Learning Loop Playbooks Learning Loop

Leadership, Product management

Business Model Archetypes

Frameworks or templates that classify businesses based on their sources of revenue, customer segments, and relationships with customers and suppliers.

Also called: Business Model Patterns, Business Model Templates, Business Model Blueprints, Business Model Canvas, Business Model Frameworks, Business Model Types, Business Model Designs, and Business Model Configurations

See also: Business Model Mapping, Value Proposition Mapping, Business Model Canvas (BMC)

Relevant metrics: Revenue growth, Gross profit margins, Customer acquisition cost (CAC), Customer lifetime value (CLV), Net promoter score (NPS), Operational efficiency, Market share, Return on investment (ROI), Gross merchandise volume (GMV), and Active user/customer count

In this article

What are Business Model Archetypes?

Business Model Archetypes (or Patterns) are a set of predefined business models that are used to describe the way a company creates, delivers, and captures value. They are used to help companies understand the different ways they can generate revenue and how they can best serve their customers.

Examples of common business model archetypes are:

  1. Multi-sided market: A business model that brings together buyers and sellers from different sources to create a single marketplace.
  2. Freemium: A business model that offers a basic version of a product or service for free, while charging for premium features.
  3. Subscription: A business model that charges customers a recurring fee for access to a product or service.
  4. Hidden Revenue: A business model that generates revenue by through a third party - for example by displaying ads on a website or app.
  5. Affiliate: A business model that rewards affiliates for referring customers to a product or service.
  6. Platform: A business model that provides a platform for others to build products or services on top of.

Business Model Archetypes, also known as Business Model Patterns, are predefined frameworks or templates that represent a standard, recurring way of organizing and operating a business. They provide a common language and structure for business model design, making it easier to understand, communicate, and compare different business models.

These archetypes or patterns are reusable components that can be combined and adapted to fit the specific needs of an individual business. They form a library of building blocks that entrepreneurs and businesses can use to design their own unique business models.

90% of all new business models aren’t actually new. They are based on existing archetypes.

By using business model archetypes, entrepreneurs and businesses can speed up their business model design process and save time and resources that would otherwise be spent on experimenting with different business models from scratch. Additionally, these archetypes can serve as a starting point for generating new business models by combining different archetypes or by modifying existing archetypes.

Where did Business Model Archetypes originate from?

Business Model Archetypes are a concept developed by Alexander Osterwalder and Yves Pigneur in their book, Business Model Generation. The concept is based on the idea that all businesses can be classified into nine distinct archetypes, each of which has its own unique characteristics.

In Osterwalder and Pigneur’s book, these archetypes were: the Free Model, the Multi-Sided Platform, the Aggregator, the Franchise, the Broker, the Manufacturer, the Distributor, the Subscription, and the Utility. Each of these archetypes has its own set of advantages and disadvantages, and can be used to create a successful business model. The proposition was that by understanding the different archetypes, businesses can better understand their own business model and how to optimize it for success.

The Four Dimensions of a Business Model

In every instance of a businesss model, the customer is at the heart, and their relevance cannot be overstated. The customer is the foundation upon which all business models are built, and it is essential to understand which customer segments are relevant to the model and which are not. Every busisness model should connsider at leasts the following four dimensionss.

  • The Customer. A business model’s target customer segments must be clearly understood, as they are the very core of any business.
  • The Value Proposition. This dimension outlines a company’s offerings (products and services) and explains how they meet the needs of the target customers.
  • The Value Chain. The third dimension details the various processes and activities required to bring the value proposition to life, as well as the resources and capabilities needed to coordinate them along the company’s value chain.
  • The Profit Mechanism. The final dimension, which includes cost structures and revenue-generating mechanisms, explains what makes a business model financially viable and answers the central question of how the business generates value for its shareholders and stakeholders.

Exploring Business Model Archetypes

Business model archetypes are a set of predefined models that can be used to define the structure of a business. These models are based on the core elements of a business, such as its products, services, customers, and revenue streams. By understanding the different archetypes, businesses can identify the most effective and efficient way to structure their operations and maximize their potential.

Creatively imitating business models from other industries can empower your business to become an innovation leader in your industry. However, learning is more important than copying.

By exploring each one, business owners can gain insight into the different strategies and approaches that can be used to create a successful business.

Business Model Archetype pairs

You always have the choice of modeling your business in one way or another. Business Model Archetypes (or Patterns) in many cases represent such choices and can be used both in opposition to each other or in combination.

You might consider some of the following design choices:

  • Freemium vs. Subscription. A freemium model offers a basic product or service for free and charges for premium features, while a subscription model charges a recurring fee for access to the entire product or service.
  • Product-centric vs. Platform. A product-centric model focuses on selling a specific product, while a platform model creates value by enabling transactions and interactions between multiple parties.
  • Direct vs. Indirect sales. A direct sales model involves selling products or services directly to customers, while an indirect sales model involves using intermediaries such as distributors or resellers.
  • Owned vs. Rented. An owned business model involves producing and selling products that the company owns and controls, while a rented model involves renting out products or services to customers.
  • Vertical vs. Horizontal. A vertical business model focuses on a single industry or value chain, while a horizontal model operates across multiple industries.
  • Product vs. Service. A product-based model focuses on selling physical products, while a service-based model focuses on providing services to customers.
  • Branded vs. Private Label. A branded business model sells products under the company’s own name and brand, while a private label model involves selling products under a different company’s brand.
  • Advertising-supported vs. Fee-based. An advertising-supported business model generates revenue through advertising, while a fee-based model generates revenue through direct payment from customers.
  • Push vs. Pull. A push business model involves actively promoting and selling products to customers, while a pull model involves creating demand for products through marketing and advertising.

Competing approaches to desiging business models

There are many different approaches to designing a business model, each with its own advantages and disadvantages.

Osterwalder vs Gassmann

Alexander Osterwalder and Oliver Gassman both have influential methodologies for designing and evaluating business models, but their approaches have some key differences.

Osterwalder’s “Business Model Canvas” focuses on visualizing a business model as a series of interconnected blocks, including customer segments, value propositions, channels, customer relationships, revenue streams, key resources, key activities, and key partners. The Canvas provides a structured way to understand and communicate the key elements of a business model.

Gassman’s “Business Model Navigator” methodology is based on the idea of “model types” which are categories of business models based on the way a company creates, delivers and captures value. He proposes five business model types: efficiency-driven, innovation-driven, customer intimacy-driven, product leadership-driven and ecosystem-driven. The Navigator provides a way to understand the different ways that companies can create and deliver value, and to select and develop the best business model for a given company based on its strengths and market opportunities.

While both Osterwalder and Gassman’s methodologies provide frameworks for designing and evaluating business models, they approach the problem from slightly different perspectives. Osterwalder’s Canvas is more focused on visualizing the key components of a business model, while Gassman’s Navigator is more focused on categorizing different types of business models based on their value creation strategies.

Lean Startup Methodology

The Lean Startup Methodology is a process for developing and testing new business models and products quickly and efficiently. The methodology is based on the principles of continuous experimentation, rapid iteration, and customer feedback. By following the Lean Startup Methodology, companies can validate their business models and product ideas quickly, avoid costly mistakes, and achieve faster time-to-market.

The Lean Startup movement proposes to enter a Build-Measure-Learn cycle to iteratively experiment with your business model design. Illustratrated sequentially, with each point having multiple iterations, a Lean Startup process could look like this:

  • Identify a problem worth solving. Start by identifying a problem or opportunity that is important to your target customers. This problem should be something that your customers are willing to pay for a solution to.
  • Develop a minimum viable product (MVP). Create a basic version of your product or service that solves the problem you have identified. The MVP should be simple and inexpensive to build, but should still provide enough value to attract early adopters.
  • Get customer feedback. Test your MVP with a small group of customers to get their feedback. This feedback will help you understand what your customers like and dislike about your product or service, and what improvements you can make.
  • Iterate and refine. Based on the feedback you receive, refine your MVP and continue testing and iterating until you have a product or service that meets the needs of your target customers.
  • Scale. Once you have validated your business model and have a product or service that is in demand, you can begin to scale your business. This might involve investing in marketing and sales, expanding into new markets, or developing new products and services.

Challenges of Designing and Implementing Business Model Archetypes

The challenges of designing a new business model based on archetypes that works seamlessly with your businesss and offering can include the following:

  • Developing a Strategy. Implementing business model archetypes requires careful consideration of the company’s goals and objectives. Companies must develop a strategy that outlines how the archetypes will be used to achieve their desired outcomes
  • Understanding the Market. Companies must have a thorough understanding of the market they are targeting in order to effectively implement business model archetypes. This includes understanding the customer base, competitors, and industry trends.
  • Adapting to Change. Business model archetypes must be able to adapt to changing market conditions. Companies must be able to quickly adjust their strategies to take advantage of new opportunities or respond to threats.
  • Measuring Success. Companies must be able to measure the success of their business model archetypes in order to ensure they are achieving their desired outcomes. This requires the use of metrics and analytics to track progress and make adjustments as needed.

The challenges of implementing business model archetypes can also include the following:

  • Resistance to change. Employees and stakeholders may be resistant to adopting a new business model, especially if it requires major changes in processes, systems or organizational structure.
  • Misalignment with strategy. The chosen business model archetype may not align with the company’s overall strategy or goals.
  • Difficulty in execution. Implementing a new business model can be complex and may require significant resources and effort.
  • Lack of understanding. Employees and stakeholders may not fully understand the benefits and implications of the new business model, making it difficult to achieve buy-in.
  • Lack of fit with the industry. The chosen business model archetype may not fit well with the industry or target market, leading to difficulties in implementation.
  • Lack of data and analytics. Without proper data and analytics, it can be difficult to measure the success of the new business model and make necessary adjustments.
  • Inadequate resources. Implementing a new business model may require significant financial, technological, and human resources that the company may not have.
  • Competition. The implementation of a new business model may put the company at a competitive disadvantage, especially if its competitors are already using a more advanced business model.

Exploring more business model pair design choices

By exploring each pair of opposing business modelss, business owners can gain insight into the different strategies and approaches that can be used to create a successful business in the specific contexts.

Different ways of approaching the competitive landscape

When addresing your competition, you might consider some of the following businesss model design choices:

  • Cost Leader vs Differentiation. The cost leader archetype focuses on minimizing costs to offer low prices and gain market share, while the differentiation archetype focuses on creating unique value for customers through premium products and services.
  • Niche vs Mass Market. The niche archetype focuses on serving a specific and well-defined customer segment, while the mass market archetype focuses on serving a large and diverse customer base.
  • Premium vs Budget. The premium archetype focuses on offering high-quality products and services at a premium price, while the budget archetype focuses on offering low-cost products and services.
  • Local vs Global. The local archetype focuses on serving customers in a specific geographic location, while the global archetype focuses on serving customers worldwide.

Different ways of approaching the value proposition

When addresing how you provide value to yor customers, you might consider some of the following businesss model design choices:

  • Convenience vs Experience. The convenience archetype focuses on making it easy and convenient for customers to access products and services, while the experience archetype focuses on creating a unique and memorable customer experience.
  • Price vs Value. The price archetype focuses on offering low prices, while the value archetype focuses on offering high perceived value for the price.
  • Customization vs Standardization. The customization archetype focuses on offering customized products and services, while the standardization archetype focuses on offering standardized products and services.
  • Access vs Ownership. The access archetype focuses on providing customers with access to products and services, while the ownership archetype focuses on selling products and services for customers to own.
  • Functionality vs Emotion. The functionality archetype focuses on offering products and services that deliver functional benefits, while the emotion archetype focuses on offering products and services that evoke emotions.
  • Time vs Cost. The time archetype focuses on delivering products and services quickly, while the cost archetype focuses on delivering products and services at a low cost.

Different ways of approaching channels

When addresing how you want to sell or distribute your product or servie, you might consider some of the following businesss model design choices:

  • Direct vs Indirect. The direct archetype focuses on selling products and services directly to customers, while the indirect archetype focuses on selling products and services through intermediaries.
  • Online vs Offline. The online archetype focuses on selling products and services through online channels, while the offline archetype focuses on selling products and services through offline channels.
  • Multi vs Single Channel. The multi-channel archetype focuses on using multiple channels to reach customers, while the single-channel archetype focuses on using a single channel to reach customers.
  • Owned vs Partner Channels. The owned channel archetype focuses on using channels owned by the business, while the partner channel archetype focuses on using partner channels to reach customers.
  • Retail vs Wholesale. The retail archetype focuses on selling products and services directly to customers through retail channels, while the wholesale archetype focuses on selling products and services to intermediaries through wholesale channels.
  • Digital vs Traditional. The digital archetype focuses on using digital channels to reach customers, while the traditional archetype focuses on using traditional channels to reach customers.

Different ways of approaching partners

When addresing how you want to work with partners, you might consider some of the following businesss model design choices:

  • Co-Creation vs Licensing. Co-creation involves working with partners to create new products or services while licensing involves granting the rights to use existing intellectual property to partners. These two models can represent opposing strategies as co-creation can result in new and unique products, while licensing allows for more control over the use of intellectual property.
  • Joint Ventures vs Strategic Alliances. Joint ventures involve forming a new company with partners to pursue a specific business opportunity while strategic alliances involve forming a partnership for a specific purpose without creating a new company. These two models can represent opposing strategies as joint ventures can result in more shared ownership and control, while strategic alliances can allow for more flexibility and lower risk.
  • Franchise vs Wholesale. Franchise involves granting the rights to use a brand, products, and services to partners while wholesale involves selling products in bulk to partners for resale. These two models can represent opposing strategies as franchises can result in more control and consistency, while wholesale can allow for more distribution and reach.
  • Affiliate Marketing vs Influencer Marketing. Affiliate marketing involves paying partners for referring customers to your business while influencer marketing involves paying individuals with a large following on social media to promote your products or services. These two models can represent opposing strategies as affiliate marketing can result in more structured and quantifiable results, while influencer marketing can allow for more creativity and audience reach.
  • Platform vs Aggregator. Platform involves building a technology infrastructure that enables partners to transact with each other while aggregator involves gathering a large number of partners and offering their products or services on a single platform. These two models can represent opposing strategies as platforms can result in more control and integration, while aggregators can allow for more reach and variety.
  • Outsourcing vs In-House. Outsourcing involves paying partners to perform specific tasks or functions for your business while in-house involves performing tasks or functions internally. These two models can represent opposing strategies as outsourcing can result in lower costs and specialized expertise, while in-house can allow for more control and integration.
  • Strategic Partnership vs Contract Manufacturing. Strategic partnership involves forming a long-term relationship with a partner to achieve specific business objectives while contract manufacturing involves paying a partner to manufacture products for your business. These two models can represent opposing strategies as strategic partnerships can result in more collaboration and shared benefits, while contract manufacturing can allow for more control and lower costs.

Different ways of approaching cost structures

When addresing how you want to finance the product or servicve you are offering, you might consider some of the following businesss model design choices:

  • Premium vs Budget. The premium archetype focuses on offering higher-priced products and services, while the budget archetype focuses on offering lower-priced products and services.
  • High-Cost vs Low-Cost. The high-cost archetype focuses on offering products and services with a higher cost structure, while the low-cost archetype focuses on offering products and services with a lower cost structure.
  • Fixed vs Variable Cost. The fixed cost archetype focuses on having fixed costs, while the variable cost archetype focuses on having variable costs that change with the volume of sales.
  • Capital-Intensive vs Labor-Intensive. The capital-intensive archetype focuses on having a high cost structure due to the need for significant investment in capital, while the labor-intensive archetype focuses on having a high cost structure due to the need for significant investment in labor.
  • High-Touch vs Low-Touch. The high-touch archetype focuses on offering products and services that require a high level of interaction and personal attention, while the low-touch archetype focuses on offering products and services that require a low level of interaction and personal attention.
  • Automation vs Manual. The automation archetype focuses on using automated processes to reduce costs, while the manual archetype focuses on using manual processes to reduce costs.
  • Scalable vs Non-Scalable. The scalable archetype focuses on having a cost structure that can be scaled as the business grows, while the non-scalable archetype focuses on having a cost structure that is fixed and cannot be scaled.
  • Vertical vs Horizontal. The vertical archetype focuses on having a cost structure that is tightly integrated and vertical within the organization, while the horizontal archetype focuses on having a cost structure that is more decentralized and horizontally organized.

Different ways of approaching revenue streams

When addresing how to capture revenue from the value you bring to your customerss, you might consider some of the following businesss model design choices:

  • Advertising vs Commission-based. Advertising models generate revenue by selling advertising space, while commission-based models generate revenue by taking a cut of sales made through their platform.
  • Direct Sales vs Reseller. Direct sales models sell products directly to customers, while reseller models sell products through intermediaries.
  • Licensing vs Royalties. Licensing models generate revenue by granting the right to use a product or service for a fee, while royalty models generate revenue by receiving a percentage of sales made from a product or service.
  • Flat fee vs Pay-per-use. Flat fee models charge a fixed price for access to a product or service, while pay-per-use models charge based on usage.
  • Transaction-based vs Usage-based. Transaction-based models generate revenue by charging a fee for each transaction made through their platform, while usage-based models generate revenue based on usage.
  • Premium Content vs Freemium Content. Premium content models generate revenue by charging for access to exclusive content, while freemium content models offer basic content for free and charge for premium content.
  • One-time vs Recurring. One-time revenue models generate revenue from a single transaction, while recurring revenue models generate revenue from recurring transactions.

Examples

Amazon

Amazon’s business model is based on the “Multi-Sided Market” archetype. This model involves creating a platform that allows thirdparty sellers to list and sell their products, while Amazon takes a commission on each sale. This model has allowed Amazon to become one of the largest online retailers in the world.

Airbnb

Airbnb’s business model is based on the “Rent instead of Buy” archetype. This model involves creating a platform that allows people to rent out their homes or other properties to travelers, while Airbnb takes a commission on each booking. This model has allowed Airbnb to become one of the largest hospitality companies in the world.

Relevant questions to ask
  • What is the purpose of the business model?
    Hint The purpose of the business model is to provide a framework for understanding how a business creates, delivers, and captures value.
  • What are the key components of the business model?
    Hint The key components of the business model are the value proposition, customer segments, channels, customer relationships, revenue streams, key resources, key activities, and key partners.
  • What are the potential risks associated with the business model?
    Hint The potential risks associated with the business model include market risk, operational risk, financial risk, and legal risk.
  • What are the potential benefits of the business model?
    Hint The potential benefits of the business model include increased efficiency, improved customer satisfaction, and increased profitability.
  • How will the business model be implemented?
    Hint The business model will be implemented by developing a strategy, setting goals, and creating a plan to achieve those goals.
  • What are the potential customer segments for the business model?
    Hint The potential customer segments for the business model are those who have a need for the product or service being offered.
  • What are the potential competitive advantages of the business model?
    Hint The potential competitive advantages of the business model include cost leadership, differentiation, and focus.
  • What are the potential revenue streams associated with the business model?
    Hint The potential revenue streams associated with the business model include sales, subscriptions, advertising, and partnerships.
  • What are the potential costs associated with the business model?
    Hint The potential costs associated with the business model include production costs, marketing costs, and overhead costs.
  • How will the business model be monitored and evaluated?
    Hint The business model will be monitored and evaluated by tracking key performance indicators, such as customer satisfaction, revenue, and profitability.

You might also be interested in reading up on:

People who talk about the topic of Business Model Archetypes on Twitter
Relevant books on the topic of Business Model Archetypes
  • Business Model Generation by Alexander Osterwalder and Yves Pigneur (2010)
  • The Startup Owner's Manual by Steve Blank (2012)
  • Profit from the Core by Chris Zook and James Allen (2001)
  • The Innovation Stack by Tim Kastelle (2019)
  • Value Proposition Design by Alexander Osterwalder and Yves Pigneur (2014)
Sources

Want to learn more?

Receive a hand picked list of the best reads on building products that matter every week. Curated by Anders Toxboe. Published every Tuesday.

No spam! Unsubscribe with a single click at any time.

Community events
Product Loop

Product Loop provides an opportunity for Product professionals and their peers to exchange ideas and experiences about Product Design, Development and Management, Business Modelling, Metrics, User Experience and all the other things that get us excited.

Join our community

Made with in Copenhagen, Denmark

Want to learn more about about good product development, then browse our product playbooks.