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
- True
- Good
- Beautiful
- 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
