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Nine Business Models

There are 9 main business models you can choose from as an entrepreneur.  This guide gives you a succinct definition, example, success factors, and monetization tactic for each. If you don't know your business model's strategy, then you don't know what it takes to win.

Geographic

  • Definition:  a brick-and-mortar business with physical location(s)
  • Example:  a retail store
  • Success Factors:  site selection (i.e., who can move next door and how can you block competitors?)
  • Monetization Tactic:  sales

Channel

  • Definition:  eliminate or add a middleman
  • Example:  Apple eliminated the chip manufacturer middle-man when they built the iPad (they manufactured their own A4 chip)
  • Success Factors:  need extra capital or extra expertise
  • Monetization Tactic:  margin

New Technology

  • Definition:  any scalable technology (i.e., most of the technology companies that Silicon Valley VC's fund)
  • Example:  Evolyte Analytics, any web app or mobile app
  • Success Factors:  does it work and can you protect it?  does the market care?
  • Monetization Tactic:  sales (the hockey stick curve)

Image Marketing

  • Definition:  luxury goods or services
  • Example:  Louis Vuitton, Rolex, Armani
  • Success Factors:  better, cheaper different (always choose better & cheaper); how do you create & maintain it in the face of a fickle public?
  • Monetization Tactic:  margin
Brand = Awareness + Positive Meaning Your brand must represent uniqueness and offer value to customers.  In addition, it should meet all four of the following criteria:
  1. True
  2. Good
  3. Beautiful
  4. Simple

Low-Cost Producer

  • Definition:  produce a high volume of a product at a cost lower than competitors
  • Example:  the off brands of products you find at the grocery store
  • Success Factors:  how are you cheaper? remove waste (anything not adding value to customer, like Toyota's jidoka system of continuous improvement); commit to high volume; how easy is it to leapfrog competitor?
  • Monetization Tactic:  margin

Social Network

  • Definition:  social structure made of individuals or organizations connected by one or more specific types of interdependency (i.e., friendship,  financial exchange, beliefs, knowledge, hobbies, etc.)
  • Example:  Twitter, Facebook
  • Success Factors:   get big fast; must establish a trusted peer-to-peer relationship network; can you monetize it?
  • Monetization Tactic:  margin

High-Performance Image

  • Definition:  a premium product or service that needs a "standard" competitor to establish "high-performance" value in customer's mind
  • Example:  Rolex Submariner vs Seiko 100 meter diving watch in 1950s (Seiko's release a few years after Rolex allowed Rolex to be viewed as a premium and high-performance product)
  • Success Factors:  objective measures; committed to low volume (high margin); patient capital (need time to build)
  • Monetization Tactic:  margin

Commodity Producer

  • Definition:  a product that is exactly the same no matter who produces it (i.e., lacks qualitative differentiation)
  • Example:  paper, coal, copper
  • Success Factors:  control input or output prices
  • Monetization Tactic:  sales

Be A Crook

  • Definition:  performing any act that's against the law
  • Example:  white collar crime
  • Success Factors:  none, just ask yourself "when do I go to jail?"
  • Monetization Tactict:  sales
Important Note:  for any type of fad or inherently unpredictable business (e.g., fashion, financial services, etc.), these strategies reach their limits Special thanks to Greg Bunch for compiling some of this information. You should follow @seanMeverett on Twitter here.
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