’s follows what could be defined as a “heavy franchised business model.” 92% of its restaurants are franchised. With a long-term objective to reach 95% of franchised restaurants.	McDonald’s
Humanist Enterprise	The most prominent advocate for the humanist enterprise business model is Brunello Cucinelli. Indeed, Brunello Cucinelli’s business model is based on three key pillars: 1. Italian Craftsmanship, 2. Sustainable Growth, 3. Exclusive Positioning and Distribution.	Brunello Cucinelli
Enterprise	In an enterprise business model, a company focuses on large clients, usually Fortune 500 clients that have a massive budget of millions or billions of dollars. This kind of business is primarily based on complex sales.	SalesForce
Instant News	Twitter has based its fortune on short messages (until 2017 140 characters, then extended to 280) which allows anyone to share the news but also updates that become news.	Twitter, Google News
Locked-In	Apple is famous in the business world (beyond launching beautifully crafted tech products) for its philosophy in keeping its ecosystem as enclosed as possible. Apple devices will talk to each other in a seamless way, to create a great experience.	Apple
Management-Consulting	As one of the most successful consulting companies in the world, Accenture makes money by selling consulting services in several industries (from financial services to communication and technology). A consulting business model is often based on hiring talented people and having them work on multiple client projects.	Accenture
Market-Maker	Some platforms create liquidity by removing hundreds of intermediaries that are used to lock in the market. When that happens the market gets bigger and more liquid over time. That enables the platform to work as the market maker, or the maker of the price, by making it liquid.	Uber
Multi-Brand	Luxury groups like LVMH and Kering today follow a multi-brand strategy based on creating economies of scale at a central level; while keeping the Maison and Houses part of the portfolio operated and run independently.	LVMH, Kering
Multi-Business Model	The core of Amazon has always been the e-commerce platform, however over the years, as a side effect of developing adjacent parts of the business, to sustain its core. Amazon built successful programs (Prime and AWS are examples) that turned into self-standing businesses.	Amazon (E-commerce, AWS, Prime)
Multi-Sided Platform	On a multi-sided platform, the company operates services to both sides. For instance, LinkedIn sells subscription services to HR managers to find candidates to fill vacancies. At the same time, LinkedIn provides another subscription service to people looking for job opportunities.	LinkedIn
Multimodal	Lyft is a transportation-as-a-service on-demand marketplace that allows riders to quickly find a driver and get from one place to another. However, Lyft has also expanded with a multimodal platform that gives more options like bike-sharing or electric scooters.	Lyft
Multi-Product	In its expansion strategy, OYO started from India, yet it quickly moved to different verticals. From there it built up a portfolio of products, each launched in parallel to its expansion strategy, to cover larger geographical areas, but also different segments of the market.	OYO
On-Demand	We now give for granted that we must watch our favorite shows and series on-demand. Yet, for decades the traditional media business model has relied on fixed schedules. You either watched the Late Show at the time it was going on air, or you were supposed to wait for the next replica of that episode.	Netflix
One-For-One	Have you ever heard of TOMS Shoes? As you can understand from the name, this is a company making shoes. What’s new about it? The founder of TOMS Shoes founder has come up with a model, in which, for a pair of shoes sold, another pair is given to kids around the world that cannot afford them.	TOMS
Open-Source	Where in a freemium and freeterprise the free product is built, developed, and maintained by the company centrally. On an open-source model, the free product is built, developed, and in part maintained by an open community of developers.	GitHub, Fastly, GitLab
Peer-To-Peer	A peer-to-peer business model is built on the premise of creating value for both the demand and offer side, while the company that acts as a middleman monetizes through commissions.	Airbnb
Platform	A platform business model generates value by enabling interactions between people, groups, and users by leveraging network effects. Platform business models usually comprise two sides: supply and demand. Kicking off the interactions between those two sides is one of the crucial elements for a platform business model success.
Platform-Agnostic	Grammarly’s CEO explained to TechCrunch as one of the key advantages of Grammarly is its “platform-agnostic approach.” In short, Grammarly focuses on being anywhere the user needs to be. Grammarly instead is trying to be anywhere, independently from the platform, thus making the user free to choose the platform.	Grammarly
Privacy-As-Business-Model	With the rise of the web and the rise of companies that make money by harvesting users’ data, privacy has become a concern. As many businesses start from people’s concerns, privacy has become an industry.	DuckDuckGo
Razor-And-Blade	Companies like Apple, for instance, use an inverse razor and blade, business model. Apple has created platforms like the App Store and iTunes, which sell apps and songs, movies, or tv series at a convenient price. While Apple charges premium prices on its devices (iPhone, iPad, and Mac).	Gillette
Self-Serving	A self-serving model is a freemium-based model able to convert quickly and with low-cost free users in paid accounts. Dropbox’s business model is a great example of acquiring new users efficiently and built-in prompts in the products instead make it possible to convert, with low-touch and automated funnels users in premium accounts.	DropBox
Space-As-A-Service	While the main carrier of this model (WeWork) had massive backlashes due to its unsustainable business model. The question of whether this model will be possible in the future still holds.	WeWork
Subscription-Based	In a subscription-based model, the company needs to build a continuous relationship with its users/members/customers, and in turn, the customer commits a subscription to sustain the business in the long-term	NYTimes/Netflix
Surfer-Model	Small businesses then will need to master how the gatekeeper works and aligns with its business model to reach potential customers. This is at the core of the surfer model, where the small or medium business builds a strong brand by complementing the gatekeeper’s value proposition.	SMBs
Three-Sided-Marketplace	Uber Eats is a great example of a three-sided marketplace, where the company facilitates interactions between eaters, delivery partners, and restaurants to develop a solid marketplace.	Uber Eats
User-Generated	There are a few interesting aspects of Quora. First, it uses a mixture of AI combined with human intelligence. Quora allows users to write content while using advanced algorithms to make the platform scale up. Second, people writing on Quora do not get paid.	Facebook, Quora, Reddit
User-Generates-AI-Amplified	For many, TikTok is just the next generation of social media. However, there is more to it. TikTok is a continuous feed that shows short video formats, where users engage in all sorts of dances, memes, and more (for now).	TikTok, Instagram, Facebook
Unbundler	Unbundling is the process of breaking the value chain to take over the most valuable part of it, without owning or bearing the total cost of ownership of maintaining it. In phenomena like showrooming, the customer browses the physical shop, yet it buys from the online retailer, which has more competitive pricing.	Amazon
Vertically-Integrated	Yet now that is the most successful company in the optical industry. Instead of being acquired by a large American company, the Italian-based Luxottica was the one acquiring brands like Oakey (the California-based eyewear company).	Luxottica

Business Models Examples Infographic

The business model examples infographic, from the FourWeekMBA Research.

Business models FAQs

Is a business model a business strategy?

A business model is a way to test part of a business strategy. For instance, within a business model, revenue streams are an essential building block. A good business strategy makes sure to test out the revenue streams that best suit that model, thus helping it become viable.

Why business models matter?

As a multi-faceted concept; business models can help entrepreneurs find the formula that works in the real world to build a sustainable company. Business models are also helpful for analysis to understand how businesses work. And to academics to study the available models of organizations present in the marketplace.

Why are business models important?

In the entrepreneurial world, business models help entrepreneurs test their ideas, monetization strategies, and value proposition to build a viable company by minimizing risks, assumptions, and time to market. Thus, offering entrepreneurs a framework for experimentation and a valid alternative to business plans, which can be hardly tested.