You Need a New Business Model

Seizing the White Space

I have a fascination with companies that make money using creative business models (or standard business models applied creatively). This list of business models comes from Mark Johnson’s book Seizing the White Space (p.131), which teaches large companies how to be innovative. Seeing structure like this applied to different companies in different categories helps me focus my thoughts as I brainstorm companies I would like to start.

Johnson has a slightly different PDF version of this list of business model analogies online here. What business models is his missing?

Type Example Description
Affinity club MBNA Partner with membership associations and other affinity groups to offer a product exclusively to its members, exchanging royalties for access to a larger customer base.
Brokerage Century 21, Orbitz Bring together and facilitate transactions between buyers and sellers, charging a fee for each successful transaction.
Bundling Fast-food value meals, iPod/iTunes Make purchasing simple and more complete by packaging related products together.
Cell phone Sprint, Better Place Sell a service through multiple plans featuring a range of prices depending on varying levels of usage.
Crowdsourcing Wikipedia, YouTube Outsource tasks to a broad group who contribute content for free in exchange for access to other users’ content.
Disintermediation Dell, WebMD Deliver directly to the customer a product or service that has traditionally gone through an intermediary.
Fractionalization Time-sharing condos, NetJets Allow users to own part of a product but enjoy many of the benefits of full ownership for a fraction of the price.
Freemium Skype, LinkedIn, Pandora Offer basic services for free but charge for upgraded or premium services.
Leasing Xerox, luxury cars, MachineryLink Make high-margin, high-cost products affordable by having the customer rent them rather than buy them.
Low-touch Southwest, Wal-mart, Xiameter Offer low-price, low-service version of a traditionally high-end offering.
Negative operating cycle Amazon Generate high profits by maintaining low inventory and having the customer pay up front for a product or service to be delivered in the future.
Pay-as-you-go PG&E, metered ISP’s Charge the customer for metered services based on actual usage metrics.
Razors/blades Gilette, personal printers Offer the higher-margin “razors” for low or no cost to make profits by selling high-volume, low-margin “blades”.
Reverse auction, Set a ceiling price for a product or service and have participants bid the price down.
Reverse razors/blades iPod/iTunes, Amazon Kindle Offer the low-margin “blades” for low or no cost to encourage sales of the higher-margin “razors”.
Product-to-service IBM, Hilti, Zipcar Rather than sell products outright, sell the service the product performs.
Standardization MinuteClinic Provide lower cost standardized solutions to problems that once could only be addressed through high-cost customized products or services.
Subscription club Magazines, Costco, Netflix Charge the customer a subscription fee to gain access to a product or service.
User communities Angie’s List Grant members access to a network, generating revenue through membership fees and advertisements.

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