Entrepreneurs with Denis Oakley
I HELP BOLD LEADERS TRANSFORM THEIR BUSINESSES AND THE INDUSTRIES THEY COMPETE IN
There are a huge number of business models in the world. Most fall into 50 - 60 similar patterns and there are several thousand families of business models. Here I've assembled 50+ business model examples, mostly from technology companies
I've collected the examples for several reasons:
This site is all about business models and business model innovation. That is, how do you create powerful business models that accelerate your business and disrupt the competition.
It makes sense to have a lot of business model examples that we can refer to as I teach you all the tools and tricks of creating powerful and disruptive business models
Another big part of denis-oakley.com is thinking about how we develop the right strategies to design business models, and even exactly what business models are and how they develop.
So as we talk through these business models it makes sense to have examples that you can see and touch and work through at your own speed. I didn't want to say - look at this company's website and try and figure out their business model by yourself.
Lots of students come here to understand what business models are. They are looking for specific business model examples to complete an assignment, for a case study or as part of their course work. So I have lots of the most common tech business models for students to easily refer to.
Business models are also the essential map (that is a map of the sense, not the important map) of what a business is and how it makes money. So when we are creating new business models it makes sense to be able to look at some examples and see how other people have put them together.
For most of the business model case studies, I've put together a short video explaining how it works, a business model canvas and often a blog post or video transcript describing how the model works.
Most of the examples are from technology because we intuitively understand a number of the more traditional business models. For example, everyone understands how corner shops or petrol stations work. Technology companies often have very different business models, enabled by new technology. There's more to learn about them, and also more potential to be changing the world for good if you then use that knowledge to be designing your own business models.
What is IBM’s business model? In this video, I use the business model canvas to answer that question.
The IBM business model is based around providing software that allows large corporations to connect their disparate software systems and improve their IT performance.
I have created an IBM business model canvas which explains the IBM business model using 9 key components that apply to any business.
In this video I answer the question “What is Netflix’s business model?” To do so I use the Netflix business model canvas. I describe each of the 9 key areas of Netflix’s business model (and also talk about why generating content is so important to it)
This video is perfect for anyone wanting to understand Netflix’s business model, looking for a good example of how the business model canvas works in real life or is curious about the business models of large technology companies work
Netflix is a B2C company targeting mass-market consumers. As of October 2018, it had about 140 million subscribers
Google is a behemoth. Throughout history heroes have been drawn to giants and dragons. The challenge of overcoming a monster is exciting. Traditionally the homes of monsters have been surrounded by the bones of unlucky, unfortunate and pathetic heroes. The path to Glory is often a short and final path. This article is an exploration of some possible approaches on how to kill Google.
Joseph Campbell in his wonderful book The Hero with a Thousand Faces talks about how every culture has its heroes. These heroes all have very similar stories. They are part of what Campbell called the monomyth. In tech and entrepreneurship we see another example of the monomyth. We see entrepreneurial heroes rising up and creating great companies out of the ashes of Schumpeterian destruction. Can a single heroic entrepreneur create so much value? Why do entrepreneurs change the world so much? How can they kill entire industries? Can they kill Google?
The truth is that giant companies are not eternal. Most people, like most heroes, can trace their family tree back further than the history of most companies. Few famous companies last more than a few decades. Even fewer last a century. The constituent companies of the FTSE 100 and the Fortune 500 have very few of the same members after more than a couple of decades.
Companies like Ford, General Electric, Standard Oil, Union Pacific and US Steel once dominated the economy as well as their own industries. They were hit by a variety of events that meant that they lost their dominance far more quickly than they could have imagined (and their power often lingered on far longer than anyone thought). Reasons for this included anti-trust, bad management, new inventions, new industries and commoditisation of their core value.
The last one is interesting. Louis XIV, the French Sun King once used aluminium plates because they were so rare and valuable. Now they are used in food kitchens and aluminium is used everywhere. The quality of the product has remained the same (increased really). Economic value leaches from products and services as they become integral to an economy
So when we think about how to kill Google these are the sort of things that we need to focus on
If I had great answers here I wouldn’t be writing this article. The aim of writing it to consider what the Economist calls the kill zone around major companies and how to overcome it to kill Google.
When I looked at the Google business model it was clear that Google has massive market dominance and this was mainly through its ability to deliver relevant search results and to place adverts accurately for advertisers. Bing and Duckduckgo have tried to fight Google here. Bing in a direct competitive assault using the power of Microsoft behind it. Duckduckgo has sought to go round the sides and find an under exploited niche based on privacy. These play to Google’s strength. Looking back at the types of power, these both rely too much on brute force.
What’s needed is either to change the way the search industry works, to make it less relevant or to commoditise it.
The key bargain that Google makes is with website owners.
Let me read everything you own and publish and I will send you readers. That dwill let you make money, have influence , create change or whatever else you care about.
This was a response to the old model where content was curated and served up by portals such as the Kussmaul Encyclopaedia, AOL, Yahoo and others.
How do you disrupt this bargain? It’s hard. It is so good for publishers. At no cost to them people find their website. They don’t even have to do anything. With a little bit of work they get more people. With a lot of SEO work they get floods of people.
Traditionally libraries and publishers have had to go to a great deal of effort to create an index or catalogue. Google has the same problem. However libraries and book publishers make their index freely available. Look at the back of a book and you’ll find one (unless you read fiction)
Google however hides its index. The index and the database is hidden as it is the source of its competitive strength. What happens if you crowdsource and open source the index? What happens if you opensource the algorithms that deliver search results? This would then allow a community of developers to be building hundreds of specialised search engines off the back of this free data.
That commoditises a great deal of Google’s competitive advantage. For sure there is a tech advantage and the brand still has a great deal of power. It opens up the market and as such it’s very difficult for Google to kill it a community platform in the same way. It also allows providers of search engines off the top to start going after parts of Google’s core market by adopting a niche strategy. Trisearch – the search engine for triathletes? Search engines for anthropology, physics and hotels? A search engine on SEO? Would this include advertising on the search engine in the same way as Google’s business model? Or would there be a different approach to monetization? I don’t know
That’s an approach to killing Google. It may work. It probably won’t. The key point is to understand that a company, even one as dominant as Google in its market is vulnerable to the way that it’s business model works. it is vulnerable to market and environmental changes. Understanding those vulnerabilities is the first step in identifying weaknesses to crack open the marker and usher in another round of wonderful value creating creative destruction.
I don’t want to wait for market changes to make Google obsolete. What should be happening is entrepreneurs clustering around Google, like stainless steel rats, looking for cracks to bring it down. It’s a massive market and one that will grow far bigger if it is not a monopoly.
We must be as stealthy as rats in the wainscoting of their society. It was easier in the old days, of course, and society had more rats when the rules were looser, just as old wooden buildings have more rats than concrete buildings. But there are rats in the building now as well. Now that society is all ferrocrete and stainless steel there are fewer gaps in the joints. It takes a very smart rat indeed to find these openings. Only a stainless steel rat can be at home in this environment…
Harry Harrison – The Stainless Steel Rat
So be a hero. Get out there and stick it to Grendel!
This videos is about Google’s business model and its business strategy. I explain the Google business model using Alexander Osterwalder’s business model canvas and explain how Google makes its money
I review who Google’s key customers are and how it delivers value to them via search and advertising. We then cover Google’s key partnerships which are the secret sauce of it’s success and how it continues to maintain market dominance.
Based on this we look at how Google looks after it’s customers and the marketing channels that it uses to acquire them. Finally, we cover the key resources that Google needs to deliver all this and its critical day to activities.
The result is a great explanation of not only Google’s business model but good insights into its business strategy and the defensive moat that it has constructed around its advertising cash cow
There are three important groups of customers for Google. The most important for its business model are the millions and millions of websites that provide Google with information for free. They allow or invite, Google to go through the information on their website and index it. Without this raw data, Google does not have a business. Website owners allow this because they benefit from the additional readers of their content. You don’t write a book for nobody to read it.
Google then processes this information so that when people undertake a search it can use it’s index to deliver high quality, relevant search results. This is the value proposition for all the free users who use its services. They can find what they want. Google then looks to see what these people are searching for and then sells advertisers the ability to put adverts in front of all search results.
Google needs content – which gives it searches – which give it advertising revenue.
The Google business model depends on the free access to content that it can index
I haven’t really distinguished between Google and YouTube (Click the link to see the YouTube business model) in the video. This is because I see the business models as being very similar. The difference is that with YouTube Google owns the entire platform where the content is hosted. Put in another way it is as if every website in the world was hosted by Google. That’s a scary thought! Once the content – video – is on the YouTube platform then it is processed and marketed to advertisers in just the same way.
Google has three key resources
The index is Google’s database of all the content freely available to it’s spiders as they crawl across the web. The faster and the more reliably that the index can be updated then the more accurately that search results can be delivered.
The algorithms (lots of them) determine what pages in the index should appear in search results and in what position. These are focused on several things – maximising relevance and value for users; minimising poor quality results (keyword-stuffed pages or off-topic pages) and maximising performance for advertisers
Finally the computing power delivers all this. I see the computing power as being a mix of the physical assets, software assets and the people who create the software. The physical assets include the cables, data centres and the Google VPN. The software assets include the codebase and the websites, whilst the people create and optimise the code. These are the key resources in the Google business model canvas.
The rest of Google isn’t really relevant to the Google business model described above. 95% of Google revenue comes from Adwords. The other 5% is not material. Google does own a number of other web properties such as Drive, Docs, Gmail, Waze, Maps, Flickr and more. The purpose of owning these is to ‘buy’ additional information that it uses to help refine the targeting data that it sells to advertisers.
It also helps to create a large defensive moat around Google to protect its core money generating machine. Any platform that attracts large numbers of people who are looking for information or exchanging it provides a potential pathway for competitors to sell ads. To continue the mediaeval castle analogy Google clears the forest for miles around its castle so no one else can get close.
Are you copying a business model?
Are you creating a new one?
I can help you get it right
GoCoin. You may think that this is another bitcoin miner or cryptocurrency exchange from the name. In fact, GoCoin does something far more interesting and really attacks one of the key pain points of all cryptocurrencies. Visa and Mastercard are accepted everywhere (almost) – bitcoins are almost inversely popular and this really hurts both their adoption and use. GoCoin sets out to solve that problem. In this article, we use the business model canvas framework to analyse the GoCoin business model
GoCoin has a B2B2C business model. It combines B2B and B2C models to deliver a complete service transaction – in this case, easy payment with bitcoins. On the B2B side, customers are e-commerce platforms. On the B2C side, their customers are the consumers at the e-commerce platforms. So like PayPal GoCoin is a payment processing ‘plugin’ that allows consumers to quickly and easily purchase online.
This is a pretty huge target market. For GoCoin the key is in working out who the early crypto-coin adopters are and where they buy and then selling the plugin integration to the e-commerce store. However, we do have the normal chasm problem. Both Bitcoin users and E-commerce stores accepting BitCoins are early adopters and haven’t really crossed the chasm yet. I think they are both at slightly different stages with the e-commerce stores being closer towards the Innovator end.
So in reality whilst there is a very large total available market the current Service Obtainable Market (SOM) is far smaller. For e-commerce stores, it is a speculative low-risk bet of adding a small proportion of incremental revenue with limited cost. For BitCoin users, the goal is very much to focus on those niches where there are lots of them and these are likely to be concentrated in the tech sector or possibly in the taboo but illegal sector where traditional payment providers fear to tread (Watch out Epoch – and whaddya know the CFO is ex-Epoch)
BMC GoCoin 2-sides
We make accepting Bitcoin safe and easy.
Private billing, secure payments, no sign up costs and low fees.
The problems being solved are two-fold. First, the perception for many people (potential Early Majority) is that it is difficult and time-consuming to pay using BitCoin. As a consequence, the risk in buying them is too high and this puts a dampener on the whole market.
If it is as easy to use BitCoin (or any of the other crypto-currencies that GoCoin supports including Litecoin and Dogecoin) then the transaction cost is significantly reduced and then BitCoin becomes normalised as another payment mechanism – just the same as cash, cheque, Amex or Visa. This is the GoCoin value proposition.
For the merchant in almost all cases, the revenue from crypto-currencies is always likely to be a portion of total revenue, probably a small portion. Accepting additional currencies is a balance between the incremental sales that can be achieved and the margin impact of the payment processor charges.
There is also the development cost in implementing and maintaining it. With low demand for BitCoin, there is little incentive to put scarce resources into the problem. So GoCoin takes that pain away and makes it a no-lose decision. The cost and security are similar to other payment systems. The incremental sales gained, as a result, are more than likely (the promise) to cover the small setup cost.
Finally by providing multi-currency integration – offering a platform rather than just a BitCoin payment – GoCoin future proofs its solution
The most powerful channel in the GoCoin business model is engineering as marketing where the payment process has a ‘Powered by GoCoin’. Everyone who uses the system knows that GoCoin is the payment processor. A certain percentage will then click through to the GoCoin site and sign up.
This is exactly the same as PayPal, Intercom and others. As their customers’ grow the effect becomes more powerful and with more customers, there will be a significant scale effect. it’s unclear what the minimum efficient scale is likely to be – 5-10% of websites (by number) would be powerful but that would leave 80% by value in the hands Amazon et al.
They will only signup if there is a compelling reason to use GoCoin – which is massive user adoption – and even then if it is easier and cheaper than using their own engineering resources.
There is also the use of existing platforms using the major eCommerce platforms such as Woocommerce and Shopify to offer the plugin through their stores. This will also involve a fair amount of store SEO and CRO to maximise downloads, installation and activation.
Finally, there’s a strong PR push both in the BlockChain world and into the wider tech arena.
The whole relationship is entirely automated with no need for human interaction. Business sign up is automated requiring just an email and payment for consumers is just as simple. Scalable with little need for human support other than customer service
The key activities in the GoCoin business model are running the payment processes, fraud prevention and detection and product development.
Starting with the fraud – GoCoin is like a bank and it needs to have the trust of its partners that contracts will be completed. It does this with a strong emphasis on security in its offering and apparently in the underlying coding. This is likely to be continuing and everlasting project to keep the cash safe for customers, consumers and itself. Usefully GoCoin appears to take on all liability risk for transactions providing partners with the additional reassurance that they require.
Managing and optimising the payment processing is the key task. If payments can’t be accepted or made then there is a big ***** problem. To a large extent, this should be automatic but with a new and growing product there are always likely to be manual interventions – for example at East 2017 payments were delayed because of bank closures.
The product development will focus both on increasing the UI/UX in the payment process and reducing cart abandonment – and thus increasing the payoff for the merchants and GoCoin’s own revenue. This will also include improving the APIs and bringing new currencies onto the platform.
The key resources for the GoCoin Business Model are the deep knowledge of the bitcoin industry and payment processing that the team has. The software team is undoubtedly strong but is essentially fungible. What’s more important is GoCoin’s ability to sit at the nexus of alternative currencies and mainstream e-commerce and offer a solution that meets the needs of both parties.
It’s also powerful that GoCoin has a lot of industry expertise on board but this isn’t a strong moat as many other competitors will have this as well. Long term the moat is really going to be adoption by a significant proportion of second-tier e-commerce sites or a very large number of small sites. This traction will be very strong but until then GoCoin is vulnerable as there are multiple ways of delivering the same VP.
Partnerships are important to the GoCoin model and broadly are divided into partnerships with cryptocurrency providers – BitCoin, DogeCoin etc. The other critical partners are the e-commerce platforms which make GoCoin available in their market places.
The costs are pretty much a pure software engineering play with the salaries and software that go to support that. Marketing is lite because of the use of engineering as marketing and existing platforms.
Revenue is straightforward and is 1% of sales made using the platform with no chargeback. The revenue model can be kept simple because integration is easy and automatic and this means that costs are much lower than say PayPal’s 2.9% – in part because there are no refunds or repayments which reduces much of the fraud issue.
And there you have it our review of the GoCoin Business Model. Please feel free to comment, criticise and suggest improvements in the comments section below.
This blog post is part of a series where we highlight a successful business and explain the Business Model Canvas.Â
This week we are talking about the Retention Science business model and using the business model canvas to understand the different components of their model. For those of you who don’t know Retention Science is a marketing company that helps brands retain their customers.
This is done through the use of Artificial Intelligence (AI) and machine learning to personalise every single customer’s experience of a brand so that churn is reduced as much as possible.
Let’s get the obvious points out of the way first. It’s AI so it needs lots of data – so it’s customers are internet-based companies with a certain amount of scale. For the machine learning to work well we’re looking at 100k customers or more. Because the business model focuses on Retention (Hat tip to the AARRR model typically we’re looking at businesses with a regular recurring revenue model.
That is normally going to be SaaS companies or companies selling subscription boxes. The customer they trumpet most is Dollar Shave club – known for its super cool videos (I’m still on Gillette [sigh] as no one in Malaysia has thought to clone that idea)
So we’re looking at CMO’s of data-driven companies with traction who have got a powerful brand working but need to stop leaks in their retention. That is taking us onto the value proposition.
We reduce your churn rate by personalising your customers experience in a way that cannot be done manually.”
Marketers have several problems here:
What Retention Science does is to segment customers on their behaviour in real-time and based on that behaviour show them the content that has the most success based on customers exhibiting similar behaviour in the past.
Retention Science doesn’t show their pricing on the website (suggesting that they are not going for the $50/month market) but it’s clear that something like this can automate the work of several marketers if they were hired to attempt to do the same thing. More importantly not only is the cost of hiring marketers to do this cost, but the system continues to get better and better over time and react to emerging patterns of behaviour. So there is a clear ROI case that can be made as you cut marketing heads and reduce churn to increase revenue.
Customer relationships are basically consultative selling. The company uses demos to qualify customers and there is likely to be some integration involved to connect the customer’s web platform and CRM through to the Retention Science’s servers via API. The customer relations can really be seen as a standard SaaS sales, account management and customer support model for larger organisations with little Face to Face time.
ReSci’s main channels are the web site, where there is extensive content marketing in place and its partnership agreements with agencies. Many customers will be engaging in a larger project to improve website performance and for all its benefits ResSci is not a one-stop solution. The one-stop solution is delivered by agencies, technology vendors and design houses delivering projects for their customers. By partnering with them Retention Science is able to increase the value of their offering and get the partner to do much of the expensive face to face sales on their behalf.
The key activities for Retention Science’s business model are looking at customer data streams and looking for new products that can be sold off the back of them. What can be learnt from the data? How can this learning be transformed into a product? Does this product work and add value? The three current suites of products – email, website personalisation and subscriptions have all been developed in this way.
The other key activity will be the integration and implementation – making sure that customers can be set up quickly – allowing a generic platform to be customised to the client requirements as quickly as possible. This is again likely to be very much a coding activity.
Now that it has been up and running for a few years the key resources in the Resolution Science business model are the data that have from multiple sources and the IP contained in its algorithms. That’s not easily or quickly copyable by competitors. Lesser resources will be the human capital but whilst this is important AI skills are becoming more fungible as the industry grows in size.
Agencies and technology vendors are key partners as will be the cloud service provider that Resolution Science users. Finally, it’s worth considering the big data/AI community as a partner given the huge reliance on Hadoop and other big data tools
Product development and design are going to be the largest single cost with a rented IT infrastructure coming in second. The third main cost will be the SaaS sales team. Sales is often a larger component but this seems to be due to relative ease of hiring technical sales as opposed to engineers in Santa Monica. Finally, there will also be sales commissions to its partners.
Revenue in Retention Science’s business model is based on a three-year contract implying large front end set up costs which may or may not be clawed back from the customer at startup. Otherwise, the focus is on pure recurring revenue for each of the different products
