Colin Barry

Business Model Innovation (15.390, Monday, Week 10)


"Has anyone here ever worked at an investment bank? No one? Not one of you? Wow, we are blessed." -- Bill Aulet

Subscription models/prepayment by customers: obviously results in negative NWC. But also means you have almost no bad debt!

A laundry list of revenue models:
-- One-time upfront charge (plus maintenance)
-- Licensing
-- Subscription/leasing
-- Shared savings
-- Consumables (razor/razorblade)
-- Operating and Maintenance (upfront cost = minimal)
-- Cost-plus => good when there is requirement risk; basically a partnership
-- Up-sell/High margin add-ons (Best Buy and warranties)
-- Advertising
-- Transaction percentage (investment banking)
-- Freemium (cute puppy; free for first three months)
-- Pay-as-you-go (cell phones; PPA in energy)
-- Utility model (per usage)
-- Franchise model
-- Micro-transactions (Second Life, Worlds of Warcraft)
-- Parking meter (make money on parking tickets)

In retailing, be aware of "signpost items" => known goods where your customers are attuned to the fair price (pack of cigarettes, galloon of milk, 12-pack of diapers)

"Decoying"/"Anchoring" => Add a high-end, premium-priced item to increase per-transaction revenue (putting Kobe steak and lobster entree on the menu at a restaurant)