Business Models
A Business Model sets the foundation for operations, outlining the core elements of how the company operates, including its value proposition, target market, revenue streams, cost structure, and key activities.
If you are choosing how a person can earn a living before choosing a company model, start with Earning Models. It maps the practical ways value flows back to an individual: labour, service, product, distribution, capital, trading, networks, and intellectual property.
| NAME | DESCRIPTION - IMPLEMENTATION | TECH POTENTIAL |
|---|---|---|
| Affiliate marketing | Commission-based promotion of other companies' products. Amazon Associates pioneered public affiliate programs in 1996, now used by 2.3% of websites with advertising networks | 3/5 |
| Agency-based | Service delivery through specialized expertise teams. iPullRank and WiderFunnel demonstrate how individual contributors can build successful agencies through networking and quality work | 3/5 |
| Aggregator | Consolidating multiple services into a single platform. Grubhub transformed food delivery by aggregating restaurants across 4,000 cities, serving 22.6 million users | 4/5 |
| AI-Native Agency | High-margin service delivery powered by AI workflows (90% AI / 10% Human). YC S26 RFS #31 pattern for software-like agency economics. | 5/5 |
| AI SaaS | AI-powered software solutions with subscription pricing. OpenAI offers API access to large language models with usage-based pricing | 5/5 |
| API licensing | Monetizing access to proprietary software interfaces. Google Maps offers flexible licensing with free tiers for low usage and paid plans for high volume. Twilio licenses communications APIs based on usage | 4/5 |
| Attention merchant | Monetizing user attention through advertising. Instagram and Snapchat allow brands to market themselves through their platforms | 2/5 |
| Auction-Based | Competitive bidding for products/services. FCC uses simultaneous multiple-round auctions (SMRA) for telecommunication frequency slots | 3/5 |
| Bundling | Combining multiple products/services into a single offering. Microsoft Office bundle increased market share from 7% to 38% in one year. Netflix bundles streaming video with wireless and pay-TV plans | 3/5 |
| Business Operations as a Service | Outsourcing operational functions through tech-enabled platforms. ServiceNow provides workflow automation across enterprise operations | 5/5 |
| Co-creator Communities | Collaborative value creation through tokenized participation. Decentraland allows users to create, experience, and monetize content and applications | 5/5 |
| Consulting | Knowledge-based advisory services. McKinsey & Company provides strategic advice to businesses and governments worldwide | 4/5 |
| Crowd Source | Leveraging distributed communities for funding or creation. Kickstarter enables creators to fund projects through community support | 4/5 |
| Data licensing | Monetizing proprietary data access. Bloomberg licenses financial data to institutions and professionals worldwide | 5/5 |
| DeFi Finance | Decentralized financial services without traditional intermediaries. Uniswap enables trustless token swaps with over $1.5 trillion in trading volume | 5/5 |
| DePIN | Decentralized Physical Infrastructure Networks using token incentives. Helium created a decentralized wireless network through community-owned hotspots | 5/5 |
| Distribution based | Controlling product delivery channels. Coca-Cola maintains one of the world's largest beverage distribution networks | 3/5 |
| Drop-shipping | Selling products without holding inventory. Wayfair connects customers with furniture manufacturers without warehousing products | 2/5 |
| Discount with high-quality | Offering premium products at competitive prices. ALDI and Lidl source products in bulk and sell at wholesale rates | 2/5 |
| Dynamic Pricing | Fluid markets based on demand, location, reputation. Uber adjusts prices based on real-time demand and supply conditions | 4/5 |
| Ecommerce | Online retail sales. Amazon revolutionized retail through its online marketplace and logistics network | 3/5 |
| Fractionalization | Dividing ownership of assets into smaller units. Masterworks allows fractional investment in fine art masterpieces | 5/5 |
| Franchise | Licensing business model and brand to independent operators. Subway has over 37,000 locations in more than 100 countries | 3/5 |
| Freemium | Basic services for free, premium features at a cost. Spotify offers free ad-supported streaming with premium paid tiers | 3/5 |
| High Touch | Personalized service with significant human interaction. Four Seasons Hotels provides exceptional personalized customer service | 2/5 |
| Immersive Commerce | AR/VR enhanced shopping experiences. IKEA Place app allows customers to visualize furniture in their homes before purchase | 5/5 |
| Leasing | Renting assets for a specified period. Enterprise Rent-A-Car offers vehicle leasing for various durations | 3/5 |
| Low Touch | Minimal human interaction in service delivery. Robinhood provides investment services with minimal human intervention | 4/5 |
| Membership Subscription | Minimal human interaction in service delivery. Robinhood provides investment services with minimal human intervention | 4/5 |
| Multi-brand | Operating multiple brands under one company. Procter & Gamble manages dozens of consumer brands across various categories | 3/5 |
| Multi-sided platform | Connecting different user groups. Airbnb connects property owners with travelers seeking accommodations | 4/5 |
| On-demand Services | Immediate fulfilment of customer needs. DoorDash provides real-time food delivery services | 4/5 |
| Online educational | Digital learning platforms and content. Coursera partners with universities to offer courses to millions of students | 3/5 |
| Pay as Go (Utility) | Usage-based pricing model. AWS charges customers based on their actual cloud resource consumption | 4/5 |
| Peer-to-peer | Direct exchange between users without intermediaries. Etsy connects artisans directly with buyers | 4/5 |
| Professional Services Retainer | Recurring fee for access to senior expertise. McKinsey, boutique agencies earn through judgment-as-a-service. Moat = client tenure. Ceiling = key-person dependency. Transition path: retainer → governance layer → IP-backed advisory. | 3/5 |
| Product as a service | Offering products through subscription. Zipcar provides car access through membership rather than ownership | 4/5 |
| Razor and blade | Selling base products cheaply, profiting from consumables. Gillette sells razors inexpensively but makes profit on blade replacements | 2/5 |
| Real Estate + Franchise Service | Strategic property ownership combined with franchise operations. McDonald's purchases prime real estate and leases to franchisees at markup | 3/5 |
| Reverse Auction | Buyers set price, sellers compete. Priceline allows travelers to name their price for travel services | 3/5 |
| Reverse Razor and Blade | Giving away consumables, charging for the platform. HP Instant Ink offers free printers with subscription ink services | 3/5 |
| Small-scale Agency | Focused, affordable service packages for SMBs. Design Pickle offers flat-rate graphic design services | 4/5 |
| Spatial Computing | AR/VR solutions for business applications. Microsoft HoloLens enables mixed reality for industrial applications | 5/5 |
| Standardization | Creating uniform processes and experiences. Starbucks ensures consistent customer experience across all locations | 3/5 |
| SaaS Subscription | Recurring payment for ongoing access. Netflix charges monthly fees for streaming content access | 4/5 |
| Transaction | Facilitating transactions through trusted connections between buyers and sellers | 3/5 |
| Tokenization | Converting rights to real-world assets into digital tokens. RealT tokenizes real estate properties for fractional ownership | 5/5 |
| User-generated content | Platforms where users create the primary value. YouTube relies on creators to produce content that attracts viewers | 4/5 |
| Vertical SaaS | Industry-specific software with deep domain expertise replacing horizontal tools. Veeva dominates life sciences CRM (45% share), Procore owns construction management. Domain knowledge = new scarce resource | 5/5 |
| Vertically Integrated | Controlling multiple stages of the supply chain. Apple designs hardware, software, and operates retail stores | 3/5 |
Diagrams | Matrices | Thinkers
Principles
- Tech Potential
- Operational Know How
- Threats
- Predictions
- Critical Path
Tech Potential
- 5/5: Transformative potential — technology fundamentally changes or creates new possibilities
- 4/5: High enhancement — technology significantly improves efficiency or capabilities
- 3/5: Moderate enhancement — technology provides notable improvements
- 2/5: Limited enhancement — technology offers some benefits but isn't transformative
- 1/5: Minimal impact — technology has little effect on core business model
Operations
- Compare alternative production processes to optimise outputs.
- Improve quality of outputs at lower cost to benefit unit economics.
- Research the integration of tech by major industry players.
- Apply AI to improve decision-making.
Threats
- Analyze all relevant technologies that may be at different stages of evolution and how these could impact the company.
- Understanding new technologies that can impact your business in advance is essential.
- Interview competitors and understand their different strategies.
- Investigate and analyze competitors' strategies to understand any competitive advantage.
- Get details on new products, productivity insights, and resource utilization of competitors.
Predictions
- What roles require human input? What capabilities do they need?
- Understand the history of technology trends in the industry.
- Research the technology roadmaps of leading industry players.
Critical Path
- What is the hardest problem to solve?
- What is the most valuable problem to solve?
- What is preventing progress?
- What are we missing?
Links
Questions
When both AI-Native Agency and DePIN score 5/5 for tech potential, what determines which model a founder should commit to first?
- Vertical SaaS is rated 5/5 and dominates niches like life sciences (Veeva at 45% share) — at what point does domain concentration become a ceiling rather than a moat?
- The Critical Path checklist asks what is preventing progress, but never asks who benefits from the current blockage — how does power analysis change the answer?
- If fractionalization (Masterworks, RealT) makes ownership of high-value assets accessible, what happens to the price discovery mechanism when liquidity fragments across thousands of micro-owners?