A business model is a framework for finding a systematic way to unlock long-term value for an organization while delivering value to customers and capturing value through monetization strategies. A Business Model is a holistic framework to understand, design, and test your business assumptions in the marketplace.
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List of business models
In this guide, we’ll also see 70+ Business model types identified by the FourWeekMBA research.
Ever since this list started to be published back in 2018, many copycats around the web have started to duplicate it without understanding the meaning of each model referenced here.
Thus, if you need our feedback, feel free to reach out. We update this list frequently based on the continued research and changing business landscape.
I’ve also built a custom database of visual business models which you can navigate from here, through our business model explorers!
Business Model Explorers
You can jump directly to some of the main ones below or read the guide in order, where you’ll find also updated patterns:
- A mix of chain and franchise business model
- Ad-supported (subsidized) business model
- Affiliate business model
- Aggregator business model
- Agency-based business model
- Asymmetric business models
- Attention merchant business model
- Barbell business model
- Bidding multi-brand platform model
- Blitzscaler-mode business model
- Blockchain-based business models
- Bundler model
- Cash conversion cycle or cash machine model
- Discount business model focusing on high quality
- Distribution based business model
- Direct-to-consumers business model
- Direct sales business model
- E-commerce marketplace business model
- Educational niche business model
- Family-owned integrated business model
- Feeding model
- Freemium model (freemium as a growth tool)
- Free-to-play model
- Freeterprise model
- Gatekeeper model
- Heavy-franchised business model
- Humanist enterprise business model
- Enterprise business model built on complex sales
- Lock-in business model
- Instant news business model
- Management consulting business model
- Market-maker model
- Multi-brand business model
- Multi-business model
- Multi-sided platform business model
- Multimodal business model
- Multi-product (Octopus) business model
- On-demand subscription-based business model
- One-for-one business model
- Open-Source Business Model
- Peer-to-peer business model
- Platform-agnostic model
- Platform business model
- Privacy as an innovative business model
- Razor and blade revenue model
- Real-time insurance business model
- Self-serving model
- Space-as-a-service model
- Subscription-based business model
- Surfer model: reverse-engineering the gatekeeper
- Three-sided marketplace model
- User-generated content business model
- User-generated AI-amplified model
- Unbundler model
- Vertically integrated business model
Otherwise, feel free to read the whole book!
Inside Porterland
There used to be a time (the late 1970s) when the strategy was way more about understanding competition, framed in terms of bargaining power and barriers to entry.
However, as digitalization took over, around the 1980s, and 1990s it became clear that the whole nature of the competition was changing.
While frameworks, like Porter’s Five Forces, might be still useful to map some business contexts.
The legendary Andy Grove, together with many other practitioners identified six forces shaping from the bottom entire industries.
Indeed the sixth force is about complementary products.
This force is subtle, hard to spot, and very very blurred.
In fact, complementary products, when it comes to the digital and tech world, are not easy to spot.
Competition might arise from unexpected places, as there is no direct overlap between these complementary products.
In short, there is a linear way to map the business context of complementary products, where you look at existing alternatives in the same market/industry.
Yet this might be effective in the short-term (3-5 years) but fail miserably in the long-term survival of the business.
Think of how, when AT&T created its Bell Labs, it prompted unpredictable innovation loops that led the way to compute.
From the phone business, there was the computing industry, which slowly, then suddenly took over the phone business of AT&T.
In fact, from Bell Labs, the first semiconductors came to life. Spurring the whole computer industry first, then the Internet.
When perhaps the same IBM decided to move from B2B computing to the consumer industry, it suddenly adopted an opposite strategy compared to what it had done so far.
IBM approached the development of a PC for consumers with an open approach, where it outsourced most components to other players (this in part also to antitrust concerns).
This strategy in the long-term generated a whole new set of markets, industries, and tech players (Microsoft, Intel, and Compaq to name a few).
From there, when the PC dominating players tried to enter the Internet (see Microsoft vs. Netscape) they also faced unpredictable market forces.
Coming from the bottom (consumer adoption) that completely reshaped entire industries, thus giving birth to the next wave of Internet players (see Google, Amazon, etc.).
Indeed, Andrew Grove, back in the late 1980s former Intel’s CEO and the father of the OKR Goal-Setting System, in his book “Only The Paranoid Survive” highlighted how the sixth force – complementary products – was one of the key forces that determined a complete reshaping of the way of doing business.
And therefore, one of the forces that most (especially in the tech industry traveling at a faster speed compared to other sectors) had the ability to change business models, leading to what Andrew Grove called a strategic inflection point.
A point from which the way of doing business would never be the same.
This could become both a big threat for existing players, and an opportunity for new entrants, but also a way for existing dominant players to redefine completely their business models.
That is why, it makes sense, especially for companies operating in the tech business world, to map and analyze the context by adding this sixth force.
Breaking the boundaries of the business world
With a much more fluid business world, the whole business playbook changed.
And while this had become already evident with players in the computer industry, things more rapidly changed with the adoption of the Internet.
As the Internet morphed into the Web, a bunch of companies that by the late 1990s were promising to revolutionize entire industries were still running with the old business playbook.
Most of these companies went bankrupt during the dot-com bubble of the early 2000s.
For the very few, great, and also lucky (you can see also how companies like Amazon managed to survive the dot-com bubble thanks to lucky timing) players who survived, the whole paradigm shifted.
They mostly turned into what today we call platform business models, leveraging network effects.
The lean startup is born
During the early 2000s, companies like PayPal and the few other survivors of the dot-com era had managed to build, on the fly, the Internet business playbook that made them thick during these decades.
Hundreds first, thousand of companies then, followed suit. Giving rise to the lean startup.
While practitioners building companies didn’t have a name for it.
Other practitioners turned academics/scholars built a terminology around that playbook.
From there Steve Blank and Eric Ries explained this whole phenomenon as lean startup.
Customer obsession as the North Star
In this increasingly complex business world, where the boundaries are much more blurred, rather than following a more complex business strategy, digital players tended to simplify it.
And companies like Amazon led the way, with their obsession with customers.
Customer obsession, therefore, is a simplification, which helps companies gain focus as they execute a business strategy.
Customer obsession also gave rise to business modeling as a key discipline!
Business modeling is intended as a bottom-up approach to business, where a company is way more focused on customer feedback, quick feedback loops, product-market fit, and demand generation than anything else!
What is a business model and why is it important?
A business model is a critical element for any startup’s success as it is what unlocks value in the long term. In a way, developing a business model isn’t only about monetization strategies.
Indeed, that is way more holistic. To develop a business model companies need to create value for several stakeholders.
Thus, a business model is about what makes users go back to your app, service, or product.
It is about how businesses can get value from your solution. It is about how suppliers grow their business through it.
A business model is all those things together. In short, when those pieces come together, that is when you can say to have a business model.
A quick history of business models
“business model” and “business models” in millions of books according to Google Ngram
While the Internet worked as a catalyzer for business model innovation, the term itself was born way before that.
Indeed, business modeling started to become a key component to explain long-term strategic advantages, by the early 1990s.
For instance, an article from 1993, from HBR, entitled “Strategy And The Art of Reinventing Value” explained IKEA’s success as a business model advantage:
IKEA has performed well with a not-terribly-original business model that, in less skillful hands, may well have failed.
Yet, as we get close to the mid, end of the 1990s business modeling starts to take a connotation tied to the Internet ecosystem.
In a research done in the Strategic Management Journal, in 2001, the authors explain:
Our findings suggest that no single entrepreneurship or strategic management theory can fully explain the value creation potential of e-business. Rather, an integration of the received theoretical perspectives on value creation is needed. To enable such an integration, we offer the business model construct as a unit of analysis for future research on value creation in e-business. A business model depicts the design of transaction content, structure, and governance so as to create value through the exploitation of business opportunities. We propose that a firm’s business model is an important locus of innovation and a crucial source of value creation for the firm and its suppliers, partners, and customers.
Therefore, at that time, in the early 2000s, business modeling becomes also a way to analyze and explain the competitive advantage that companies had built in the marketplace.
The peak of this movement – I argue – came, when in 2019, Fred Wilson, from AVC, in a piece entitled “Business Model Innovation” explained:
I believe business model innovation is more disruptive than technical innovation.
In short, Fred Wilson, went on to articulate the reason why business model innovation matters more than technical innovation.
A good example of this was moving from web apps to mobile apps, which was largely a technical innovation. While the move to mobile certainly created some new companies, it largely strengthened the market position of the big Internet companies because there was little to no business model innovation.
And referring to the rise of blockchain-based business models he explained:
I am excited about the move to crypto based business models supporting decentralized apps for this very reason. I think it opens up the possibility that some very large new companies will be created that innovate largely on entirely new business models.
To take a step back, when the Internet proved commercially viable, indeed, business model innovation took off.
Indeed, the dot-com burst proved to the best enhanced for the next wave of digital companies, which would leverage business model innovation as a key ingredient to their success:
Source: internethistorypodcast.com
Indeed, many companies were born during the dot-com era.
Those companies used the Internet as a new distribution channel but they still played with an old business playbook.
When the dot-com bubble burst.
That left the room for a few companies which not only would prove commercially viable. They would also become among the tech giants that dominated the web.
Companies like Amazon, Google, and eBay built, tweaked, and consolidated their business playbook during that era.
A business model is not a business plan
Among the top results, Google suggests “How to write a business model” when typing “how to … business model. When you click on the result that Google suggested, see what happens.
When you click on the Google suggested result for “How to write a business model,” you get “how to write a business plan.”
A common misunderstanding is to think of business modeling as a one-page business plan.
However, a business plan is a document with a specific aim. It contains a bunch of assumptions about your business.
It also contains financial projections about the business for the next 3-5 years.
However, those assumptions can be hardly tested. The business plan thus remains a document that lives in the imaginary world.
Drafted beautifully to impress banks and potential investors; hardly of any use for business model innovation. Instead, as we will see business modeling is primarily about experimentation.
