HSG
Pay What You Want
Whatever it's worth to you
What, Why
This model allows customers to have full control over the price of a product or service as the vendor accepts the price offered by the customer (even if it is zero). It works best in industries with low marginal costs and when customers have a strong relationship to the vendors.
Radiohead:
In 2007, the band offered its album for downloading at an undetermined price. Even though the average amount paid was below previous albums' prices, Radiohead greatly increased its popularity.
Peer to Peer
Dealing from person to person
What, Why, How
As opposed to traditional transactions, peer to peer connects private individuals to connect, share, and exchange. The company acts as a platform which builds the relationship between its users.
Zopa:
The UK-based company allows the issuance of credits between individuals without the involvement of banks. Revenue is generated through transaction fees
Performance-based Contracting
Basing fees on results
What, Why, How
The price of a product is not determined by its face value but by the services it delivers. Often a specified amount covers all expenses such as operation, maintenance, and repair. The company is therefore often strongly integrated into the customers value chain.
Rolls-Royce:
With the power-by-the-hour program for aircraft engines, customers do not buy an engine but pay for the performance of said engine per flying hour.
Razor and Blade
Bait and hook
What, Why, How
To acquire customers, the basic product is offered at a very competitive price. In order to use the product, customers need to purchase complementary products, which are high-priced and responsible for generating revenue. This model is often applied in combination with the Lock-in model (# 27).
Hewlett-Packard:
In 1984, ThinkJet was the first inkjet printer created for private individuals. It was sold at a very affordable price and revenue was generated through complementary ink cartridges.
Rent instead of Buy
Pay for the temporary right to use
What, Why
The customer benefits from not having to pay the total value of a product at once, which allows to acquire products that he would otherwise not be able to afford. Companies have the advantage of reaching a wider customer base. This model is very similar to Pay Per Use (# 35) but focuses on the duration of usage and not the actual usage.
Xerox:
As the 1959 Xerox 914 model would have been too expensive for many buyers, Xerox rented the products out for a monthly fee. This boosted the demand so far that at some point Xerox was not able to cope with production.
Revenue Sharing
Win-win with symbiosis
What, Why
Several parties cooperate and share the resulting revenues. Revenue sharing is often found among internet businesses, for example users which upload certain content to a database and in return receive a part of the revenue for every transaction connected to this content.
Apple:
The App Store is a prominent example of this pattern. Independent developers upload their applications to Apple's platform where customers can download them. Apple then shares the revenue generated through an application with its developer.
Reverse Engineering
Taking lessons from competitors
What, Why, How
By analyzing an existing product, service or even an entire business model, a company develops an imitation of this product at low costs and can therefore offer it to the market at a lower price. This makes it possible to reach target groups, which were not willing or able to afford the original product which usually has a higher price.
Denner:
After recognizing Nespresso's success, Denner reverse engineered the concept and started offering cheap, Nespresso compatible capsules. The low price and the non-exclusive distribution network allowed Denner to reach a wide customer base.
Reverse Innovation
Learning from good-enough solutions
What, How
As opposed to traditional innovation where products are being developed for industrialized countries, this refers to the activity of creating simple and inexpensive products for developing countries and later adapting those products for their use in industrialized countries.
Nokia:
The Nokia 1100 was developed as an inexpensive phone specifically for India's hinterland, including country-specific features such as a torch. It was later very successful with customers looking for a simple device in industrialized countries as well.
Robin Hood
Take from the rich and give to the poor
What, Why, Who
Besides offering its products and services to 'the rich', a company also offers them to 'the poor' at a much lower price. While the rich subsidize the poor, the poor help to create economies of scale, which would otherwise not have been possible.
Aravind:
As many Indians cannot afford surgery to cure their blindeness, Aravind requires wealthy clients to pay the full price for their eye surgery, while poorer customers pay as much as they want/can afford. Even if 2/3 of customers pay nothing, Aravind earns yearly profits.
Self-service
Putting the customer to work
What, Why, How
In exchange for a lower price, a part of the value creation is outsourced to customers, which often find that this also saves them time. Self-service is especially effective in cases where relatively high costs are generated for activities which add little value.
IKEA:
Distribution and assembly are outsourced to the customer in return for relatively low prices. In addition to distribution and assembly, IKEA saves money on inventory and packaging as products need less space before being assembled.
Shop in Shop
Piggybacking
What, Why, How
A win-win situation is created by establishing an independent store within another store. The host benefits from collecting rent, attracting additional customers, and not having to build up its own expertise for those products. The smaller branch can profit from an existing customer base, existing resources, and freedom in the presentation of its products.
Bosch:
Many customers opted for cheaper no-name products as they were not adequately informed at hardware stores. With its Shop in Shop concept Bosh was able to have more freedom in the display of its products and to consult/inform potential buyers.
Solution Provider
Finding all you need at the one-stop shop
What, Why, How
Within a particular domain, a solution provider offers total coverage of products and services, typically providing maintenance, consulting, as well as supplies and spare parts and therefore creating a single point of contact. This allows customers to save time and having a specialized partner contribute his specialized experience.
Lantal Textiles:
Originally a manufacturer of textiles, Lantal Textiles now focuses on designing and implementing solutions for airlines, bus companies, railways, and cruise lines. This business has less exposure to business cycles and creates constant revenue.
Subscription
Taking a season ticket to services
What, Why
Based on a contract which defines the frequency and the length of agreement, customers receive a product or service regularly without having to purchase it over and over again. Companies profit from better predictability while customers can save time and often also money.
Blacksocks:
The Switzerland-based company offers a subscription to regularly shipped black socks. Customers can choose how many socks they want in which interval and do not have to go out to buy them individually.
Supermarket
Large selection and small prices under one roof
What, Why, How
With this business model, a company is able to satisfy most customers' needs by offering a wide range of products at low prices. While having lower margins, the company is able to draw customers and profits from economies of scope.
Toys R Us:
While competitors offer a small range of high-priced products in boutique stores, Toys R Us attracts customers to their large stores with a wide variety of toys at low prices.
Target the Poor
Customers at the base of the earnings pyramid
What, Why, How, Who
This pattern focuses on low-income countries where income lays at or below USD 2'000. This customer segment benefits from gaining access to affordable products and can be very profitable as it includes over half of the world's population.
Grameen Bank:
Loans are issued to impoverished applicants, which cannot get a regular bank-loan. The village acts as a guarantor for the loan, which creates social pressure and results in a default rate of only 2 per cent.
Trash to Cash
Turning old rubbish into new cash
What, Why, How
By recycling old materials, a company can lower or even eliminate its cost for resources and transform them into new products or resell the resource in other parts of the world. This creates a win-win situation for supplier (free trash disposal) and manufacturer (low or zero cost for resources)
Freitag:
The company recycles old canvas from trucks (and other materials) in order to create stylish bags and fashion accessories. This keeps costs for resources very low and attracts ecologically aware customers.
Two-sided Market
Attracting indirect network effects
What, Why, How
The company acts as an intermediary or provides a platform for the interaction between two complementary groups. Benefits usually correlate with the size of the network which is why the company has to achieve a fast visibility.
Groupon:
A platform which connects customers and vendors through discounts. Customers can benefit from receiving discounts on products or services while vendors can increase their visibility.
Ultimate Luxury
More for more
What, Why, How, Who
Focusing on the top financial class, a company offers the highest quality, a strong brand, competent representatives, and frequent special events support this business model. High margins make up for initial investments, which are required when offering such products and services.
Lamborghini:
Differentiation is achieved through limited editions of high-powered sports cars at high prices. Close customer care and comprehensive support packages can justify high margins.
User Design
The customer as inventive entrepreneur
What, Why, How
In addition to being consumers, customers also take the role of a designer and can design products, which other customers will later buy. A company can therefore offer products specific to the customers' requirements while customers pursue their entrepreneurial ideas at low risk and cost.
Threadless:
Chicago based company which accepts inputs for t-shirt designs for which the community can vote. The highest rated designs will then be produced and its designer financially rewarded.
White Label
Own brand strategy
What, How
A company produces products, which are not given any specific brand name and can therefore be sold by different companies under different brands. As this enables the manufacturer to exploit economies of scale, he can also supplement the sales of his own branded product with sales of the same product as a white label.
Foxconn:
Technology company which manufactures electronic devices for many well-known brands such as Apple, Dell, and Intel. Estimations say that Foxconn produces about two thirds of all computer motherboards as white label products.
Wieso scheitern Geschäftsmodelle ?
Oft antworten Firmen auf neue Innovation mit einer Verbesserung ihrer alten Produkte. Wie zum Beispiel in der Automobilindustrie, Motor vs. Elektrogetriebe. Noch weniger Sprit Verbrauch oder Elektro? “In Zukunft findet der Wettbewerb nicht mehr zwischen Produkten oder Unternehmen statt, sondern zwischen Geschäftsmodellen. – Gary Hamel”
Beispiele innovative Geschäftsmodelle
Nespresso: Razor and Blade - Grundmodell günstig, komplementär Gut ist dafür teuer.
Like Gillette. Ggf. unter dem Produktionspreis verkauft. Quersubventioniert (Schindler):
Viele Aufzüge verkaufen, über den Service Profit machen / Quersubventionieren
- Auch Nespresso: Lock in Effekt; Razor and Blade Effekt funktioniert meistens nur mit
Lock In. (Bspw. mit den Kappseln)
- Lock In Effekt: 1) Nespresso Club (Community) & 2) Feel like George Clooney
(unterschwellige Methode) & 3) Dichtung sind auf Kappseln und nicht in der Maschine /
mit anderen Maschinen funktionieren die Maschinen nur halbrichtig & 4) Direkt Selling
- Nespresso wird vom Effekt (3) wegkommen, da die Verpackungstechnologie kostspielig
ist
The Business Model Triangle
Geschäftsmodelle vs Prozess- und Produktinnovationen
- Neue Geschäftsmodelle schöpfen gegenüber Produkt- und Prozessinnovationen zusätzliches
Innovationspotenzial und erzeugen zusätzlichen Profit (Produktinnovation/
Technologieinnovation < Prozessinnovation < Business Model Innovation)
Drei Strategien um neue Geschäftsmodelle zu entwickeln
Transferieren
Kombinieren
Hebeln
Transferieren
Razor and Blade von Gillette für neue Industrie; Transferieren von
Prinzipien/ Patterns aus)
- Def: “Ein bestehendes Geschäftsmodell wird auf eine neue Branche portiert. Die meisten Unternehmen nutzen diese Strategie. Wichtige Vorteile: Andere Unternehmen dienen als Blueprints und ihre Fehler können vermieden werden, so dass sie in ihrer Branche zu einem Innovationsführer werden können. Große Herausforderung: genügend Raum für Experimente und Anpassungen zu lassen.“
Kombinieren
(Razor and Blade, Lock-in, Direct Selling Nespresso; mehrere Prinzipien/ Patterns kombinieren)
- Def: “Übertragen und kombinieren von zwei Geschäftsmodellen. Besonders innovative Unternehmen können sogar drei Geschäftsmodelle gleichzeitig nutzen. Großer Vorteil: Synergien verringern die Wahrscheinlichkeit, dass Wettbewerber das Geschäftsmodell imitieren. Große Herausforderung: Planung und Ausführung werden hochkomplex.“
Hebeln
(Nespresso, Special T, Babyness; auf den bestehenden Prinzipien/ Patterns ein neues Produkt anbieten)
- Def: “Ein Unternehmen nutzt ein erfolgreiches Geschäftsmodell für eine andere Produktlinie. Nur die innovativsten Unternehmen können dies erreichen. Wesentliche Vorteile: Fähigkeit, Erfahrungen und Synergien zu nutzen; überschaubares Risiko. Große Herausforderung: Balance zwischen Veränderung und Stabilität.”
Kernaussage Geschäftsmodelinnovationen
→ Kernaussage daraus: Ein Unternehmen muss sich nach außen öffnen und bereit sein, von anderen
Branchen zu lernen. Der bisherige Erfolg anderer Branchenrevolutionen könnte einem dabei helfen, sein
eigenes Zukunftspotenzial zu finden.
90% aller Geschäftsmodellinnovationen sind Kombinationen: Erfolgswahrscheinlichkeit ist hoch, wenn bestehende Bestandteile wiederverwendet werden
Aber es werden jedoch heute gerade mal 10% Budget für BMI eingesetzt (der Rest geht meist an Produkt- und Prozessinnovationen)
Herausforderungen für BMI
1) Dominierende Industrielogik (bspw. Rolls Royce mit dem neuen Revenue Model;
Performance Based Contracting)
2) Schwierigkeit in Geschäftsmodellen zu denken (nicht in Produkten oder
Technologien; bspw. Dell mit dem Build to Order Prinzip/ negatives Working Capital)
3) Fehlen von systematischen Tools, Kreativität nimmt mit dem Alter ab, kreativ denken wird nicht gelernt (Studie George Land), 5 Jährige 98% Kreativität, über 25 noch 2%; Wenn es gelingt Regeln zu verändern (=Geschäftsmodelle verändern), ist man mit höherer Wahrscheinlichkeit erfolgreich)
4) BMI Mythen: (müssen überwunden werden, damit man erfolgreich sein kann; dazu braucht man ein unternehmerisches Mindset & die Fähigkeiten zu Innovieren)
- R&D Mythos (R&D sind die Zentren für Innovation)
BMI Mythen
- Initial Ascent Myth (Ideen, die noch nie jemand gehabt hat)
- Think-big Mythos (BMI sind immer radikal und neu für die Welt)
- Technologie Mythos (Innovation basiert auf einer neuen Technologie)
- Zufalls Mythos (Innovationen sind ein purer Zufall/ Glück)
- Einstein Mythos (Nur Genies können eine innovative Idee haben)
- Ressourcen Mythos (Grosse Innovationen bedingen viel Ressourcen)
Systematisches BMI - Gassmans Antwort
Vier Schritte Business Model Navigator
1. Initiation
2. Ideation
3. Integration
4. Implementation
Schritt 1 Business Model Navigator
Initation - Das Ökosystem analysieren
Voraussetzungen Initiation
- Ein Geschäftsmodell ist kein isoliertes Konstrukt, sondern ein komplexes Beziehungsnetz, das ständig mit dem sich verändernden Ökosystem des Unternehmens zusammenhängt. Um der Herausforderung der Geschäftsmodellinnovation gerecht zu werden, müssen die Beteiligten nicht nur ihr eigenes Unternehmen und ihr bestehendes Geschäftsmodell, sondern auch die Rollen der Stakeholder und verschiedene Einflussfaktoren genau verstehen.
- Dieser Schritt kann in der Regel eine Weile dauern, jedoch ist dieser extrem wichtig
- Dieser Schritt kann das Verstehen des Status Quo dazu beitragen, dass man “Innovationsbedarf”
entdeckt, weil man erkennt, dass sein GM nicht stark gegenüber der Industrielogik abweicht.
Heutiges Geschäftsmodell
Ich muss das heutige Geschäftsmodell kennen. Man kann nicht per se das GM innovieren; man muss es kennen. Man muss die Change Driver identifizieren. (e.g., Digitalisierung, Globalisierung,...) Neben Change Driver gibt es auch Player (bspw. Porters 5 Forces; speziell Neueintretende Unternehmen, meist technologie driven)
Disruptive Veränderungen
Disruptive Veränderungen können von Konsumenten (Barbie früher Markt von 3-11Jährige, heute geschrumpft auf 3-5 Jährige) dem Markt (“Iphone bleibt ein Nischenprodukt→ uhm no) oder durch Technologie (Kodak, digitale Fotografie; Blockchain, IoT) entstehen
Kunden Partner Konkurrenz
- Partnersystem analysieren, Kundenreise beobachten, wer macht was wie? Kunden, Partner, Konkurrenz
- Wenn der Wettbewerb in einer Branche zunimmt, stellt sich die zentrale Frage: wie kann ich eine gewisse Stickiness (für Kunden, Partner) aufbauen
Megatrends und Regulierungen
(kennen wir zwar alle, aber wie wirken sie sich auf unsere GMs aus?)
- Fragen:
- What are relevant trends for us?
- Where can we create and capture value out of an identified trend?
- How radical should we think about innovation?
Ökosysteme & digitale Transformation Eigenschaften
- Sinkende Transaktionskosten
- Allgegenwärtigkeit von mobilen Schnittstellen
- Exponentieller Datenzuwachs
- Immer besser werdende AI
Und dann kommen noch die veränderten Kundenerwartungen dazu, welche die ganzen Industriegrenzen verändern.
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Flashcards
Cash Machine
Coining money with negative working capital, build to order Prinzip
Why, How
By generating revenue faster than having to pay suppliers (managing payment periods), a company can achieve a negative cash conversion cycle and therefore generate increased liquidity. This liquidity can be used to invest in growth, in other areas or to pay off existing debt.
Dell:
With its build-to-order strategy in combination with favorable payment conditions, Dell was able to receive customer's payments before it had to pay its own suppliers.
Cross-selling
Killing two birds with one stone
What, Why, How
To exploit existing customer relationships, complementary products are being offered which are not part of the company's basic product and service catalogue. Existing resources and competencies can also be leveraged through cross-selling.
IKEA:
Being a textbook example, IKEA does not limit its product range to furniture but offers a wide range of satellite products and other services.
Crowdfunding
Taking finance by swarm
Why, How
Outsourcing project financing to the general public to limit the influence of potential investors. After an initial announcement of the search for backers, anybody can invest into the project and receive certain rewards in return. Rewards can include finished products or other benefits. Financing will only be realized if a critical mass is achieved.
Pebble Technology:
Tried to raise USD 100'000 in 2009 in order to produce the pebble (smart-) watch. The goal was reached after just 2 hours and a total of USD 10 million has been raised.
Crowdsourcing
Outsourcing to the crowd
Why, How
Specific tasks are being outsourced to external actors in order to extend the company's knowledge base beyond the organizational structure. Motivating external actors through monetary or intangible reimbursement, this approach can offer more sophisticated solutions with less effort.
Procter & Gamble:
'Connect and Develop', launched in the early 21st century, connects P&G's researchers with over 1.5 million scientists around the world and has greatly influenced the number of external ideas used in product development.
Customer Loyalty
Incentives for long-lasting fidelity
What, Why
Loyalty programs offer customers additional value in order to retain them and to foster their loyalty (e.g. through incentive-based programs such as discounts). This pattern is often used to exploit the customer's 'bargain hunting' instinct which generates sales that would otherwise not have been possible.
American Airlines:
The AAdvantage frequent flyer program offers customers to collect air miles on each booking which can then be used for upgrades, future bookings, and other benefits. American Airlines profits from repeated business by loyal clients.
Digitisation
Digitising physical products
What, How
Through creating a digital variant of a physical product or service, a company can profit from a variety of advantages such as the reduction of overheads. Customers on the other hand benefit from accessing digitized content at any time and anywhere. Besides digitizing physical offerings, it is also possible to create entirely new offers.
Hotmail:
As one of the first webmail service providers, Hotmail very early on realized the potential of digitizing physical services and making them available to a much wider customer base.
Direct Selling
Skipping the middleman
What, Why, How
Cutting out the middleman (e.g. retailer) enables the company to eliminate retail profit margins and makes it possible to increase its own profits while still passing a part of the savings on to the customers. The direct contact also allows the company to get in direct contact with their customers, receiving first-hand feedback and being able to offer better service.
Tupperware:
Using so-called Tupperware Parties, Tupperware puts its customers in place of the middleman. Consultants (customers which host Tupperware Parties) are classed in hierarchies to manage sales and distribution. Tupperware can therefore avoid paying high listing fees and profit margins to distributers.
(auch Hiltl siehe Vorlesung)
E-commerce
Online business for transparency and savings
What, Why, How
Using online channels to distribute traditional products and services removes expenses from running physical branches. Customers on the other hand can benefit from lower prices, better comparability, and around-the-clock availability. The main disadvantage is not being able to try/test the offer before buying.
Flyeralarm:
Using e-commerce, automating the printing process, and eliminating their intermediaries allowed Flyeralarm to ship most of their products within 24 hours and to become one of the largest printing companies in Europe.
Experience Selling
Products appealing to the emotions
What, Why, How
By adding an experience, the value of the initial product or service is increased. Instead of just offering a functionality to a customer, experiences and impressions are created which increases the customer's loyalty and willingness to buy more at a higher price.
Starbucks:
Besides coffee and pastries, Starbucks offers a variety of services such as free Wi-Fi, music, and atmosphere which create the unique Starbucks experience. This experience is also reflected in Starbucks' prices.
Flat Rate
'All you can eat' - unlimited consumption at a fixed price
What, Why
Paying an initial lump sum, customers can use a product or service as much as they wish. Therefore they benefit from having full cost-control. From a company perspective it is assumed that customers which consume less than they are paying for with the flat rate make up for the additional cost of those customers with above-average consumption.
Netflix:
Offering flat rate streaming of movies and TV series on-demand, Netflix has revolutionized the media sector. By paying a monthly fee of USD 7.99 a customers is granted unlimited access to a huge selection of films and shows.
Fractional Ownership
Timeshare makes for efficient usag
What, Why, How, Who
By offering customers the chance to purchase only a part of an asset, a company is able to reach additional customers which would not have been able to afford the entirety of the asset. This model works best for capital-intensive assets which otherwise would have a limited customer base.
Mobility Carsharing:
Cars are used more efficiently by sharing them amongst several owners. In return for a membership fee, insurance, and fuel cost, a customer receives around the clock access to a selection of rental cars.
Franchising
All for one and one for all
What, Why, How
Instead of building up the resources to expand a business, a franchisor sells the right to use its business model and the IP associated with it to franchisees. These independent entrepreneurs then bear the responsibility for their own franchise but benefit from a proven business model.
Subway:
Offers its business concept to restaurants around the world, allowing for minor changes to the menu. This model allows Subway to reach a broader customer base and to adjust to regional tastes and customs.
Freemium
Choosing between free basic and paid premium versions
What, Why
As suggested in the name, this business model combines a free basic offer and a premium version of the product or service which is made available in return for a payment. With the free version the company is able to establish a large customer base in hopes that enough of them will move over to the paid version of the product or service.
Skype:
Its basic offer, a VoIP service is offered to customers completely free of charge. For premium services such as calling landlines or having extended group calls however, the customer is charged a premium fee.
From Push to Pull
Customers create a value vortex
What, How
In order to increase customer focus ('customer is king' paradigm) the company moves the decoupling point further upstream to allow for customer inputs to be accounted for at an earlier stage in the production process.
Zara:
By employing a number of designers and observers around the globe, Zara is able to recognize upcoming trends early on and then design new collections based on the customer's desire.
Guaranteed Availability
Assured access to the product
What, Why, How
A company ensures its customers close to zero downtime in order to reduce the costs caused by breakdowns. Guaranteed Availability is usually offered as a flat rate contract which includes replacement equipment as well as maintenance services. By applying this pattern, strong long-term relationships can be built.
Hilti:
Anchoring specialist which guarantees constant availability of their tools. Downtime can have a huge impact on the progress of construction sites which is why Hilti offers instant repairs or maintenance in case of breakdowns.
Hidden Revenue
Seeking alternative sources
What, Why, How, Who
By creating an alternative source of income a business no longer depends on the revenue from its main product. Commonly, income is generated through a third party which advertises in the context of the main product and therefore enables the company to sell said product at a lower price while attracting customers to the advertiser.
Zattoo:
Its free internet television broadcasting service attracts a large number of customers which will then be exposed to Zattoo's advertising market which generates the actual revenue from third parties.
Ingredient Branding
Brand within a brand
What, How
By advertising a product which is only an ingredient of another product, brand awareness can be created which attracts customers and reduces the chance that substitutes are being used in products. This customer attraction gives the company more bargaining power over the manufacturer of the end product.
Intel:
With its 1990s ad campaign "Intel Inside", Intel was able to increase the customer awareness for the importance of microprocessor and to position itself as the number one brand in this area. Intel now rates as one of the most valuable brands globally.
Integrator
Involvement all the way down the line
Why, How
The integration of most or all parts of the supply chain allows a company to reduce dependence on third-party suppliers and therefore to reduce delay-caused costs and to increase efficiency. Integration can also decrease the reaction time to market changes as internal adjustments can be made. These benefits are partially offset by the loss of specialization which comes with an increase in costs.
Zara:
Designing and producing in Zara-owned factories in Spain and other European countries, Zara is able to react to changing customer expectations quicker than most its competitors which produce in Asia to keep down production costs.
Layer Player
Benefiting from specialised know-how
What, How
When focusing only on a few activities within a value chain, a company acts as a layer player and usually serves customers which apply the Orchestrator model. Specializing on key activities creates benefits based on efficiency and multiplication of know-how.
PayPal:
The company focuses on delivering its customers a number of services connected to online payment. PayPal accomplished to leverage this know-how and apply their service to a variety of industries.
Leverage Customer Data
Making use of what you know
Why, How
Value is created through the collection and preparation of customer data. The generated data can either be used for the company's own purposes (e.g. real-time market analysis, more effective advertisement, …) or can be sold directly to third parties.
Google:
By offering a series of free web services, Google is able to generate large quantities of customer data. This data is used for Google's customer specific AdWords and AdSense services to generate revenue.
Licensing
Commercialising intellectual property
What, Why, How
As opposed to realizing and capitalizing its Intellectual Property [IP], a company can choose to commercialize it by licensing its rights to third parties. While licensing fees are often lower than outright selling the IP, revenues and risks can be diversified among several parties, market penetration can be increased, and the company can focus solely on R&D.
Walt Disney:
After creating Mickey Mouse in 1928, the rights to use the cartoon character have been licensed to several companies, starting in 1929. This generates immense revenues from films, video games, and other merchandise (Krasniewicz & Disney, 2010).
Lock-in
Forcing loyalty with high switching costs
Why, How
By creating barriers of substantial costs or penalties, customers are being tied to a companies products or services which prevents the change to a competitor. This lock in can be reached for example by patents or compatibility issues of previously invested assets with competitors accessories.
Nestlé:
With its Nespresso system, Nestlé managed to create a textbook example of the Lock-in pattern. Due to IP protection, customers could use their Nespresso machine only with Nespresso capsules - using competitors' capsules would make the machine obsolete.
Long Tail
Many a mickle makes a muckle, or little and often fills the purse
What, Why, How
When applying the long tail business model, a company does not follow the classic 80-20 rule but focuses on selling large quantities of a small product range. To differentiate itself from its competition, a company offers niche products which make up an alternative source of revenue. Having access to such a large range, customers have a better chance of finding a satisfying product.
Netflix:
The company offers its customers access to over 100'000 films, television series, and shows while traditional video stores only offer around 1'000 titles. Offering a number of niche products allows Netflix to reach customers with non-conventional taste which slide under the radar of conventional stores.
Make More of It
Multiply competencies outside your core business
What, Why, How
Besides using its competencies for its own purposes only, a company offers its resources and know-how to outside companies. This allows the company to reduce spare capacities and to monetize their know-how. Furthermore the company benefits from building up additional expertise.
Amazon:
Amazon's business requires a lot of expertise in internet infrastructure management. Instead of just using this expertise for its own business, Amazon's Web Services division offers a variety of services in this area to outsiders.
Mass Customisation
Off the rack individualism
What, Why, How
Modular product architectures make it possible to offer individualized products while still keeping a high level of efficiency as known from traditional mass production. Standardized modules can be combined to build a variety of products to fit individual customer needs. This differentiation from mass-producing competitors gives customers the possibility to buy bespoke products without a significant markup.
Miadidas:
Initiated by Adidas, this project offers shoes, shirts, and other products which can be customized through a graphical interface. Customers can choose from a variety of color and design options and can add personalized images to their product which they will then receive by mail.
No Frills
Whatever, as long as it's cheap
What, Why, How, Who
The No Frills pattern describes a model where a company trims down its value proposition to its minimum while typically passing the cost savings on to the customers. In combination with cost saving measures (e.g. optimize distribution, standardize products) this pattern can reach large audiences and be very profitable despite its price sensitive customers.
Ford:
With its Model T, Ford introduced the No Frills model to the car industry in 1908. Using simple construction, making customization unavailable, and introducing large-scale manufacturing, Ford was able to offer its car at half of usual prices.
Open Business
Leverage collaborative value creation
Why, How
Opening its value creation process to outside partners gives a company the possibility to engage in independent yet successful businesses by leaving profitable niches to potential partners. Having an open business can help to secure strategic advantages, improve efficiency, and to enter new markets.
InnoCentive:
A platform founded in 2001 which connects the pharmaceutical company Eli Lilly with researchers from around the world. Today it is open to all businesses and has over 300'000 registered problem solvers.
Open Source
Working together to create a free solution
What, Why, How
Instead of developing a product itself, the company makes its source code publically accessible to allow anyone to join the community and to contribute to the product with his expertise. The company in turn makes money with complementary products or services.
Local Motors:
The first car manufacturer to apply the Open Source business model in 2008. An open design network made it possible to develop a vehicle at a fraction of what typical car manufacturers spend.
Orchestrator
Directing the value chain
Why, How
Parts of the value chain which are not one's core competency are being outsourced to specialists while focusing on coordinating and matching activities. This creates higher transaction costs which are being offset however by the advantage of having a specialized partner and additional innovative capacity.
Airtel:
Located in India, Airtel is one of the largest telecommunications companies worldwide. As its core competencies lie within marketing, sales, and finance, all other activities have been outsourced to experienced providers. This makes it possible to offer its services at very low cost.
Pay Per Use
Pay as you go
What, Why
Customers do not pay a fixed rate but are being charged based on their actual usage of a product or service. This makes the incurred costs very transparent for the customer but increases the difficulty of forecasting sales expectations for the company.
Pay per click:
This internet advertising model does not charge advertisers for simply displaying their ad but based on the number of times said ad has been clicked on by users.
Pay What You Want
Whatever it's worth to you
What, Why
This model allows customers to have full control over the price of a product or service as the vendor accepts the price offered by the customer (even if it is zero). It works best in industries with low marginal costs and when customers have a strong relationship to the vendors.
Radiohead:
In 2007, the band offered its album for downloading at an undetermined price. Even though the average amount paid was below previous albums' prices, Radiohead greatly increased its popularity.
Peer to Peer
Dealing from person to person
What, Why, How
As opposed to traditional transactions, peer to peer connects private individuals to connect, share, and exchange. The company acts as a platform which builds the relationship between its users.
Zopa:
The UK-based company allows the issuance of credits between individuals without the involvement of banks. Revenue is generated through transaction fees
Performance-based Contracting
Basing fees on results
What, Why, How
The price of a product is not determined by its face value but by the services it delivers. Often a specified amount covers all expenses such as operation, maintenance, and repair. The company is therefore often strongly integrated into the customers value chain.
Rolls-Royce:
With the power-by-the-hour program for aircraft engines, customers do not buy an engine but pay for the performance of said engine per flying hour.
Razor and Blade
Bait and hook
What, Why, How
To acquire customers, the basic product is offered at a very competitive price. In order to use the product, customers need to purchase complementary products, which are high-priced and responsible for generating revenue. This model is often applied in combination with the Lock-in model (# 27).
Hewlett-Packard:
In 1984, ThinkJet was the first inkjet printer created for private individuals. It was sold at a very affordable price and revenue was generated through complementary ink cartridges.
Rent instead of Buy
Pay for the temporary right to use
What, Why
The customer benefits from not having to pay the total value of a product at once, which allows to acquire products that he would otherwise not be able to afford. Companies have the advantage of reaching a wider customer base. This model is very similar to Pay Per Use (# 35) but focuses on the duration of usage and not the actual usage.
Xerox:
As the 1959 Xerox 914 model would have been too expensive for many buyers, Xerox rented the products out for a monthly fee. This boosted the demand so far that at some point Xerox was not able to cope with production.
Revenue Sharing
Win-win with symbiosis
What, Why
Several parties cooperate and share the resulting revenues. Revenue sharing is often found among internet businesses, for example users which upload certain content to a database and in return receive a part of the revenue for every transaction connected to this content.
Apple:
The App Store is a prominent example of this pattern. Independent developers upload their applications to Apple's platform where customers can download them. Apple then shares the revenue generated through an application with its developer.
Reverse Engineering
Taking lessons from competitors
What, Why, How
By analyzing an existing product, service or even an entire business model, a company develops an imitation of this product at low costs and can therefore offer it to the market at a lower price. This makes it possible to reach target groups, which were not willing or able to afford the original product which usually has a higher price.
Denner:
After recognizing Nespresso's success, Denner reverse engineered the concept and started offering cheap, Nespresso compatible capsules. The low price and the non-exclusive distribution network allowed Denner to reach a wide customer base.
Reverse Innovation
Learning from good-enough solutions
What, How
As opposed to traditional innovation where products are being developed for industrialized countries, this refers to the activity of creating simple and inexpensive products for developing countries and later adapting those products for their use in industrialized countries.
Nokia:
The Nokia 1100 was developed as an inexpensive phone specifically for India's hinterland, including country-specific features such as a torch. It was later very successful with customers looking for a simple device in industrialized countries as well.
Robin Hood
Take from the rich and give to the poor
What, Why, Who
Besides offering its products and services to 'the rich', a company also offers them to 'the poor' at a much lower price. While the rich subsidize the poor, the poor help to create economies of scale, which would otherwise not have been possible.
Aravind:
As many Indians cannot afford surgery to cure their blindeness, Aravind requires wealthy clients to pay the full price for their eye surgery, while poorer customers pay as much as they want/can afford. Even if 2/3 of customers pay nothing, Aravind earns yearly profits.
Self-service
Putting the customer to work
What, Why, How
In exchange for a lower price, a part of the value creation is outsourced to customers, which often find that this also saves them time. Self-service is especially effective in cases where relatively high costs are generated for activities which add little value.
IKEA:
Distribution and assembly are outsourced to the customer in return for relatively low prices. In addition to distribution and assembly, IKEA saves money on inventory and packaging as products need less space before being assembled.
