To sustain a long-term growth, a company has to select and fine-tune a business model to fit with its underlying marketable products – whether there were designed in response to a market-pull or a technology-push. Here I attempt to throw together a long list of business models that I have recently come across.
Business Model Canvas
These grids give us a systematic views of a business:
9 building blocks:
- Key partners
- Key activities
- Value proposition
- Customer segment
- Customer relationship
- Key resource
- Distribution channel
- Cost structure
- Revenue stream
Mainly for start-ups or small companies. Comprised of 9 key areas:
- Top 3 problems
- Key activities
- Unique value proposition
- Customer segment
- Solution
- Channels
- Cost structure
- Revenue streams
- Unfair advantage
Embraces uncertainty whilst maximising growth and prioritises speed over efficiency.
4 Growth Factors:
- Market size
- Distribution
- High gross margins
- Network effects
2 Growth Limiters:
- Lack of product / market fit
- Operational scalability
Types of business models
Pricing
Leverage customer loyalty to profit from related accessories.
E.g. Profit from the razor blade replacement and sell the core item cheaply
E.g. (Inverse) Apple sells iPhone with a high mark-up price but its music, apps etc. are less pricy.
Cheap basic services, high charge on everything else
E.g. Budget airlines
Free basic version, charge the advanced usage
Long-term low-price payments. Maintain a safe customer base
E.g. Netflix
Low profit margin, rely on the fast turnaround time for suppliers and customers. Hold the stocks only for a short period of time and pay back the suppliers relatively quickly.
E.g. Amazon
Middleman
Create value for demand and offer sides, taking commissions as the middleman
E.g. Airbnb
One-off sales, as in most of the high street stores. To succeed however, one should sell to a qualified audience – not everyone, to sustain the business model.
Webstore only
E.g. ASOS
Online + offline
E.g. Almost all apparrel companies
Aggregate multiple sellers into a single platform
E.g. eBay, Etsy
No product or inventory but just a store. Sell products by partner sellers, who send the goods directly to the customer.
Network Effect
Feature products/services and get commission on a popular site
Gain popularity and receive commission to endorse and advertise for products.
E.g. Influencers, Celebrity, Famous Instagrammers
A multi-level pyramid: get commissions for their own sales and their recruits’ sales
Gain mass to populate the website with contents, and profit from contextual advertising
E.g. Quora / Reddit
Sell data
E.g. Twitter, Facebook
On-demand Usage
Access personnel on demand, per hour/day/project charges
E.g. Consultancy
Software, infrastructure, and platform as a service. Pay on demand.
Distribution Channels
Start with the wholesaler, build value-added features/finishing and sell directly to customer
Distribute rights to operate, expand the brand quickly with low entrance barriers to franchisees.
Approach to Retail Customers
Require lots of human interactions. Rely on the relationship between the salesperson and the customer.
E.g. Salon, Consulting firms
Require minimal human intervention
E.g. SurveyMonkey, IKEA