Updated January 2021.
CHANGE OR COLLAPSE
The industry that which is the stronghold of the American economy was dumbfounded. They heard the unthinkable.
“You can fight [the end of car ownership], and that will probably not turn out well. Or you can acknowledge that this is happening. This is real, serious, and going to change your world." This ultimatum was delivered by the Lyft president and co-founder John Zimmer, at the Los Angeles Connected Car Expo in August 2015.
Obviously, as you would guess, this did not sit very well in a room that comprised mainly of auto dealers, parts manufacturers, insurance hawkers and industry regulators. However, there was an exception in the audience — GM president, Dan Ammann.
He was inspired by Zimmer and agreed a $500 million GM investment in Lyft, thus hiking up its' valuation to $5.5 billion. And, a few months later, Ammann pulled off a similar partnership with Cruise, a startup building software for autonomous vehicles.
You see, John Zimmer was not preaching to choir, he was driving towards a solution that addresses the accelerating challenges of our times; — 'Climate Change' and 'Sustainability'.
"The implications of autonomous vehicles for the future of cities has only just begun to be understood. Quite apart from the safety benefits, huge areas of land could be freed up for other uses, including the sort of green space needed to cool cities in the midst of accelerated global warming."
WE ARE LIVING IN EXPONENTIAL TIMES. ThIS WAS iN 2016
An emerging environment is setting up for trade and commerce, giving rise to a new market normal. A new report commissioned by Business and Sustainable Development Commission and presented by Volans suggest that we are heading into a period of exponential change, disruption and uncertainty. Nonetheless, this report also suggest breakthrough business models, that is disrupting the ‘business as usual’ incumbents and driving progress, and value, exponentially.
Below, is a quick reference of 81 breakthrough business models. This is time when it make sense to re-think your value proposition.
Progressive and upcoming brands are using these models to create value for their stakeholders, recognizing the fallacy of the philosophy 'infinite growth on a finite planet' and are working towards closing the gap between where we are and where we need to be as the world population accelerates towards 10 billion people.
The core offering is priced competitively, but adding extras drive the revenue up for the brand. And, customers benefit from a variable offer they can adapt to as needed.
A brand supporting others to sell products successfully and benefiting directly from successful transactions. Usually uses some kind of a pay-per-sale system.
A brand offers something diametrically opposed to the image and mindset of the competition. The novelty of the offering attracts a particular segment of customer.
When brand sells a product or service to the highest bidder. A brand may indulge in this attribute as a part of their bigger vision.
5. Base of the Pyramid
The product or service targets customers positioned at the base of the wealth pyramid at an affordable price point. Despite small profits with each product sold, brands benefit from the higher sales numbers.
Exchanging goods or services with no transfer of money.
7. Behavior Change
Stimulating customers to embrace new behaviors, such as reducing consumption or
modifying daily habits.
8. Building a Marketplace
Reinforcing the marketplace through the use of social programs, local market adaptation,
and other services such as financing mechanisms or technical assistance.
9. Buy One, Give One
Using a portion of the profits from the sale of a product or service towards donating a similar product/service to those in need.
10. Cash Machine
Customer pays up-front for the products sold before the company has to cover any associated expenses.
11. Circular Supplies
Using renewable, bio-based or fully recyclable materials to replace single-lifecycle inputs.
12. Closed-Loop Production
Virtuously recycling the material used to create a product back into the production system.
13. Collection Service
Providing a service to collect old or used products from customers in a convenient manner.
14. Consumer Lock-In
A value proposition that entices customers to continue using a specific product or service regularly.
15. Cooperative Ownership
Where companies are owned by members.
Services or products from outside the business are added to the offerings.
Enabling entrepreneurs to tap into the resources of a wider network of people to raise money.
Solutions to tasks or problems are generated via an anonymous crowd, with contributors
receiving some incentives.
19. Customer Loyalty
Customers are retained by providing value over and above the actual product or service itself.
Reduction in the amount of materials used in the production of products.
21. Differential Pricing
Charging more to those able to afford, and subsidizing those who cannot.
Turning existing products or services into digital versions of themselves, offering advantages such as more rapid distribution.
23. Direct Selling
Where products are available directly from the manufacturer or service provider. Savings from cutting out the middleman are passed on to the customer.
Traditional products or services are delivered through online channels only.
25. Experience Selling
Value of a product or service is increased by an additional customer experience.
26. Flat Rate
A single fixed fee is charged for a product or service, regardless of actual usage.
27. Fractional Ownership
Sharing of a certain asset class among a group of owners.
Independent franchisees bear the risk of local operations whilst being licensed to use the franchisor’s brand name, products and corporate identity.
Allowing users to access a proprietary product or service for free, but charging a premium to access advanced functionalities.
30. From Push to Pull
Decentralization, adding flexibility to a company’s processes in order to be more customer-
31. Guaranteed Availability
Makes the customer’s needs central to decisions within the enterprise and the shaping of
the value proposition.
32. Hidden Revenue
Main source of revenue comes from a third party who cross-finances any free or low-priced
offering that attracts users. Advertising is a common application.
33. Inclusive Sourcing
Shifting the focus of sourcing from volume and price, to supporting the farmer or producer.
34. Increased Functionality/Services
Uncovering multiple, alternative, uses for an existing product, resulting in fewer products required.
35. Industrial Symbiosis
Sharing of services, utility, and by-product resources among industries to improve resource efficiency.
36. Ingredient Branding
Inclusion of a branded ingredient to a product and stressing the added value or positive
37. Innovative Product Financing
Leasing or renting products to customers.
Company has command of the majority of steps in the value-adding process, including all resources and capabilities in terms of value creation.
39. Layer Player
A specialized company limited to providing one value-adding step to different value chains, thus benefiting from economies of scale, more efficient production and specialized expertise.
40. Lean Production
The elimination of waste within a manufacturing system, or the creation of more value for customers with fewer resources.
41. Leverage Customer Data
Creating new value by collecting customer data and preparing it in beneficial ways.
Developing intellectual property that can be licensed to other manufacturers, transforming intangible assets into money.
43. Local Loop
Co-locating of production processes in countries or regions where the businesses’ main markets are.
Favoring local and/or community-based production and consumption.
45. Long Tail
The bulk of revenue is generated through a “long tail” of niche products, which individually, demand neither high volumes nor a high margin.
46. Make More of It
Where know-how and other assets in a company are offered to other companies, creating additional revenue using slack resources.
47. Mass Customization
Customizing products through mass production using modular production systems that enable efficient individualization. Skyline has gained massive leverage by doing this.
Providing low-income, financially excluded, customers with small loans, and at times access to other financial services.
Traditional franchising with a focus on creating economic opportunities for the poor to become micro-entrepreneurs.
Designing a product based on smaller component parts that can be independently created, purchased, used and replaced.
51. Multi-Sided Platform
Creating value by enabling direct interactions between two (or more) groups, typically through an intermediary platform. Success is dependent on attracting more users to all sides.
52. No Frills
Focusing on the necessary minimum to deliver the core value proposition, where cost savings are shared with the customer.
53. Open Business
Where collaboration with partners in the ecosystem becomes a central source of value creation.
54. Open Source
Where the source code of a product is made freely accessible for anyone.
Where a company focuses on core competencies within the value chain, outsourcing and
co-ordinating other segments.
56. Pay for Success
Performance-based contracting, typically between providers of social services and governments
57. Pay Per Use
Actual usage of a service or product is metered, and customers pay for what is effectively consumed.
58. Pay What You Want
The buyer pays any desired amount for a given commodity, sometimes even zero. Seller benefits from a larger number of customers.
Personalization of products through the use of data.
60. Peer to Peer
Based on cooperation among individuals in a group or community connected via a meeting
point, usually an online platform.
61. Physical to Virtual
Replacing brick and mortar infrastructure with virtual services.
62. Produce on Demand
Producing a product only when a customer order is made.
63. Product as a Service
Customers pay for the functionality of a product, without the responsibility of repairing, replacing or disposing it.
64. Razor and Blade
Basic product is cheap or given away for free, while the consumables are expensive and sold at high margins.
Sourcing materials from recovered waste to create entirely new products.
66. Rent Instead of Buy
Customers rent the product, reducing the capital typically needed to access it.
67. Repurposing Excess Capacity
Excess capacity is mobilized in new ways, or with new customers.
68. Revenue Sharing
Sharing revenues with ones stakeholders.
69. Reverse Engineering
Obtaining a competitor’s products, taking it apart and using the information obtained to
produce a similar or compatible product. Products are offered at a lower price
because of no investment in research or development is required.
70. Reverse Innovation
Simple, inexpensive products that have been developed within and for emerging markets.
Part of the value creation of the service or product is transferred to the customer in exchange for a lower price.
72. Shop in Shop
Instead of opening new branches, a company finds a partner whose branches can profit from integrating its offerings.
73. Solution Provider
Offering comprehensive coverage of products and services in a particular domain, consolidated at one point of contact.
74. Stewardship Model
Where products and/or services are delivered via means that take into account biodiversity
protection, ethical trade, consumer care, etc.
75. Subscription Model
Customers pay a recurring fee to gain ongoing access to a product or service. SaaS, Food and now Travel is embracing this model.
76. Sufficiency Model
Where customers are encouraged to consume less – e.g. extending the product life, encourage product take-back, product exchange, premium branding, etc.
A company sells a large variety of readily available products and accessories under one roof. Customers are attracted to the wide variety, while economies of scale yield advantages for
78. Trash to Cash
Used products are collected and either sold or transformed into new products. Resource costs for the company are practically eliminated.
79. Ultimate Luxury
Where a company distinguishes its products or services by offering high standards of quality or exclusivity.
80. User Design/ Customer Contributor
Where a company supports customers to apply their creativity and preferences through
services such as an online shop, or design software – resulting in the customer being also the manufacturer.
81. White Label
A White Label producer allows other companies to distribute its goods under their own brand name.
If you made this far, sign up for new articles where we evaluate how companies are exploring markets in innovative ways, and global brands are disrupting themselves to reawaken their brand and rehabilitate their value proposition in this new era of trade and commerce.
For Further Reading:
The Business Model Navigator, FT Publishing International.
Oliver Gassmann, Karolin Frankenberger & Michaela Csik (2014).
Model Behavior: 20 Business Models
Forum for the Future & Unilever, 2015.
Innovative business models and technologies to create value in a world without limits to growth, Accenture, 2015.
Journal of Cleaner Production