Are you good at business models?
Of course you are. We know all about business models, don’t we?
A lifetime as a consumer and almost a lifetime as a professional we all believe that we are well proficient in business models. We don’t hesitate more than a second to give our opinion if a business idea will work or not. And we are very generous to give our feedback how a company can perform better. But do we really have enough insights about business models?
We still receive significant number of questions from our community and from our humble students who ask for a second opinion about complementary business models to flourish their services and products. To properly answer this question we have made a research on business model innovation.
Guess how many different models we have revealed? 15? 30? No.
We have identified 55 business models for you.
The list below presents these business models with a short description and some example companies who have successfully exploited these business models. This article is not meant to be a comprehensive in-depth guide to introduce various different business models, but it intends to cover the surface of big picture for most common business models.
We also hope that this list serves you as a simple checklist the next time you establish, enhance or innovate a business model.
Let us know in the comments sections below which business models you find most attractive as a consumer and/or as a professional. If you have any questions or require further clarity, please drop a comment too.
|Business Model||How Does it Work?||Who Uses it?|
|Add-On (Upsell)||Sell Extra Custom Features||Ryanair|
|Affiliation||Use Sellers for you to sell your products||Amazon|
|Aikido||Disrupt against the proposition of competition||Nintendo Wii|
|Auction||Bidding, Reverse Auction||Ebay|
|Barter||Sponsoring and Value Exchange||P&G to give away Pampers, Pepsi to import Vodka to export Cola|
|Cash Machine||Collect Money from customers, but pay later to suppliers||Amazon, Dell, Travel Checks|
|Cross Selling||Sell other products which can be relevant to customers||Shell, Tchibo|
|Crowdfunding||Crowd invests for a sample product||Pebble, Music Record|
|Crowdsourcing||Crowd thinks, delivers, chooses||P&G Connect & Develop, Cisco|
|Customer Loyalty||Loyalty Card Programs to collect discount balance||Airlines, Advantage Card|
|Digitalisation||Physical Products and Offers become immaterial||Spiegel Magazine|
|Direct Selling||Producer directly faces and sells to customers||Tesla, Tupperware, Dell, Vorwerk|
|E-Commerce||Business transactions and communications via ICT||Amazon, Würth (intelligent box to give orders autonomously when the amount of supply goes low)|
|Experience Selling||Offers exclusive and unique product and service experience combined with positive emotions||Starbucks, Nespresso, Ikea, Marlboro|
|Flatrate||Offers unlimited use with the comfort to control prices||Netflix, Spotify, flat rate telecommunications subscriptions, all inclusive tourism offers|
|Fractionalized Ownership||Customer owns a specific portion or usage rights of a product||Timesharing holiday resorts, Netjets (network with 8000 airplanes), Sefage (Car Sharing Initiative established in 1948)|
|Franchising||Franchiser offers its business concept for expansion with the resources of franchisee whereas franchisee enjoys reduced risks and established brand and business processes||McDonald’s, Pizza Hut, Marriott, Starbucks|
|Freemium||Free basic version to wake the interest of customer and introduce the product, Paid advanced versions with full features||Skype, Spotify, Mailchimp, LinkedIn, Dropbox|
|From Push-To-Pull||Put customers as the central driving factor in every operation and decision, Produce only what the customer is ready to buy and do it as efficient as it is possible without waste||Toyota, Zara, Geberit|
|Guaranteed Availability||Provider offers uninterrupted availability instead of ownership, Provider is responsible for achieving this including timely repair, replacement and maintenance||Hilti, Fleet Management, Otis, IBM|
|Hidden Revenue||Offers free or cheap service to customers, but generates revenue from ads||Free newspapers, TV, Google|
|Ingredient Branding||Creating a brand for a component or a feature of a product||Intel for processors, Shimano for bicycle components, Bosch vehicle components|
|Integrator||Offering supplies mostly by own means with minimal dependency on 3rd Party suppliers||Zara, Ford|
|Layer Player||Specialised products and services which usually operate in multiple industries||Paypal, TRUSTe, Dennemeyer, Outsourcing Providers|
|Leverage Customer Data||Improved decision making and offering capabilities from the insights gained from raw customer raw||Google, Amazon, Facebook, Twitter|
|License||Focusing and investing on the commercialisation of intellectual properties||Mickey Mouse, IBM, BASF, ARM Limited|
|Lock-In||Offering products and services which are attached to intensive costs, time and learning if the customer wants to move to another provider||Software, Operating Systems, Gillette, Nespresso, Innovative external interfaces of hardware and mobile devices|
|Long Tail||Offering a large portfolio of products, not only the ones most people buy, but also niche products||Amazon, Ebay, iTunes, Netflix|
|Make More Of It||Offering core competencies to others externally||Porsche Consulting, Porsche Engineering, Festo, AWS|
|Mass Customisation||Customised Products but still in Mass Production, usually established with modular designs and components||Dell, Automobile Industry, Apple Watch with various bands, Levi’s, mymuesli|
|No Frills||Cheapest prices by offering unusual, but still essential version of products||Ford’s T-Modell, Southwest Airlines, Aldi, McFit, McDonald’s|
|Open Business Model||Involving external business partners for open research, development and innovation without detailed planning, P&G’s Connect+Develop to build new product ideas||Eli Lilly to build InnoCentive to solve complex scientific problems, IBM’s investments on Linux|
|Open Source||Products are built by community, Revenue doesn’t come directly from the product, but from the services around it||Mozilla, Red Hat, Wikipedia, Local Motors|
|Orchestrator||Company focuses only on its core competence, everything else is provided by third parties, but the company is also excelled to administer and integrate the activities of third party providers||Nike, Bharti Airtel, Li & Fung|
|Pay Per Use||Customer is charged based on her effective use of services and products||Pay-Per-View TV Offers, Pay-Per-Click Advertisement, Car2Go, Ally Financial’s Pay-Per-Risk Advertisement|
|Pay What You Want||Customer decides how much she wants to pay for a given service or product||One World Everybody Eats, Radiohead, Noisetrade, Humble Bundle|
|Peer-to-Peer||Company enables business transactions between private persons||eBay, Zopa, Airbnb, Uber, Upwork|
|Performance-based Contracting||Client is charged based on the monetary benefit it received from the offer or based on successful delivery of complex/risky offers||Rolls-Royce airplane motors, BASF Coatings, Xerox|
|Razor and Blade||Base component of the offer is either cheap or free of charge, but the complementary components to be able continue using the product is more expensive||Lamp oils from Standard Oil Company, Gillette, Printer Inks, Nespresso|
|Rent Instead Of Buy||Customer rents the product instead of buying it which frees the customer to do capital intensive investments to use the product||Saunders System, Xerox, CWS-boco|
|Revenue Sharing||Strategical partnership and collaboration to increase revenues in a win-win situation||CDNow, iTunes, AppStore, Groupon, Consultancy Industry|
|Reverse Engineering||Detailed Analysis of competitor’s products, services and business models to exploit the gained knowhow for its own business||Brilliance China Auto, Software, War industry|
|Reverse Innovation||Innovation and R&D are executed in developing countries to meet the extreme needs of developing countries, and then the offer is brought to developed countries||General Electric, Dacia Logan, Nokia, Haier|
|Robin Hood||Earn more from privileged customer segment, but supply more to unprivileged customer segment which may not otherwise afford the offer||Aravind Eye Care System, TOMS Shoes, One Laptop Per Child|
|Self-Service||Customer is actively involved in the delivery process of the offer, so thanks to the saved costs the company can further invest or reduce its prices||Supermarkets, restaurants, Ikea, Backwerk, Ibis Budget|
|Shop-in-Shop||As the name implies, this is about opening a business or a store (rent or franchise) inside another business or store||Bosch, Tschibo, Amazon Marketplace|
|Solution Provider||Offering not only a product, but also a turn-key solution around customer’s problem, so the customer can focus on its own core business||Heidelberger Druckmaschinen, Würth, Tetra Pak, 3M Services, Geek-Squad|
|Subscription||Recurring services or deliverables in regular time intervals||Salesforce, Blacksocks, Dollar Shave Club, Mailchimp, Entrepreneur Magazine|
|Supermarket||Offers a large spectrum of product to fulfil many requirements of the customer at one place||Toys"R"Us, Merrill Lynch, MediaMarkt, King Kullen Grocery Company|
|Target The Poor||Offers are targeted to the bottom of income pyramid, they are usually designed to cover minimal, but still essential needs of customers||Hindistan Unilever, Grameen Bank, Tata Nano, Walmart|
|Trash-To-Cash||Exploit recycled material to build new products with reduced costs, Give the customer good conscience to use your product||Freitag lab. AG, Greenwire, Emeco|
|Two-Sided-Market||Platform concept where the suppliers and customers are brought together||Diners Club, Ebay, Amazon, Zappos, Groupon, Facebook, Google|
|Ultimate Luxery||Offers are targeted to the top of income pyramid, they are usually unique and suit for self-realisation needs of customers, Focus on branding, events, highest quality standards associated with large investments which are covered with high margin of sales prices||Lamborghini, Jumeirah Group, Abbot Downing, Apple, Various watch producers|
|User Designed||Gives consumers the ability and infrastructure to design, produce, sell and market their own custom products||Spreadshirt, Lego Factory, Ponoko, Dreamheels, Createmytattoo|
|White Label||Offers no-name Products to vendors without any branding, so the vendors define their branding and pricing, focuses mainly on production and distribution optimisation||Foxconn, Richelieu Foods, Printing-In-A-Box|
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