1. Five Common Successful Business Models

2. Service, Product, Operation, Channel, or Exchange
Copyright 2017 IntelliVen, LLC and Peter F. DiGiammarino.
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3. It is best to choose one of the five common business models over multiple models or a hybrid.
Products
Hardware, Software
(tools, systems, applications,
departmental, enterprise,
cross-company, cross-industry)
Services
Staff augmentation,
Project management,
Consulting, Program mgt.,
Systems development,
Systems integration,
Engineering
Operations
Hosting, Outsourcing,
Facilities management,
Service processing
Run time: 1:30-3:00
Channel
Reselling,
Contracts
Exchange
Dynamic markets,
Marketplaces,
Information Exchanges

4. Outcome: to gain a deeper understanding of each business model
Group Activity
Outcome: to gain a deeper understanding of each business model
Break into 5 groups (count off by 5s)
Work in your group to answer the following for the business model with the corresponding number from the previous slide:
What is it?
How does a business of this sort get paid?
Provide an example.
Run time: 1:30-3:00

5. There are five common high-tech business models (cont’d)
Exchange
Channel
Operation
Service
Product
Payment
Description
Example
Business Model
Per copy
Per unit
Software, hardware, or information
Hewlett Packard
Microsoft
Per hour
Per deliverable
Hourly or project
consulting or service
PWC
Booz Allen & Hamilton
Per unit of time
Per unit processed
Outsourcing
Facilities Management
USInternetworking
EDS outsourcing
Run time: 1:30-3:00
Percentage of
revenue
Set up and administer connection between buyer and provider
GTSI
IDIQ contractors
AOL
Subscription fee
Transaction fee
Broker links between many buyers and many sellers
NYSE
Metals Exchange

6. The business model defines characteristics
Products
Hardware, Software
(tools, systems, applications,
departmental, enterprise,
cross-company, cross-industry)
Services
Staff augmentation,
Project management,
Consulting, Program mgt.,
Systems development,
Systems integration,
Engineering
Financial
Model
Focused,
vs. hybrid
business model
Defines
Critical
Competencies A
Operations
Hosting, Outsourcing,
Facilities management,
Service processing
Run time: 1:30-3:00
The underlying business model defines the financial model, critical competencies, and metrics of success. Hybrid businesses are rarely successful for long because they are too complex financially, require too many competencies, and have no identifiable metrics of success.
Channel
Reselling,
Contracts
Success Metrics
Exchange
Dynamic markets,
Marketplaces,
Information Exchanges

7. There are inherent risks to adopting multiple or hybrid business models
Financials
Competencies
Metrics
Business Model
EBIT=20%
P/E=100X
Sales, Call Center, Development
No. of Salesmen, salesmen tenure, $/sale, sales/salesman
Product
EBIT=15%
P/E=25X
Project Management
Account Management
Staff utilization
Average hourly rate
Service
EBIT=10%
P/E=10X
Efficiency of operation
Driving to scale
Cost per unit
Service levels
Operation
Contract management and administration
Space, Inventory mgmt
EBIT=3%
P/E=5X
Contract order backlog
Commitment level
Channel
EBIT<0
P/E=n.a.
Domain competence
Efficiency of operation
Number subscribers
Number of Transactions
Exchange

8. Which business model is the right one? Example: Cunningham Crane
Locates, fixes, and resells secondhand
cranes throughout the world
Refurbished
Cranes
A reliable crane
at a good price
Construction Companies
Run time: 1:30-3:00

9. For any given solution, there are multiple possible businesses
Exchange
Channel
Operation
Service
Product
Customer: Construction Companies; Problem: Reliable Cranes; Solution: Refurbished Cranes
Build, or procure and refurbish, cranes to sell
Assess, recommend, and service cranes
Own, maintain, and operate cranes for rent
Connect crane buyers and sellers
Broker link between crane seekers and crane owners who bid to sell their cranes

10. Choose which business model is best for you based on:
What you are good at and what you like to do.
Resources available (people, money).
Economic returns sought.
Appetite for risk.
Run time: 1:30-3:00

11. No one option is always correct
Customer: Banks; Problem: Customer Access;
Solution: Phone, Branch, Mail
+ Internet
Product
Sell software to enable access via Internet
(S1)
(AMS)
(ORCC)
(Andersen Consulting)
(e-Loan)
Service
Hourly services to help banks develop own Internet front-end
Operation
Operate a service by the account/month to let bank customers access via Internet
Run time: 1:30-3:00
Channel
Connect banks to suppliers of Internet front-end software
Exchange
Match any of several banks with any of several front-ends based on needs, price, and availability

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Thank you.
Q&A
Peter  asks Ray a question: So Ray, you’ve worked in some small companies and some very big companies. What do you think is the same and different in how they approach services sales?
A: Big companies have advantages in terms of being able to bring a wider range of capabilities so they often focus on how can we sell every offering to every big client. That is usually the right strategy for them. But just because a big company has done something really well somewhere does not always mean they can bring the right resources and skills to bear every account. Small companies are naturally more agile and they need to be very focused and passionate about what they do and make sure they communicate that. In addition to being passionate, small companies need to be equally focused on what they don’t do and be as specific and clear with clients about that. For small companies, it’s about getting clear. What are the few things they are great at, the few accounts they are going to be serious about, and the sales strategy they are going to live or die by. There is always room for great small companies but you can’t be great if you are not really clear about what you are going to be great at.
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