By: Nokwazi Mzobe
“Breaking an old business model is always going to require leaders to follow their instinct. There will always be persuasive reasons not to take a risk. But if you only do what worked in the past, you will wake up one day and find that you’ve been passed by.”
Clayton Christensen Rapidly changing business environments; constant influx of new and disruptive technologies and a consumer base that is more connected, conscious and informed, it has never been more critical to understand not just your organizations business model, but also those of other companies and industries.
This is important for existing businesses as well as start-up businesses anywhere in the world. Organizations need to know how to adapt and create new business models not just for a competitive edge, but for impact and growth. As a business leader, manager or entrepreneur, you need to ask yourself if your business model is the right model for the survival and future of your organization?
One of my favourite sayings is “everything is a remix” and in his book, the business Model Navigator, Oliver Gassmann illustrates this by pointing out that ninety percent of all business model innovations simply recombine existing ideas and concepts from other industries.I’m sure you experience these models everyday with the various businesses you interact with.
Focusing specifically on revenue models. Here are some examples revenue models applied differently in diverse industries.
- Third-party model, also known as the advertising model. In this model, someone else (the customer) pays for the service on behalf of the user (consumer). Some examples: Radio; Google and Schools.
- Freemium model: as you can see from the word, part of this model requires an organization to give a part of its service for free. I always tell entrepreneurs in my workshop that this is a strategic model and should be implemented carefully. Examples include streaming services: Netflix (one month free); Spotify – has a free and paid service and Survey monkey.
- Brokerage model: This is where a “middle man” facilitates a transaction or deal between 2 parties and makes money from the commission. This is a model made popular by the financial services industries e.g. Insurancecampanies or credit card companies such as Visa and Mastercard. Many online platforms implement this model in one way or another, such as Airbnb, OLX and Paypal.
- Subscription model: This model was made popular in the print magazine and newspaper industry, today we see it used in a number of platforms such as online learning platforms e.g. Udemy; music streaming platforms e.g. Spotify and research platforms e.g. Survey monkey.
- Incentive model: This is where the service providers revenues are derived directly from the positive impact or performance of its product or service. For example,Danfoss Solutions a company that helps industrial businesses reduce the amount of energy used in their operations. They guarantee their customers a saving with a ROI of 2-4 years. They are paid a percentage of the savings made by their customers.
Organizations don’t have to create new business models. By taking the time to understand other industry models; your own business needs as well as changing market, technology, society and consumer dynamics, you can implement an existing business model from a different industry in a new way and give your business the necessary edge to thrive in the future.