Having previously delved into the components of digital business models, we can’t help but quote Aristotle: “The whole is greater than the sum of its parts”. It’s easy to look at digital business models as monolithic, pre-defined frameworks we can just take and turn into viable businesses in various industries, but in doing so, we’re doing ourselves a great disservice.
Why? Because the main value of designing your own business model is creating the framework that’s more likely to succeed based on your vision, resources and capabilities. On top of that, designing your own model (going through this series will be more than enough to help you achieve that) forces you to do research, write down your assumptions, validate them (wherever possible) and put most of the puzzle pieces together before spending your first dollar.
Looking at the components used in designing business models, we can theoretically generate an infinite amount of digital business models and each of them would be unique (yet not necessarily viable), but in order to keep our sanity, we’ll create an easily digestible structure centered on revenue models / streams, value models and more. In the design phase of our business model we will be using patterns, not the more general “types”, since patterns are structural blocks specifically created to help us design models, which we will explain shortly.
Types vs. Patterns of Digital Business Models
The simplest way to approach patterns is to think of them as repeatable structures or building blocks you can swap in & out to experiment with your digital business model in the design phase. These patterns have been created from the similarities in the ways that businesses have successfully created, distributed and captured value. You can also look at patterns as reusable architectural components that have already been validated by other businesses, such as eCommerce, Affiliate, Advertising, Subscription, Marketplace, Digitization, Pay with Data, On Demand, XaaS (X as a service) and many, many more.
A lot of these patterns can stand on their own – such as the eCommerce pattern and the subscription pattern, but they may also be complementary – in this example forming a Subscription Service eCommerce Business Model (for example the popular subscription box services where you get curated products – be they cosmetics, media, food etc.). As we’ll discuss later, they can also run in parallel under one or more digital business models. Even with this simple example, the potential of using patterns to (try and) design innovative business models becomes clear.
Types are mostly interchangeable with patterns, they’re simply a more general way of classifying business models.
Digital Business Models vs Digitally Enhanced Business Models
Before we dive into the types of business models,
Digital Business Models by Revenue Model:
- Subscription / Recurring Revenue Models
- Free with Hidden Monetization Models
- Free with Premium Tiers Models
- Transactional Revenue Models
- Licensing Revenue Models
- Leasing Revenue Models
- Advertising Revenue Models
- Pay-as-you-Go Revenue Models
- Community Funded Models
- Mixed / Indirect Revenue Models
- Strategic Value Models – No Revenue
Advertising models can be further broken down and they can be the primary revenue model or a (very common) secondary revenue stream in most digital business models. Most popular advertising revenue models revolve around ad placement, native advertising and we can take a small leap and include sponsored content here.
Subscription models can be further broken down and they can overlap with eCommerce models as well.
For software products, things get really interesting, as we usually see freemium, shareware, donationware, nagware and crippleware (especially effective combined with lock-in models).
Mixed revenue models can prove to be very successful. While some forms of revenue generation are truly creative, they are usually very limited in their applicability. For example, some developers may release a product for free, bank on it becoming more popular and selling their services to further customize the product for various customers. Consider WinRar success and how its revenue model worked: it was technically speaking a paid product with no , but 99% of its revenue came from corporate users who were most comfortable using WinRar as their compression software and wouldn’t take any legal risks by not paying.
eCommerce Business Models by Revenue Model:
- Markup Revenue Model (Dropshipping included)
- Affiliate Revenue Model
- Commission Revenue Model
Digital Business Models by Platform:
Coming Soon To a Blog Post Near You!
Traditional Business Models:
While traditional business models are not a key topic in this series, we can still discuss the aspect of digitally-enhanced business models and how transformation processes can turn traditional players facing extinction into disruptive, innovative players who are not afraid of a refreshing their business model.
What’s Next?
We’re going to dig deeper into business models and look at all their components and how those components are combined under a framework (or multiple frameworks) to generate a viable business model. Afterwards, we’ll deconstruct a couple interesting ones and start looking at digital business model patterns, an important tool in innovating and designing disruptive (or at least viable) digital business models.
- Components of Digital Business Models
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This content of this post is scheduled for May 30th 2020. Sorry for the inconvenience – I’m currently working on the site and testing various elements such as excerpts, recommended articles and other features and this is the fastest way for me to get all the pieces together.
