Aslin Ovita Damayanti

19222018

5 Primary Business Model Patterns

Source : medium.com

According to Christoper Alexander, a pattern in architecture is a concept that forms

the basis of design ideas and can be reused as a prototype [1].
A novice businessman needs a reference for how his business will be run. When
searching for different types of business models, there are often similar characteristics,
block arrangements, or behaviors. These similarities are referred to as "business model
patterns". Given that there are so many business models, the presence of business
model patterns will greatly help readers in understanding the dynamics of business
models.
There are 5 patterns, including Unbundling, the Long Tail, Multi-Sided Platforms,
FREE, and Open Business Models. These patterns are presented in a standardized
format using the Business Model Canvas. This is done so that familiar business
concepts can be interpreted in a standardized format, so that they can be directly useful
in the reader's work related to business model design or innovation.
 Over time, new patterns based on other business concepts may emerge. And these
5 patterns are not meant to be limiting. Because a business model can include several
patterns [2].
1. Unbundling
Unbundling refers to the concept that a company is divided into three
fundamental types of businesses: Customer Relationship businesses, product
innovation businesses, and infrastructure businesses. According to Hagel and
Singer, these three business types are ideally separated into distinct entities to
avoid potential conflicts or undesirable trade-offs. For instance, in the Swiss
banking industry, there has been a shift from an integrated business model to an
unbundled one, where banks like Maerki Baumann separate their transactional
business into entities such as Incore Bank to focus more on building customer
relationships. Similarly, mobile telecommunication companies like Bharti Airtel
implement unbundling by outsourcing network operations to emphasize brand
value and customer relationships. By applying the unbundled concept,
companies can achieve clarity in focus and reduce potential conflicts of interest
internally.
a. PT Cahaya Damar Utama

PT Cahaya Damar Utama adopts the unbundling approach in its business

model to enhance operational efficiency and cater to specific business
domains. By focusing on infrastructure management, the company can
streamline its operations for cost-effectiveness and improved
performance. This unbundling strategy allows PT Cahaya Damar Utama
to concentrate on its core competency, optimizing resource allocation and
 ensuring a more targeted and efficient business approach. The emphasis
on unbundling aligns with the company's goal of achieving operational
excellence in managing its infrastructure-related activities, contributing to
a more specialized and effective business operation [3].
b. PT Pahala Bahari Nusantara

According to Gun et al, the company integrates 3 fundamentally different

types of businesses, namely customer relationships, product innovation
and infrastructure business. The company currently shows its focus on
infrastructure management and customer relationship management, while
innovation is still lacking. Product innovation requires talented and creative
human resources so that the company can continue to make market
breakthroughs. So that the company cannot be said to focus on product
innovation because this business is the key to economies of scale. In the
customer relationship management business is quite a focus because it is
oriented towards good service in addition to retaining customers but also
to gain a larger market share.

2. The Long Tail

The Long Tail business model pattern involves the sale of numerous niche
products, each with relatively low individual sales, but collectively contributing
significant revenue. Coined by Chris Anderson, this concept signifies a shift from
 selling a small number of popular items in large volumes to selling a vast array of
niche items.
Successful implementation of Long Tail models, as seen in companies like
Netflix, eBay, and YouTube, requires low inventory costs and robust platforms
for easy access to niche content. Anderson identifies three economic triggers
leading to this shift: the democratization of production tools, distribution through
the internet, and reduced search costs connecting supply with demand.

Example of Long Tail business model pattern

The Long Tail concept extends beyond media, with examples such as eBay's
success in auctioning non-hit items. LEGO also embraced the Long Tail by
allowing users to design and sell their own sets online, expanding its product line
beyond traditional best-sellers. This approach demonstrates the effectiveness of
Long Tail models in diversifying revenue streams and engaging a broader
market.

3. Multi-Sided Platforms
Multi-sided platforms, also known as multi-sided markets, constitute a pivotal
business model that brings together two or more interdependent customer
groups. Examples such as Visa, Microsoft Windows, and Google highlight the
prevalence of this model. These platforms create value by facilitating interactions
between distinct groups, with their success hinging on attracting and serving all
groups simultaneously, often presenting a "chicken and egg" dilemma. To
overcome this, operators may subsidize one customer segment to attract others,
as seen in the cases of Metro and Microsoft. However, challenges persist,
requiring careful consideration of pricing strategies and understanding the
dynamics between different customer segments.
 a. Google
Where the company serves advertisers, web surfers, and content owners.
Google's primary revenue comes from
advertisers, while it subsidizes free
services to attract and retain users.
The success of this model relies on the
interconnectedness of these segments,
emphasizing the importance of a robust and widely-used search platform.
b. Video game consoles
Exemplified by Nintendo's Wii, represent another facet of multi-sided
platforms. The traditional model, as seen in Sony and Microsoft's
approach, involved subsidizing hardware to attract gamers and earning
revenue from game developers. Nintendo, however, differentiated itself by
targeting casual gamers, offering a unique motion-controlled experience,
and generating profits from both console sales and royalties from game
developers
c. Apple
Apple’s transition from the iPod to the iPhone exemplifies a shift toward a
powerful multi-sided platform. With
the introduction of the App Store,
Apple not only sold devices but also
created an ecosystem where
application developers and users
coexist, demonstrating the evolution
and success of their platform business model.

4. FREE
The free business model revolves around providing at least one substantial
customer segment with continuous benefits through a free-of-charge offer.
Various patterns enable the integration of free products and services into a
business model, including advertising, freemium models, and the bait & hook
approach. Advertising, a well-established revenue source, allows for the
provision of free content or services to users while generating revenue from
advertisers. For instance, Metro, a free newspaper, attracts readers with free
content while selling advertising space. The impact of free offerings is evident in
the newspaper industry, where the rise of freely available online content and free
newspapers has challenged traditional paid models.
Another example is Red Hat's disruptive approach in the enterprise software
industry. Instead of selling proprietary software, Red Hat builds on open-source
software, providing stable versions and earning revenue through subscriptions.
This model benefits both Red Hat and its customers by leveraging the
advantages of open source while ensuring ongoing support and updates.
Additionally, Skype's freemium pattern in the telecommunications sector offers
free calling services through the internet, with users paying only for premium
services like SkypeOut for landline and mobile calls.

Example of Free business model pattern

The bait & hook pattern, also known as "loss leader" or "razor & blades,"
entices customers with an attractive, inexpensive, or free initial offer, encouraging
future purchases of related products or services. In the mobile
telecommunications industry, operators often offer free or discounted handsets to
attract subscribers, covering the initial loss through subsequent service fees. The
razor and blades model, pioneered by King C. Gillette, involves selling razor
handles at a discount or giving them away to create demand for high-margin
disposable blades. This model, applied in various sectors, emphasizes the
 importance of controlling the subsequent product to ensure ongoing revenue,
often through patents or other mechanisms.

5. Open Business Models.

Open business models offer companies the opportunity to create and capture
value by systematically collaborating with external partners. Coined by Henry
Chesbrough, the terms "open innovation" and "open business models" involve
opening a company's research process to external parties. In a world
characterized by distributed knowledge, organizations can enhance their
innovation processes by integrating external ideas, intellectual property, and
products. Chesbrough distinguishes between "outside-in" and "inside-out"
innovation.
"Outside-in" innovation involves incorporating external ideas, technology, or
intellectual property into a company's development and commercialization
processes. Companies increasingly rely on external sources of technology to
strengthen their business models. On the other hand, "inside-out" innovation
occurs when organizations license or sell their intellectual property or
technologies, especially unused assets.
Procter & Gamble (P&G) serves as an example of successful open
innovation. Under CEO A.G. Lafley's leadership, P&G implemented a "Connect &
Develop" strategy, aiming to create 50 percent of innovations through outside
partners. The company achieved this goal by building "bridges" into its business
model, connecting with technology entrepreneurs, Internet platforms, and
retirees. This approach led to increased R&D productivity and innovation.
 The inside-out approach to open innovation often focuses on monetizing
unused internal assets, such as patents and technology. GlaxoSmithKline's
"patent pool" research strategy, however, had a different motivation. The
company aimed to make drugs more accessible in the world's poorest countries
by placing intellectual property rights relevant to developing drugs into a patent
pool, open to exploration by other researchers.
InnoCentive, initially part of Eli Lilly, operates as an independent intermediary
connecting organizations with research problems to a global network of
researchers. Seeking solutions to problems posted on InnoCentive's platform,
researchers, or "solvers," receive cash prizes from the companies, or "seekers."
InnoCentive's business model pattern resembles the multi-sided platform,
aggregating and connecting seekers and solvers, reducing search costs for
companies with open business models.
References

1. Five main business model patterns in simple language. Soject. (Sep 17, 2021).
https://soject.com/business-model-patterns/
2. Osterwalder, A., & Pigneur, Y. (2013). Business model generation A handbook for
visionaries, game changers, and Challengers. Wiley & Sons.
3. Al Anshari, R. (2021). Analisis Model Bisnis Pt. Cahaya Damar Utama Dengan
Pendekatan Pola Unbundling. Jurnal Ilmiah Mahasiswa FEB, 9(2).
4. Somantri, G. G., Satria, A., & Iskandar, B. H. (2018). Analisis Model Bisnis Pt.
Pahala Bahari Nusantara Dengan Menggunakan Pendekatan Model Bisnis Kanvas.
ALBACORE Jurnal Penelitian Perikanan Laut, 2(1), 1-12.