From Strategy to Business Models
From Strategy to Business Models
Subscription: Customers pay a recurring fee for the product or service. • Advertising: Customers access the product or service for “free,” and sponsors or vendors pay fees for
advertising that goes with the product or service. • Cost plus: Somewhat like a traditional retailer, customers purchase the product or service for a specific price
that is usually the cost plus some markup for profit. • Renting/Licensing: Customers pay a fee to use the product or service for a specified period of time. • All‐you‐can‐Eat: Customers pay one fee for access to as much of the product or service as they want to
consume, usually over a specific period of time. • Freemium: Customers get something for “free,” and the company makes money from selling customers
something after they get the giveaway. This is similar to a business model used in brick‐and‐mortar busi- nesses that give away something or sell something for a very low price, but the customer has to pay for refills or upgrades such as giving razors away but making money from selling razor blades.
For a more detailed treatment of the concepts of business models, strategy, and tactics, see Ramon Casadesus‐Masanell and Joan Ricart, “From Strategy to Business Models and to Tactics,” Harvard Business School working paper 10‐036, http://www.hbs.edu/ faculty/Publication%20Files/10‐036.pdf (accessed August 21, 2015). † For a list of 15 different business models, see http://www.digitalbusinessmodelguru.com/2012/12/15‐business‐models‐complete‐ list.html (accessed August 21, 2015).
skills and knowledge that are relevant to the dot‐com business. Their processes must support the dot‐com strategy. Imagine what would happen if the order process for their services was not Internet based. It seems silly to even consider a dot‐com that would insist that orders be placed in person or even by telephone. The dot‐com processes are aligned with companies ’ on‐line‐based business strategy. Further, their IS strategy must also be aligned with their processes. It would be equally silly to expect information to be based on paper fi les rather than electronic fi les.
A classic, widely used model developed by Michael Porter still frames most discussions of business strategy. In the next section, we review Porter ’ s generic strategies framework as well as dynamic environment strategies. 5 We then share questions that a general manager must answer to understand the business ’ strategy.
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