Understanding Business Model Patterns

Oct 8, 2024

Notes on Hochschule St. Gallen Business Model Patterns

Introduction

  • Lecturer: Professor Dr. Bernard Ostheimer
  • Focus: Business model patterns identified by Hochschule St. Gallen
  • Structure:
    1. Motivation
    2. Dimensions of a business model
    3. Business model patterns

Chapter 1: Motivation

  • Industrial economies are rapidly changing.
  • Example: Kodak's failure to transition from analog to digital cameras.
  • Importance of innovation in business models, not just products.

Types of Business Model Innovations

  1. Startups: New companies or ideas.
  2. Transformation: Changing existing models.
  3. Diversification: Adding new models alongside existing ones.
  4. Acquisition: Acquiring another company’s model.
  • Example: Nespresso vs. traditional coffee market prices.

Global Perspective

  • Dominance of US and Chinese companies in digital innovations.
  • European companies are less prominent.
  • Relevant companies and platforms include AWS, Microsoft, Google, Tencent, and Alibaba.

Chapter 2: Dimensions of a Business Model

  • Four Key Questions:
    1. Who is the target customer?
    2. What is the product/service offered?
    3. How is the value proposition created?
    4. Why does the business generate profit?
  • Business model innovation requires changing at least two of the four dimensions.

Chapter 3: Business Model Patterns

  • More than 90% of innovations are recombinations of 55 patterns.
  • Selected Patterns:
    • Add-on: Basic product with add-ons (e.g., Ryanair).
    • Affiliation: Earning through referrals (e.g., Amazon's affiliate links).
    • Auction: Competitive bidding (e.g., eBay).
    • Barter: Trade products/services instead of money (e.g., Pepsi for vodka in Russia).
    • Cash Machine: Advance customer payments (e.g., vouchers like Groupon).
    • Cross Selling: Offering unrelated products (e.g., Chibo).
    • Crowdfunding: Public funding for projects (e.g., Startnext).
    • Customer Loyalty: Reward programs (e.g., Lufthansa Miles & More).
    • Direct Selling: Manufacturer sells directly to consumer (e.g., Vorwerk).
    • E-commerce: Online sales platforms.
    • Freemium: Free basic service with paid premium features (e.g., Dropbox).
    • Peer-to-Peer: Platforms connecting users (e.g., Airbnb).
    • Subscription: Regular service fee (e.g., Netflix).
    • Two-sided Market: Facilitating interactions between different groups (e.g., Airbnb).
    • Ultimate Luxury: Targeting high-income markets (e.g., Rolls Royce).

Conclusion

  • Encouragement to consider how these patterns might influence projects or teamwork.
  • Open invitation for questions and further discussion.