vangogh
05-05-2009, 11:39 PM
Seth Godin has an interesting post, Thinking About Business Models (http://sethgodin.typepad.com/seths_blog/2009/05/thinking-about-business-models.html) that I thought might generate some good discussion here. I think all too often businesses, especially online, neglect to really consider the underlying business model behind their site.
Seth defines 4 elements of a business model:
1. What compelling reason exists for people to give you money? (or votes or donations)
2. How do you acquire what you're selling for less than it costs to sell it?
3. What structural insulation do you have from relentless commoditization and a price war?
4. How will strangers find out about the business and decide to become customers?
I think there's a 5th, which probably falls between #2 and #3 above that would relate to distribution of your offering. It's possible Seth means to include distribution in #2 though.
Seth adds some thoughts about how business models evolved on the web. It's a short post, but an interesting one and I think a worthwhile read.
This idea particularly intrigues me, since it's something I've preached for a long time.
The idea of connecting people, of building tribes, of the natural monopoly provided by online communities means that the internet is the best friend of people focusing on the third element, insulation from competition. Once you build a network, it's extremely difficult for someone else to disrupt it.
Online so much focus seems to be on how much traffic you can get when it really should be on finding a smaller group of people who truly want your offering and will be loyal to you. It's what Seth calls tribes and it makes a lot of sense.
How big your tribe needs to be depends on your offering and how much profit a sale means for your business. In my own business I can easily make a good living with about 20-25 good clients. Most service based business are the same. You don't need to reach millions of people. A few thousand targeted people and you can build a pretty good business. There's a big difference in how you market your business if you need to reach thousands instead of millions.
What do think about business models in general? Do you agree with the 4 elements Seth mentions? Are there more? Most of use here have sound business models, but have you really looked at yours? Can you answer the 4 questions above in a way that proves the soundness of your business model?
Seth defines 4 elements of a business model:
1. What compelling reason exists for people to give you money? (or votes or donations)
2. How do you acquire what you're selling for less than it costs to sell it?
3. What structural insulation do you have from relentless commoditization and a price war?
4. How will strangers find out about the business and decide to become customers?
I think there's a 5th, which probably falls between #2 and #3 above that would relate to distribution of your offering. It's possible Seth means to include distribution in #2 though.
Seth adds some thoughts about how business models evolved on the web. It's a short post, but an interesting one and I think a worthwhile read.
This idea particularly intrigues me, since it's something I've preached for a long time.
The idea of connecting people, of building tribes, of the natural monopoly provided by online communities means that the internet is the best friend of people focusing on the third element, insulation from competition. Once you build a network, it's extremely difficult for someone else to disrupt it.
Online so much focus seems to be on how much traffic you can get when it really should be on finding a smaller group of people who truly want your offering and will be loyal to you. It's what Seth calls tribes and it makes a lot of sense.
How big your tribe needs to be depends on your offering and how much profit a sale means for your business. In my own business I can easily make a good living with about 20-25 good clients. Most service based business are the same. You don't need to reach millions of people. A few thousand targeted people and you can build a pretty good business. There's a big difference in how you market your business if you need to reach thousands instead of millions.
What do think about business models in general? Do you agree with the 4 elements Seth mentions? Are there more? Most of use here have sound business models, but have you really looked at yours? Can you answer the 4 questions above in a way that proves the soundness of your business model?