In today's rapidly changing business world, companies need to understand the latest business models and evaluate how they might apply to their organization. Martin Giesswein, country director of Nokia in Austria, has seen firsthand the disastrous consequences of companies ignoring digital business opportunities. In his workshop “Digital Game Changer”, given at the Executive Academy of the University of Washington, he shows business managers how to analyze which digital business models are best suited to their fields of business. In this article, we will explore 10 of the most popular business models and how they can be used to create success for companies large and small. The retail model is one of the most common business models.
It involves selling products directly to customers through physical stores or online stores. Companies that use this model are typically focused on providing a wide selection of products and excellent customer service. Examples include Amazon, Walmart, and Target. The freemium model is based on a free model intended to attract potential customers. The term is a combination of the words “free” and “premium”.
Companies that use this model offer a basic version of their product or service for free, while charging for additional features or services. Popular examples include Dropbox, Spotify, and Evernote. The affiliate model is a type of marketing where companies pay affiliates for referring customers to their products or services. Digital products can also be marketed to end users with the help of influencers who share affiliate links in their photos or stories or from marketing partners with a lot of followers. Amazon Associates is one of the most popular affiliate programs. The licensing model is used by companies that sell or license their products or services to other companies.
In the offline world, Microsoft, for example, sells or licenses its products through thousands of certified partners. This model is closely related to the sharing economy and subscription models (see below).The subscription model is based on customers paying a recurring fee for access to a product or service. This model is particularly popular with software companies that offer monthly or annual subscriptions for access to their products. Popular examples include Adobe Creative Cloud and Microsoft Office 365. The platform model is based on providing a platform for parties to interact with each other.
Platforms offer value to users by facilitating direct connections and exchanges between people (the more valuable the network is to the user, the more successful it will be). Popular examples of platform companies include Facebook, GitHub, Uber, and Airbnb. The data-driven model is based on collecting data from customers and using it to make better decisions and refine operations. Truly intelligent organizations promote a data culture, in which the importance of data is recognized at all levels of the company and decisions across the company are based on data, not on assumptions. The experience-based model is based on creating an experience for customers that goes beyond just buying a product or service. Nowadays, customers want to see the people behind the brand; they really want to “connect” with a company.
Companies that use this model focus on creating an emotional connection with their customers through storytelling and personalization. The partner-focused model is based on working with partners to create new sources of revenue. Just take a look at today's average small or medium-sized business and you're likely to see an example of a partner-focused, networked company. The flexible/scalable model, also known as the “gig economy” model, is based on hiring independent contractors instead of full-time employees. As such, companies are increasingly happy that people come and go and that they are working for more than one company at a time. Finally, the innovative/experimental model, also known as the “startup” model, is based on experimenting and innovating at a faster pace than traditional corporate models. Companies that use this model focus on solving customer problems, anticipating their needs, making people's lives easier and eliminating any friction or discomfort. In today's rapidly changing business world, larger companies have a lot to learn from these flexible and scalable models.
The traditional corporate business model, with its hierarchies, silos and endless formal meetings, is changing. Companies need to understand these new models in order to remain competitive in today's economy.