I think the best businesses are ones where the business model is so ingrained into the product or service that you can’t think about the business and business model separately. That is not always the case – most businesses are built first and they try to answer their business model question later.
My broad definition of a business model is “How do you separate customers from their money”? Business models aren’t only about your pricing model; it’s about the entire process, from how a customer finds out about you, to how you deliver your product or service to them, and how they pay you for it.
Great businesses often are inseparable from their business models. American Idol is a great example. Thousands of people audition for free; millions of people vote for free to select which artist they want to spend tens or hundreds of dollars on in the future buying their albums or attending their concerts. The show charges advertisers millions and generates huge profits (minus what they pay to Simon). It’s a genius model.
I had the same “that business model is genius” reaction when I read TechCrunch’s article about Crush Notifier, the Facebook app that lets you send someone an anonymous message that you have a “crush” on them. On the surface it doesn’t sound that revolutionary, until you learn about their business model. You get two “crushes” to send for free, then you need to buy more. If someone crushes you, the only way to learn who they are is if you happen to crush them back – i.e. they’ll tell you if the crush is “mutual”.
Talk about viral – if you get a crush message, how many different crushes are you going to buy to send to people trying to find out who crushed you? Each crush you send out is going to prompt that person to do the same.
Of course, I’m married so I’m not exactly the target audience… but I still think the market would be huge for this genius business that probably took one person very little time to build.
Rocco Tarasi was an accountant, investment banker, and CFO before becoming a technology entrepreneur.