How can you identify different business models?

Business models are the ways that companies create, deliver, and capture value for their customers, stakeholders, and themselves. They can vary widely depending on the industry, market, and competitive environment. But how can you identify and analyze different business models? Here are some steps you can follow to gain a better understanding of how businesses operate and generate revenue.

1 Define the value proposition

The value proposition is the core benefit that a business offers to its customers, and how it solves their problems or meets their needs. It is what makes a business stand out from its competitors and attract loyal customers. To identify the value proposition of a business, consider what problem it solves for its customers, how it delivers its solution, what unique features or benefits are associated with its solution, and how it communicates its value to its customers. Answering these questions can help you understand the value proposition of any business.

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Gustavo D.

Empowering Individuals and Organizations with Innovation and AI-Driven Solutions
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Those questions are fundamental and the starting point for understanding a business model. I have found that taking some time to consider “3-degrees “ of distance from the target customers up/down stream in the value chain might reveal interesting findings about unspoken benefits.

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2 Identify the customer segments

The customer segments of a business are defined by their characteristics, needs, preferences, and behaviors. To identify these segments, you can ask questions such as who the current and potential customers are, how they differ from each other, what their goals and challenges are, and how they discover, evaluate, and purchase the business's solution. By understanding the customer segments of a business, you can gain valuable insights into how to best serve them.

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3 Map the revenue streams

The revenue streams of a business are the sources of income generated from its customer segments, based on the value proposition and pricing strategy. When mapping out the revenue streams, questions such as how the business charges its customers, what types of revenue streams are present or could be created, how much each stream contributes to the total revenue, and how stable, predictable, and scalable the revenue streams are should all be considered.

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Gustavo D.

Empowering Individuals and Organizations with Innovation and AI-Driven Solutions
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After mapping the revenue streams as mentioned above, creatively challenging traditional assumptions is the next step. Startup founders could benefit a lot if extending their focus on innovation and value creation to exploring new alternatives for revenue streams. Asking unconventional questions about revenue sources can lead to disruption and competitive advantages, which might lead to significant changes in the original business model.

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4 Analyze the cost structure

The cost structure of a business is the combination of all expenses incurred to create, deliver, and capture value. It is heavily impacted by the business model, value proposition, and revenue streams. To analyze the cost structure, one should ask questions such as what the main cost categories are, how they relate to the value proposition and customer segments, how much each cost category represents in total costs, and how the business can reduce or optimize its costs.

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5 Evaluate the competitive advantage

The competitive advantage is the edge that a business has over its rivals in the market, based on the value proposition, customer segments, and revenue streams. To evaluate this advantage, you can ask questions such as what are the strengths and weaknesses of the business compared to its competitors, what opportunities and threats it faces or could face in the market, how it differentiates itself from its competitors and creates loyal customers, and how it protects its competitive advantage from imitation or substitution. By following these steps, you can identify and analyze different business models and gain a deeper insight into how businesses create and capture value. This knowledge can be used to improve your own business model or to explore new possibilities for innovation and growth.

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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How can you identify different business models?

1

2

3

4

5

6

1 Define the value proposition

2 Identify the customer segments

3 Map the revenue streams

4 Analyze the cost structure

5 Evaluate the competitive advantage

6 Here’s what else to consider

Strategy

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How can you identify different business models?

1

2

3

4

5

6

1 Define the value proposition

2 Identify the customer segments

3 Map the revenue streams

4 Analyze the cost structure

5 Evaluate the competitive advantage

6 Here’s what else to consider

Strategy

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