Business Model Patterns and Analysis

Business Model Patterns

The text is not exhaustive; other business model patterns exist.
Patterns can overlap.
Don't panic if your business idea doesn't fit neatly into one pattern.
- It may be a novel idea.
- It may be a combination of existing patterns.

Many businesses are diversifying and creating value in multiple ways.
Consider separating these different value creation methods.
If a company is doing something well in one area, think about whether it could be a standalone business.

Reverse unbundling by combining separate businesses to achieve economy of scope.
Offer services together to the same customer instead of requiring customers to go to multiple places.

The classification of businesses into customer relationship, product innovation, and infrastructure businesses is just one way to categorize them.

Taking music away from physical products (e.g., vinyl records).
- Once spun at 78 revolutions per minute, then 33.

Graphical representation of products sold by a company, showing many products with few sales each.
Horizontal axis: different types of products.
Vertical axis: number of products being sold.
Companies sell a few of one product, and less of the next, with a long tail of products selling very little.
Examples:
- Amazon.
- Netflix.
- eBay.

Creating value in several directions simultaneously.
Customers are often interdependent.
Example: Credit cards.
- Banks, retailers, and retail customers must participate.

As the number of customers increases, the value of the product or service increases.
Important in the digital world.
Operating systems:
- If only 10 people use an operating system, its value is low.
- If 100 million people use an operating system, its value is much higher.
  - Users can communicate and exchange data.
  - Users can use the same apps.
Network externality effects can be attached to multisided platforms.
Credit cards:
- The more people, stores, and banks using a credit card, the more valuable it is.
- Visa and Mastercard are the biggest because they are accepted the most.

Common in the digital world.
Offering some level of product or service for free.
Monetization strategies:
- Advertising (e.g., Google, Twitter/X).
- Freemium (e.g., ChatGPT).
  - Offer basic access for free, with additional features for a fee.

Not necessarily a pattern for selling products or services.
A way of thinking about developing products and services.
Organizations share intellectual property resources that other companies can use.
Strategic alliances to license technology or intellectual property.
Inside out: Organization has something and needs others to use it.
Outside in: Organization needs something from others.
Franchising.
- Fits into the outside-in/inside-out thinking.
- Licensing intellectual property, knowledge, brand, and process.
- Common in restaurants (e.g., Chick-fil-A, McDonald's).
Technology companies.
- Licensing of intellectual property.
- Tech commercialization offices (e.g., Texas A&M).
  - Commercializing basic research.
  - Licensing to companies.
  - Receiving royalties.