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7 Fundamental Business Models

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The Business Model Archetypes are seven fundamental business  “personalities” upon which any business model can be developed.  By providing the context of all available models, it becomes easier to see how businesses relate and directions in which businesses can pivot. In this article, we’ll discuss the model and the archetypes, as well as describe use patterns where the models might benefit entrepreneurs and product strategists who use the model.

BACKGROUND & CONTEXT

The purpose of a business model is to concisely describe the function of your business within the overall market landscape, including details such as business inputs and dependencies, target customer base, and the value being created on behalf of those customers. By using such a conceptual construct for evaluating a business, strategists are able to more easily understand the function of the business, identify strengths, weaknesses, and opportunities, by comparing the attributes of other similar businesses who may be using a similar structural model.

While the concept is great, the value of such an exercise is lost on many product managers, who require something a bit more compact and immediately usable. There is a growing library of popular models that go by names like ‘Razor and Blades’ and ‘Network Effects Business’ which describe popular models that have been successfully used by other companies, but the knowledge is diffuse and there is little organization or context from which to easily discover and compare model options that may be appropriate for a business. The net result is that unless you have formally studied business strategy, there’s a good chance you are not aware of these known models, and thus the wisdom they represent is not leveraged. It is critical however for product managers to clearly articulate the function and contact of their business in the market.

business models

It was with this challenge in mind that a different approach was developed, called The Business Model Archetypes. The concept is derived from work by Carl Jung, the 20th century Psychiatrist who suggested there are fundamental personality templates from which we all inherit and combine attributes to create our own personalities. By understanding the fundamental templates he believed, you could better understand the personality of an individual, and predict their response to a variety of stimulus. He called this theory, the Personality Archetypes.

Jung’s concept is also relevant to the fundamental personalities of a business and provides an excellent structural base from which to identify the spectrum of possible templates. In the case of businesses, there are three primary personalities that describe the fundamental interests and activities of every business. And, similar to an additive color wheel, three secondary archetypes are derived by combing attributes of the three primary archetypes:

business model archetypes
 

PRIMARY

  • Product – one time purchase of an artifact
  • Service – manually doing something and charging a fee
  • Trade – Connecting buyers and sellers for commerce

SECONDARY

  • Brokerage – providing trade as a service
  • Subscription – productizing and semi-automating a service
  • Marketplace – productizing trade with a self-service platform
  • Ecosystem – Platform that combines all three (Mature)

ABOUT THE MODEL

These seven archetypes are high-level abstractions that describe basic truths about categories of businesses. This can be helpful for identifying a generalized context from which to determine where in the spectrum of possibilities to focus your efforts, but it is not specific enough to be actionable. For this, two prototypes were added to each of the model archetypes. A prototype is a more specific and functional demonstration of what is possible within a model archetype.

To demonstrate this idea, the Trade archetype has two prototype examples: eCommerce and Lead Generation. Both are examples of sourcing something of value and bringing it to the market for sale. In both cases, money is made on the spread between the cost of acquiring the item and what it can be sold for by the trader by taking it to market and promoting it. Similarly software and content are the two most common types of products to sell if you are an online business.

Being able to see the spectrum of structural options is a great place to begin thinking through the strategy of your business. Typically, teams will find they relate more strongly to one of the archetypes than the others, but while evaluating their options more closely, they might be able to reasonably pivot to the neighboring archetypes, providing additional opportunity and potentially even a more innovative and effective approach to their business. A well-connected Trader for example might find interest in expanding their business through a Brokerage model, by providing Dropship fulfillment of their products. Or they may be interested in building a category-leading brand online by establishing the go-to Marketplace for the types of products they specialize in.

The important point is to take the time to do the analysis and to understand the primary function of your business and to consider the possible variations on your theme that might be more optimal that what you’re currently doing. That is where the Business Model Archetypes framework is useful, by providing a conceptual framework with which to think through the possible opportunities you may not have considered. At the end of the day, every product manager be able to clearly articulate their business’s foundational strategy and to understand their context and expansion and pivot options – this framework provides a simplified method for achieving these goals.

ABOUT THE ARCHETYPES

Here’s a brief description of each of the archetypes to demonstrate further:

I. PRODUCT

inf-product

 

This primary archetype focuses on the development of a tangible artifact that can be bought and sold for a one-time cost. The product is usually consumed either because it provides personal entertainment, or because it offers some gain of efficiency and can be acquired for less cost than hiring a services company to perform an activity. When applied to the online world, the most common types of products are software in the form of plugins for major platforms such as WordPress, or content in the form of mobile apps of ebooks.Indicative Attributes

  • Key partners: Marketplaces
  • Value proposition: Productivity or entertainment
  • Key Activities: Product Development
  • Monetization: Sale of product

II. SUBSCRIPTION

inf-subscription

 

This secondary archetype is a popular blend of a product and a service. The most common examples are software as a service (SaaS) and Content as a Service (CaaS). Rather than buying a tangible product one time at a maximum cost, the subscription model provides continued access to the product or service for a lesser monthly cost, and continues to update, improve, and support the product over its lifetime. The benefit for the business is a reduction in up-front cost, reduced dependency upon a marketplace, and a continued relationship with the customer. For the customer, its also a way to reduce up-front cost, and ofte means having access to more and better resources than if they needed to purchase the tangible equivalent.Indicative Attributes

  • Key partners: Ecosystem platform owner
  • Value proposition: Customization and support of platform
  • Key Activities: Customization and maintenance
  • Monetization: Time and materials

III. SERVICE

inf-service

 

The third primary archetype provides intangible solutions for customers and clients, where commoditized products are not sufficient. Often this is in the form of integration, maintenance, or customization of a popular platform solution. Usually this type of organization is formed by an organization of skilled professionals who sell their services for an hourly rate.Indicative Attributes

  • Key partners: Ecosystem platform owner
  • Value proposition: Customization and support of platform
  • Key Activities: Customization and maintenance
  • Monetization: Time and materials

IV. BROKERAGE

inf-brokerage

 

This a secondary archetype which combines the activities of Trade and Service by trading on behalf of clients, as a service. These businesses typically service consumer-facing brands that focus on marketing and need assistance with more efficient sourcing. Prototype examples of this type of business include advertising networks which provide online traffic sourcing for brand retailers, and dropship programs which often have deeper sourcing relationships, and better fulfillment relationships than the brands they service.Indicative Attributes

  • Key partners: Wholesalers
  • Value proposition: Efficient commodity procurement
  • Key Activities: Recruiting Wholesalers
  • Monetization: Base fee plus commission

V. TRADE

Trade Archetype

 

The primary archetype of Trade focuses on connecting buyers and sellers. Money is earned by buying a product for less than it IS sold for. The trader’s primary occupation is sourcing something of value “in the field”, packaging it, and making it readily available to those who desire it. Prototypical examples include the eCommerce retailer and lead generation. In both of these examples, the Trader sources something, qualifies and prepares it, then sells it to a customer. In the case of lead generation the behavior is the same as retail, except that the product is information about a customer prospect.Indicative Attributes

  • Key partners: Product sourcing and advertising
  • Value proposition: Low price, convenience, and curation
  • Key Activities: Sourcing and advertising
  • Monetization: Product arbitrage

VI. MARKETPLACE

inf-marketplace

 

The Marketplace is a secondary archetype that combines attributes of of the primary Trade and Product archetypes. It brings together buyers and sellers for trade, but it does o via self-service platform which itself is product. The product could be a physical shopping mall or an online technology platform that facilitates payment processing and statistical reporting. What is sold in a marketplace can either be tangible products or services. In both cases, the value and the efficacy of the marketplace is affected by Metcalfe’s law (aka Network Effects): the value of the network exponentially increases with every new node on the network. This can be a powerful dynamic that sustains a marketplace once critical mass is achieved, though it can also be rather difficult to reach critical mass to begin with.Indicative Attributes

  • Key partners: Merchants (sellers)
  • Value proposition: Destination shopping
  • Key Activities: Recruit vendors and advertise
  • Monetization: Commission per sale

VII. ECOSYSTEM

info-ecosystem

 

The Ecosystem is the only Tertiary archetype in this model, in that it combines all three primary archetypes – Product, Service, and Trade. This is the rarest and most difficult archetype to achieve but is the more desirable. Success with one primary or secondary archetype behavior typically opens up the opportunity to extend the brand into complimentary and synergistic offerings. A product creator for example, may start to offer services in support of their product. If that too is successful, they may begin looking at how to facilitate marketplace activities and a host of other supportive behaviors. All of the synergistic activity helps to entrench the brand as a market leader, and adds to the value chain and perceived value of the customer. Typical prototype examples of an ecosystem are the technology platform (Salesforce CRM, Microsoft, etc) and the media platform (NBC, Facebook, etc).Indicative Attributes

  • Key partners: PaaS providers
  • Value proposition: Turnkey software and management
  • Key Activities: Develop software and manage servers
  • Monetization: Subscription fee

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About the Author 

This article was produced by Smarter Startups. Smarter Startups began with the publishing of the book of the same name in 2013 and where authors Neal Cabage and Sonya Zhang, Phd continued to refined their thoughts. As for the book, it provides a comprehensive look at why some startups succeed while others fail and how to have a more predictable and reliable outcome. The book is available online and at major bookstores.

Entrepreneurship

Women on Top in Tech – Daphne Ng, CEO of JEDTrade

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(Women on Top in Tech is a series about Women Founders, CEOs, and Leaders in technology. It aims to amplify and bring to the fore diversity in leadership in technology.)

Daphne Ng is the CEO of JEDTrade, a blockchain technology company focused on trade, supply chain, and financial inclusion projects in ASEAN. She is also the Scretary-General at ACCESS and Exco. of Singapore Fintech Association

What makes you do what you do?
I was introduced to blockchain technology in 2016 after I left my corporate banking career after 10 years. It was my mentor who first got me interested in this technology, which I then went on to delve further into, on its potential applications in the lending and trade finance space – domains where I came from.

How did you rise in the industry you are in?
Being in the space for 2 years and actively involved in the ecosystem, I was able to bring on the projects, network and a good degree of thought leadership in this vertical. Early on in the startup journey, our team faced many challenges. And to me, the key to rising above failures are two essential factors – resilience and support. While resilience is innate, I received a lot of help be it in terms of connections or advice. ‘Nobody succeeds without help’ rings very true for me.

Why did you take on this role/start this startup especially since this is perhaps a stretch or challenge for you (or viewed as one since you are not the usual leadership demographics)?
From the start, I focused on my domain expertise in trade finance and the application construct of how blockchain and DLT can be applied to these use cases. Also, my strategy from the start was to build a technology company made up of 80% tech and engineers, which is also our key competitive advantage today. At the end of the day, deliverables are about strategy and execution, which includes building and leading an ‘A’ team.

Do you have a mentor that you look up to in your industries or did you look for one or how did that work?
I have many mentors, which includes our company advisors (all of whom are well-known in this industry) and mostly informal mentors I meet via my connections, and on various occasions and circumstances. Creating opportunities also means putting myself in the right place, at the right time. And in my case, these were mostly organic and genuine friendships formed from the initial connection.

How did you make a match if you and how did you end up being mentored by him?
To me, a match in values is very important. It also takes humility to ask for help and be willing to listen to advice, which is important in order for mentorships to be successful – be it formal or informal.

Now as a leader how do you spot, develop, keep, grow and support your talent?
I love this question! I am passionate about building strong teams and helping my people grow. I abide by the 3Rs when identifying talents: resourcefulness, resilience and right values. And then I invest in the ‘potential’ and this means giving them room to lead, make decisions and take risks.

Do you consciously or unconsciously support diversity and why?
My support of diverse talents, skillsets and characters can be seen in the make-up of our core team – all helming specific roles and each bringing their own value to the table. We need the sum of all parts to build a great company.

What is your take on what it takes to be a great leader in your industry and as a general rule of thumb?
Great leaders emerge in times of failures and challenges, never abandoning the team, and always putting the team’s interests before her own. And I consciously live by these mottos every day.

Advice for others?
My advice to other entrepreneurs: be resolute and dare to be different. If you are going to follow others, then you will end up on the same path as them. No right or wrong; but I would rather chart my own path. This June, we are officially launching our blockchain project, Jupiter Chain (www.jupiterchain.tech), which have garnered much interest in the industry, even before we made it public. We believe this project is the epitome of marrying innovation with practical implementation, and we want to be the first to truly operationalize blockchain for our ecosystem projects in this region.


If you’d like to get in touch with Daphne Ng, please feel free to reach out to her on LinkedIn: https://www.linkedin.com/in/daphne-ng-%E9%BB%84%E7%91%9E%E7%8E%B2/

To learn more about JEDTrade, please click here.

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Callum Connects

Jace Koh, Founder of U Ventures

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Jace Koh believes cash flow is the lifeblood of your business. Understanding it will enhance your ability to run and manage your business.

What’s your story?
My name is Jace Koh and I am the Founder of U Ventures. I’ve always been inclined towards investment and entrepreneurship. I’ve played a hand in starting businesses across these industries – professional services, cloud integration, software and music. I believe that succeeding in business is tough, but that’s what makes the rewards even sweeter.

What excites you most about your industry?
Everything excites me. These are my beliefs:

  • Why is accounting important?
    The accounting department is the heart. Cash flow is like blood stream, it pumps blood to various parts of the body like cash flow is pumped to various departments and/or functions in a business. It is vital to the life and death of the business.
  • Is accounting boring?
    Accountants are artists too. They paint the numbers the way they want them to be.
  • What makes a good accountant?
    A good accountant can tell you a story about the business by looking at the numbers.
  • Why is budgeting and projection important?
    Accountants are like fortune tellers, they can predict the numbers and if you wish to understand your business and make informed decisions, feel free to speak to our friendly consultants to secure a meeting.

What’s your connection to Asia?
I was born and raised in Singapore, and here’s where I want to be.

Favourite city in Asia for business and why?
Singapore is my favourite city. We have great legal systems in place, good security and people with integrity. Most importantly, we have a government that fosters a good environment for doing business. I recently went for a cultural exchange programme in Hong Kong to learn more about their startups. I found out that the Hong Kong government generally only supports local business owners in terms of grants. They’ve recently been more lenient and changed the eligibility to include all businesses that have at least 50% local shareholding. But comparing that to Singapore, the government only requires a 30% local shareholding to obtain government support. In the early days of starting a business, all the support you can get is precious. It’s great that we have a government that understands that.

What’s the best piece of advice you ever received?
The best time ever to plant a tree was 10 years ago as the tree would have grown so big to provide you with shelter and all. When is the next best time to plant a tree? It is today. Because in 10 years time, the tree would have grown big enough to provide you shelter and all.

Who inspires you?
Jack Ma. His journey to success is one of the most inspiring as it proves that with determination and great foresight, even the poorest can turn their lives around. I personally relate to his story a lot, and this is my favourite quote from him, “If you don’t give up, you still have a chance. Giving up is the greatest failure.”

What have you just learnt recently that blew you away?
I’ve faced multiple rejections throughout my business journey, and recently came across a fact on Jack Ma about how he was once rejected for 32 different jobs. It resonated very deeply and taught me the importance of tenacity, especially during tough times.

If you had your time again, what would you do differently?
Nothing. I live a life with no regrets. Everything I do, regardless of whether it is right or wrong, happy or sad, and regardless of outcome, it’s a lesson with something to take away.

How do you unwind?
I love to pamper myself through retail therapy and going for spas. I also make a conscious effort to take time off work to have a break outside to unwind as well as to uncloud my mind. This moment of reflection from time to time helps me see more clearly on how I can improve myself.

Favourite Asian destination for relaxation? Why?
Taiwan! Good food with no language barriers and the people are great!

Everyone in business should read this book:
I don’t really read books. Mostly, I learn from my daily life and interactions with hundreds of other business owners. To me, people tell the most interesting stories.

Shameless plug for your business:
We’re not just corporate secretaries, we’re “business doctors.”
U Ventures is a Xero certified advisory firm that goes beyond traditional accounting services to provide solutions for your business. You can reach us on our website: http://uventures.com.sg/

How can people connect with you?
Converse to connect. You can reach me via email at [email protected] or alternatively, on LinkedIn here: https://www.linkedin.com/in/jacekoh/

This interview is part of the ‘Callum Connect’ series of more than 500 interviews

Callum Laing is an entrepreneur and investor based in Singapore. He has previously started,
built and sold half a dozen businesses and is now a Partner at Unity-Group Private Equity and Co-Founder of The Marketing Group PLC. He is the author two best selling books ‘Progressive Partnerships’ and ‘Agglomerate’.

Connect with Callum here:
twitter.com/laingcallum
linkedin.com/in/callumlaing
Download free copies of his books here: www.callumlaing.com

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