Various Business Model Patterns

● ADD-ON – The core offering is priced competitively but there are numerous extra
offerings that drive up the final price and the consumer ends up paying more than
he or she initially assumed because of the additional (Add-On) offerings.

● Affiliation – The focus is on supporting others to successfully sell products and

directly benefit from successful transactions. The affiliates (people who sell) profit
from pay-per-sale or pay-per-display model. The company benefits from gaining
access to a wider market.

● AIKIDO – In this business model a business a company offers something that is

diametrically opposite to what the competition is offering. The new value proposition
attracts customers who prefer something that is against the mainstream.

● AUCTION – This business model allows an organisation to sell their offering at the
highest possible price through a sale by bidding. The product is sold to highest
bidder.

● BARTER – In this business model goods are given to the customers without the
transaction of actual money. The customer in return provides something that is
valuable to the organisation.

● CASH MACHINE – In this business model the customer pays upfront for the goods
purchased by the customer. This helps the business to increase their liquidity.

● CROSS SELLING – In this business model, a business provides additional offerings

which are not related to the main industry of the business in order to generate extra
revenue from the customers.

● CROWD-FUNDING – In this business model the business is supported or financed

by a crowd of investors who wish to support the underlying business idea.

● CROWD-SOURCING – In this business model an organisation adopts a solution to

a problem faced through anonymous crowds. A small reward is usually associated if
a person’s solution is adopted by the company to solve the problem faced by the
company.

● CUSTOMER LOYALTY – A business tries to retain customers and assure loyalty by

providing values that are beyond the actual product offered by the company. These
services are usually complementary, and the goal of the company is to create an
emotional bond with the customers.

● DIGITIZATION – The focus of the organisation is on the ability to turn existing

products or services into digital variants for ease of distribution which also helps in
accessing a wider range of customers.
● DIRECT SELLING – In this model the business eliminates the middleman and sells
the product or service directly to the customers without any intermediaries.

● E-COMMERCE – Traditional products or services are delivered through online

channels only, thus removing the costs associated with running a traditional brick
and mortar store.

● EXPERIENCE SELLING – The value derived by the customer is increased by the

experience offered along with the product which allows the business to charge a
higher price.

● FLAT RATE – The business offers the products or services at a fixed flat rate
regardless the usage of the product or any time restriction on the price.

● FRACTIONAL OWNERSHIP – In this business model, the ownership of an asset,

typically a capital-intensive asset which is not required on a regular basis, is shared
amongst a group of owners.

● FRANCHISING – The business which owns the brand name, products licenses
them to independent franchises who carry the risk of local operations and the
business generates revenue from a part of the revenue of the franchisee.

● FREEMIUM – The business gives away the basic version of a product for free in the
hope that on the usage of the basic version the customer will generate a need of the
premium version and ultimately pay for it.

● FROM PUSH-TO-PULL – This business model focuses in adding flexibility to the

operations of the company in order to make it more customer focused to quickly
respond to the needs of the customers.

● GURANTEED AVAILABILITY – The business guarantees that the product will be

available at any given point of time which reduces the losses that a customer might
have to bear because of the downtime involved in the buying process.

● HIDDEN REVENUE – In this business model an organisation obtains the major

revenue from a third party which cross-finances whatever low-priced offerings
attracts the customers. Example – 0 cost EMI on durable consumer goods.

● INGREDIENT BRANDING – The business uses a branded ingredient from a

supplier and uses it to manufacture its own product. The product is then advertised
along with the branded ingredient to attract more consumers.

● INTEGRATOR – An integrator is in command of the bulk of steps in a value-adding

process. The control off al resources in terms of value creation lies with the
company.
● LAYER PLAYER – A layer player is a specialized company and is limited to providing
one step in the value-adding process for value chains of different organisations. The
layer player can benefit from economies of scale.

● LEVERAGE CUSTOMER DATA – Value is created by collecting customer data and

preparing it in beneficial ways either for own usage or to sell it to interested third
parties.

● LICENSE – The business focuses on developing intellectual property that can be

licensed to other manufacturers in exchange of licensing fees to generate revenue.

● LOCK-IN – The business locks in the customers in its own world and switching to
another business would involve substantial switching cost for the customer.

● LONG TAIL – Instead of focusing on a single large product, the business focuses on
several small niche products. These products when put together create demand
which is more than the blockbuster product.

● MAKE MORE OF IT – The business model ensures that there are no slack resources
and if any, such resources are either used to create additional products for the
organisation or to produce for other organisations.

● MASS CUSTOMIZATION – The business models integrates mass manufacturing

with customization of products which earlier seemed to be an impossible task. The
focus of the business is on production systems that enable individualisation of
products.

● NO FRILLS – Value creation focuses on what is necessary to deliver the core value
proposition which is as basic as possible. The cost saving is shared between the
organisation and the customers.

● OPEN BUISNESS MODEL – In this business model, an organisation collaborates

with the partners in the ecosystem and it becomes a central source of value creation.

● OPEN SOURCE – Others can contribute to the product, but also use it for free as a
sole user. Money is usually earned by services that are complementary with the
product.

● ORCHESTRATOR – The business focuses on the core competencies in the value

chain and other segments of the value chain are outsourced.

● PAY PER USE – In this business model the customer usage is monitored, and any
user must pay only for how much or for how long he or she uses the product.

PAY WHAT YOU WANT – The buyer is free to any price he or she wants to pay for a
product which might even be zero. Usually the business sets a floor price in this business
model.
● PEER-TO-PEER – The company offers a meeting point between two customers to
exchange products or services and only acts as a mediator between the two
consumers.

● PERFORMANCE BASED CONTRACTING – The price of a good or service is not

derived based on the physical value of the product but on the outcome it delivers for
the user.

● RAZOR AND BLADE – The basic product is given away for free or for a low price,
but the products needed to operate the basic good are expensive and sold at a high
margin.

● RENT INSTEAD OF BUY – Instead of buying the product, the customer has an
option to rent the product for the time period for which it is needed. It reduces the
capital required to access the product.

● REVENUE SHARING – The business shares the revenue generated with the
stakeholders of the company.

● REVERSE ENGINEERING – New products are developed by obtaining the

competitor’s product, taking it apart, gaining knowledge from it and using it to
design a similar product.

● REVERSE INNOVATION – The process involves developing products in industrial

nations and adapting them to meet the need of emerging markets.

● ROBIN HOOD – In this business model, the organisation offers the same product to
the rich at a much higher price than the poor and the bulk of the profit is generated
by servicing the rich segment of the society.

● SELF-SERVICE – The business transfers a part of the value creation process to the
customers in exchange for a lower price of the product. These steps usually add little
to the value obtained by the customer but incurs a huge cost or the business.

● SHOP-IN-SHOP – Instead of opening new branches, the organisation ties up with

other businesses and sets up their offerings in the stores of other businesses in a
way that imitates a small shop within another shop so that it results in a win-win
situation.

● SOLUTION PROVIDER – A solution provider offers total coverage of products and

services in a particular domain and the customer needs to contact a single person for
any need in that particular domain.

● SUBSCRIPTION - The customer has to pay a regular fee on a monthly or annual

basis for continued use of product or service. The business is able to generate a
steady stream of income.
● SUPER-MARKET – In this business model an organisation sells a number of
products under a single roof. The assortment of the products is high but the prices
are generally kept low.

● TARGET THE POOR – The business instead of targeting the rich, targets the
customers at the base of the pyramid. The customers with low purchasing power are
able to benefit from the low price of goods and the organisation earns a small
margin of profit compensated by the large sales numbers.

● TRASH-TO-CASH – In this business models, the organisation collects used products

which are sold in other countries or transformed into new products. The scheme is
based on low-to-no purchase prices.

● TWO-SIDED MARKET – It facilitates interactions between multiple independent

groups of customers. The value of platform increases as more groups or more
individual members of a group are using it.

● ULTIMATE LUXURY – The focus of the business is on the top of the pyramid which
comprises of the upper section of the society. This allows a company to distinguish
its products or services greatly from others and they are able to charge a premium
for the same.

● USER DESIGNED – The business model benefits from the creativity of the
consumer and the consumer is both, the manufacturer and the consumer. The
business provides a platform for the consumer to design the products and the
consumer benefits from not having to obtain the required entrepreneurial resources
to implement their ideas.

● WHITE LABEL – A white label producer allows other companies to distribute its
goods under their own brand name, so it appears that the products are made by
them. The same product is usually sold by different businesses under different
brands which allows various segments of the population to be satisfied by the same
product.
 The Stages of Implementation of Business Model
Innovation
A business model is made of-:

1. Who? -: Who is your target customer segment?

2. What? -: What do you offer to your customer? [Customer Value Proposition]

3. How? -: How do you create value? [Value Chain]

4. Value? -: How do you generate revenue [Revenue Model]

These are the four stages of Implementation of a Business Model-:

1. Initiation-: In this process, we analyse our current business model and get to know our
customers and the benefits we are providing, etc.
This process involves the following steps

⮚ What is the problem?

⮚ Where is it happening?
⮚ When is it happening?
⮚ How can we overcome the problem?
⮚ When do we need to get involved?
⮚ How do we know when the problem is fixed?

2. Ideation-: This process involves the following steps

⮚ Analyse the current business model with the existing 55 business model patterns and
develop newer business models.
⮚ We challenge our basic assumptions and the dominant common sense of our
company and never try to Re-Invent the wheel.
⮚ We need to know what can be learned, copied and adapted from other business
models into our own business model.

3. Integration-: In this step, we need to check the consistency of the current business
model and should examine all four questions regarding organizational fit. Here we integrate
all pieces of the new business model into the company keeping in mind all the four
dimensions(who, what, how, why).Here the challenge is to the integration of partners into
the design of the concrete new business model, and it can only work of all involved
stakeholders support it and adjust their business models accordingly.
4. Implementation-: During implementation, now it’s the moment when we have to
awaken the beast and take care of the steps we take. In iterative cycles, we design a
business model, develop a point, examine our point, and return to the design phase. It is
important to gain qualitative and quantitative data to confirm or fix our assumption about
our new business model but also not forget about the soft factor of innovation.

Due to incorrect management’s behaviours and organizational resistance, more than 70% of
all transformative plans be unsuccessful. So, we should keep the few rules in mind-:

⮚ At one time, only implement only one business model.

⮚ Evidently communicate the new business model and the need for change.
⮚ Don’t overemphasize short term KPI’s as modernism requires time.
⮚ We should have the commitment of top management as without their sponsorship
business model is doomed to fail.
⮚ Overcome the not invented here syndrome.