Gennaro is the founder of FourWeekMBA, which he brought to reach over a million business students, professionals, and entrepreneurs in 2019 alone. He is also Head of Business Development at a high-tech startup; he helped grow at a double-digit rate and become profitable. Gennaro is also an International MBA with an emphasis on Corporate Finance.
WIth FourWeekMBA Gennaro dissected hundreds of companies in several industries and verticals. He uses business modeling to look at any company's engine and what key elements best describe them in the current moment. He also leveraged on business model innovation to grow FourWeekMBA as one of the leading sources on the topic.
Currently, FourWeekMBA is the leading source of business models, business strategy, and growth marketing. That is a portal which aims to provide highly practical educational resources that can help you grow your business, to become a better executive and business person.
As Head Of Business Development for a high-tech startup, Gennaro looks after the sales and distribution side. At the core, Gennaro manages partnerships, structures complex deals, and he focuses on the growth side of a high-tech startup.
As a former Financial Analyst and Controller, Gennaro oversaw the financials of hundreds of entities in the commercial real estate sector in California. He Audited and analyzed a commercial real estate portfolio in California, and he performed controller activities and ensured consistency between financial and operational activities while working closely with CFO and other top-tier executives within the organization.
With his international experience and competence spanning across finance, business, law, digital marketing, and entrepreneurship, Gennaro wants to bring you through a journey to become a better business person.
Business modeling is about finding a systematic way to unlock long-term value for an organization while delivering valuable products and services. A business model isn’t just about how a company makes money. But also the kind of incentives it is able to create for its users, the distribution networks it is able to tap into and the key partnerships a business can leverage on. In short, a business model is a holistic framework to understand, define and design your business in the marketplace.
A business model is a critical element for any startup success as it is what unlocks value in the long-term. In a way, developing a business model isn’t only about monetization strategies.
Indeed, that is way more holistic. To develop a business model companies need to create value for several stakeholders. Thus, a business model it is about what makes users go back to your app, service or product. It is about how businesses can get value from your solution. It is about how suppliers grow their business through it.
A business model is all those things together. In short, when those pieces come together, that is when you can say to have a business model.
One of the biggest misconceptions of theis to confuse it with the monetization strategy or the revenue model of the company. While this is an essential piece of the puzzle, it is just one of the components of a successful .
In this blog, we’ve discussed at great length how companies make money as a way to start the discussion of a. However, a implies the understanding of operations, customer acquisition, retention, supply chain management, besides monetization.
According to theyou designed over the years for your organization there will be a piece that plays a more critical role compared to others. For instance, a vital component of the Coca-Cola business model is its distribution strategy. For other companies like McDonald’s, the key to its business model success is the heavy franchised restaurants that helped the company scale up all over the world.
Each company will develop a uniqueamong the many types of business models which is what makes your company robust in the long-run!
The primary aim of ais to create a sustainable chain, able to unlock value for several players in a market, industry or . Therefore, this value chain will start from a , a promise you make to the key players and partners in that market, industry or depending on where you start.
For instance, when PayPal started it didn’t look to dominate the whole market. It started from a. As Pether Thiel put it in his book, Zero to One:
The most successful companies make the core progression—to first dominate a specificand then scale to adjacent markets—a part of their founding narrative.
Indeed, PayPal began from identifying its most valuable partner, what at the time they called “power user.” That was a choice driven by its business model design.
Therefore, instead of focusing on generically offering a service for everyone, PayPal focused on acquiring and attracting as much power users as possible. Those power users were mostly on another platform that had already scaled up: eBay. Thus, PayPal focused all its effort on acquiring those power users from eBay, fast!
Only after PayPal had drafted, tested and validated a clear for a , yet a critical group of power users, it could move on to take larger and larger segments of that market.
We can classify business models in several ways. For instance, based on how companies and startups monetize their business, how they deal with their suppliers, customers and the value proposition those companies can offer to several stakeholders.
Some business models have always existed, some others are new, others yet innovate by bringing old business models to new industry (take the Netflix business model case study as an example).
In this guide, we’ll see several business models based on successful companies, tech startups and also more traditional organizations. The aim is to give you an overview of all the different moving parts that comprise a business model. In some cases – take Microsoft or Amazon – there isn’t a single way to describe a business model, as some companies have been able to diversify so much their operations to be able to generate value propositions across several stakeholders across many industries.
For instance, Microsoft isn’t just the company selling the Microsoft Office products. True, that is still an essential part of the business, as of 2017. Yet, Microsoft has many other segments, that are independent of others, and some others that are complementary:
From a quick look at Microsoft revenues breakdown from 2015-2017, you can appreciate the changes the company has gone through and the complexity of its business model. Indeed, while Microsoft Office is still the core of the business, other products, such as Xbox, might seem at first sight completely separate segments. However, when you understand that the Microsoft involvement in the gaming industry has proved as a perfect ground for AI systems; you can appreciate how the Xbox becomes the perfect “playground” for innovation in the other company’s segments!
Take also LinkedIn, a social media network for professionals. If you look at it merely as a social network, you don’t realize the importance of LinkedIn on Microsoft overall business model. In fact, LinkedIn, which is powered by a knowledge graph might be playing a critical role for Microsoft’s search engine, Bing.
Or take how Amazon back in 2000 was trying to figure out a way to allow other stores to build their e-commerce on top of Amazon, yet it was impossible to do that with its infrastructure at the time. That is why Amazon started to develop that infrastructure, which has now become Amazon AWS:
In 2017, Amazon AWS represented the fastest growing segment of the company, and it generated over $17 billion in revenues!
Why am I telling you that? As highlighted so far, a business model can be designed. Yet, most of it is about tinkering and experimentation. Thus, the business model design is a tool to accelerate the process of building up a sustainable machine that captures value on the long-run. The key though is to leave that machine unleashed.
How do you understand the way the business model moving parts come together? What is the glue that keeps them together?
There is one key ingredient of any company’s business model that seldom changes, that is the company’s vision.
While the company’s mission statement might change over time, the vision sticks. The main difference between mission and vision is about the present and future. The mission is the way the company wants to achieve its objectives now and its purpose in the present.
Take Google mission statement:
In other words, the vision is the map, that influences the company directions and decisions for the future. The mission is about how the company wants to achieve its objectives, thus getting closer to its future vision, in the moving present. That is a tool aligning the key players of an organization (employees, suppliers, customers and more), while it allows the forming of a culture within the organization.
The mission statement instead might have two functions, one is internal, and one is external. Internally, the vision aligns people around the same map. Externally, the vision allows outside observers to understand why an organization might be looking toward a certain direction.
Therefore, the vision is the “organizational DNA.” Once the vision is clear, you might not even need a mission statement to succeed. Even though the mission statement if an critical propeller that helps companies focus on short-term success.
Going back to Google’s mission statement “to organize the world’s information and make it universally accessible and useful,” that allows Google to focus its efforts to achieve its future vision. For instance, when Google announced its transition from mobile to AI first that hasn’t changed its mission.
That only represented the mean to achieve its mission.
One of the people that I like to follow the most in the business world, venture capitalist, Fred Wilson, in a recent article, highlighted something that many are still missing today:
I believe business model innovation is more disruptive than technical innovation.
That might sound trivial, yet it's not. Most of us believe that technical improvements (what we call technology) are what enabled global changes.
While this is true, there is another component, the business model innovation which caused even more massive changes to our society. That's because technology enables a new way of doing business. And assumptions that in the past were the basis of doing business, suddenly become outdated.
As Fred Wilson further explained:
The move from desktop computing to the web. We saw massive disruption as we went from a licensed software business model to an advertising-supported business model, which has evolved into an advertising/subscription freemium business model.
When new, revolutionary technology finally is widely adopted, that is when a massive phase of business model innovation happens. For instance, we're still looking at how the Internet enabled the digital economy still ongoing explosion.
We might be looking at a similar change and blossoming of new business models with the advent of the Blockchain and crypto-based business models.
That's why the course will be centered around dissecting business models and understanding business model innovation at deep level.
When you get online, and want to look for something, but you’re not sure what is that chances are you’ll land on a white page with asearch box on it, that is
Why in the first place do you get there?
Well, you get there becauseis an incredible product, able to find you anything on the web at a super fast speed. Yet, is the best product out there? And how do we define best?
Well,is a great search engine able to give you relevant results to any question, but it also benefits from network effects. In short, one of the reasons why is good enough in intercepting search intents is the fact that billion people around the world use each day.
At the same time,is a decent product for what it gives us back (and it is free), but it also has drawbacks. For instance, in an experiment, an SEO expert tried to rank a Latin Language site (a language used by ancient Romans, no longer in use) and guess what? It did that successfully.
This is not to say thatis not a good search engine. today is the most widely used search engine on earth, and part of the reason why is thanks to its distribution strategy.
Since its scale-up phase, Google aggressively acquired deals that made it the tech giant we know today. However, a few people realize it, and it is easy to think – especially in tech – that the best product wins.
A great product with a lack of distribution strategy won’t go far.
Peter Thiel, former CEO of PayPal has shifted an important business paradigm. As the common business thinking goes “be the first and you’ll probably win over time.”
This is called in business jargon, first-mover advantage. Peter Thiel, instead pointed out an important paradigm, especially in the tech industry, which is the last-mover advantage.
In other words, companies that come later, especially in the tech industry, can win over existing organizations, even when those were the first movers. For instance, Google and Facebook were not the first movers to move in the search and social media space. They dominated it.
What happened there? The answer isinnovation!
Whencame out of the Stanford dormitory where the two P.h.D. had invented it, it was a great search engine. Many argue it was 10x better than competitors.
Yet it wasn’t financially successful until it managed via a couple of years of trial and errors to design an innovative. In short, Google introduced an auction system for advertising, which aim was to remove the inefficiencies of how advertising had worked for decades.
That was not the primary innovation. Indeed, another search engine called Overture was already doing it successfully. Therefore, whereinnovated was the introduction of a few critical parameters to allow advertisers to show on top of text-based ads results.
In other words, it wasn’t enough to be offering a higher bidding rate on a keyword.crossed that with a few other parameters which allowed to show on top of the ads space on results, those that were most relevant and had a higher click-through rate.
Even though it might sound trivial now, as the whole web, afterhas been built on the premise of click-through-rate, it was not back then. That innovation was critical to economic hypergrowth, scale, and domination.
Business modeling isn’t a simple concept, and in the mind of most people, that is about how you make money. However, business modeling is way more than that. It is how you make a great product or service so that your customers keep coming back.
It is about how you make that product or service scalable. And how you keep making financial sense of your business over time. But also theyou’re able to deliver to key partners, which are a crucial ingredient of your business success!
Thus, even thoughinnovation can be about changing the way you charge your customers and how you make money, it can also be about other critical aspects of the business that will allow you the scale up.
There isn’t a single path toinnovation, but there are a few critical questions to ask.
To understand how to innovate ayou might want to think along the line of how to tweak and redesign your value chain, cost structure, key partners and in general what can help you scale:
There isn’t a single path towardinnovation. At times you can design a drawing from your previous experiences in that industry.
Other times you’ll have to figure it out along the way. Among the many paths toinnovation, we’ll see three paths that might be quite interesting for your business.
As Reid Hoffman points out in his book Blitzscalinginnovation is a key ingredient to success, especially in the digital space, where a countless number of companies offer innovative tools and solutions on the market.
That’s why in some casesinnovation can be engineered before
This is what happened when I cofounded LinkedIn. The keyinnovations for LinkedIn, including the two-way nature of the relationships and filling professionals’ need for a business-oriented online identity, didn’t just happen organically.
As explained by Reid Hoffman he used his understanding of the social networking world (he had founded a social network called SocialNet) to design an innovative Microsoft for an astounding $26.2 billion.for LinkedIn, which got acquired in 2016 by
In short, what gives a competitive advantage isn’t any more technology alone but a combination of technology paired with an innovative.
Yet designing aisn’t always possible beforehand. In some cases, you need to experiment, reiterate and find it.
In theoryinnovation is for anyone. Think of the case of a consulting business that operates in a traditional industry, where most of the competitors charge by the hour.
Yet instead of keeping to do that theconsulting business starts only to charge a retainer and a success fee. This kind of model might be not financially viable at the beginning, but it might wipe out competitors over time.
Indeed, with a larger customer base, the retainer becomes an essential base for the company’s revenues. And the success fees the scalable part of the business.
In other cases though,innovation might require massive financial resources. Think of a business that decides to dominate an existing industry, and it does that by introducing an innovative that grows at an incredible pace.
That pace might be attractive for investors looking for high returns on their investments, while it might also burn a lot of cash!
In the last years, I’ve been dissecting business models of any type, and companies of any size. At the same time, I’ve been talking, interviewing, and discussing business model and business model innovation with dozens of entrepreneurs and practitioners.
I’ve been doing that for several reasons:
In short, I found myself using business modeling for several reasons, and those I believe are all legitimate.
At the same time, while researching the topic with the mindset of an entrepreneur but the depth of reach of a Ph.D. I noticed how business model and business model innovation had become widely adopted concepts. And also (and probably for that reason) widely misunderstood.
Let me then clarify a few things that I’ve found out over the years, which if you’re starting out; but also if you’re passionate about the topic might help make sense of it.
As technology becomes over time a commodity, creating a lasting advantage requires business model understanding, experimentation, and execution.
That’s because business model innovation shifted the focus from the competition; which is what in the last decades we’ve all been looking at with frameworks like Porter’s Five Forces, to customers.
Without going through all the reasons why that happened today, business model innovation has become more important than technical innovation.
A quick caveat, before we move on.
When I say that the focus has shifted to customers, it doesn’t mean that you don’t need to understand your competition. It just means you need to start from customers and the problems they face. Only after that, you want to move to competition and what existing alternatives exist.
Although we like to give a single definition to each of the concepts we know. Those concepts will adapt based on the context they sit into.
In short, that is fine to have multiple definitions of the concept, based on the objective that each practitioner might have.
Therefore, it’s okay that a concept translated in several fields will have different meanings.
Thus, let’s see some of those meanings.
Business modeling can be seen as a technique to dissect any organization and business for analysts and business people trying to gain a better understanding of those businesses.
Business and financial analysts use business modeling to have a better understanding of tech companies. They do it to give investment recommendation, financial reviews, and investment advice.
For academics, a business model might be just a holistic way to describe a business. And the purpose of an academic might seem more rigorous than an entrepreneur. The academic has to prove the business has certain features that make it different or similar to other businesses.
And from those features, the academic will derive classifications, that as they become more and more complex only live in theory land.
The research, therefore, doesn’t have necessarily a practical purpose. But instead the goal of uncovering universal classification systems for things in the real world. As such, they might lose a practical application.
Among the top results, Google suggests “How to write a business model” when typing “how to … business model. When you click on the result that Google suggested, see what happens.
When you click on the Google suggested result for “How to write a business model,” you get “how to write a business plan.”
For most people (those that didn’t study the topic), business models often resonate with business plans. I noticed it when I started to research the topic.
As Google makes accessible the searching data and behaviors of billions of people, it also adapts to those search behaviors.
To my surprise, in the past, I noticed how for the query “how to write a business model,” Google served results around “how to write a business plan.”
I’ve learned to appreciate those “mistakes” as Google is a commercial search engine. And as such, it follows what most people search. If collectively people think that a business model is a business plan, Google might enable that to be true.
This means that if you are an entrepreneur searching for valuable resources either you are lucky to find the resource you need or you might end up writing a hundred-page business plan which won’t help much with your business.
If at all will prevent you from starting it. As you will start making things more complicated than what they should be.
An example of how business model for its monetization strategy (Slideshare)“confused” its
How WeWork described its business model in the report before the IPO. You might notice that what they’re talking about is their revenue generation strategy. (WeWork Financials)
And for many startups, business model resonates with monetization strategies. I’m not saying this is right or wrong; it’s just what it is.
Overall that is fine. Startup pitches or financial forms are in many cases, also a marketing tool meant to communicate and simplify a concept.
Thus, if most investors want to know about your business model but what they mean is how you make money, that is fine to simplify it.
However, as an entrepreneur, if you do believe yourself that a business model is how you make money that might limit your options, as all day long you’ll think about monetization strategies, rather than having a more holistic and strategic approach.
Business model design is not about sketching a plan on a piece of paper, but rather a mindset of experimentation.
In business modeling, you can manufacture experiments (business models, and business model variations) that enable the entrepreneur to test the assumptions around the business quickly, cheaply, and with minimum effort.
It is important to start testing (as practitioners like Ash Maurya highlighted) from the riskiest assumptions.
Those assumptions for which the business might not become sustainable over-time. Things like monetization strategy or key customers understanding are some of the riskiest assumptions , and they need to be tested, quickly.
An entrepreneur has different goals than a scientist. Where the scientist might try to uncover more universal truths. The entrepreneur needs business model experimentation to test the assumptions, uncover market opportunities, reduce the time to market, and eventually build a valuable business.
In short, an entrepreneur is a market-driven animal. Rather than starting from theories to find if that is true through experiments. An entrepreneur starts from a problem, and she, or he goes back to theory to understand what are the underlying assumptions which are preventing the business to succeed.
Once those assumptions have been streamlined, they can be tested, so that the entrepreneur can move on and make the product or service in target with the market.
Business model innovation, therefore, can be seen as a mindset, framework, and a set of tools for entrepreneurs to build relevant businesses in today’s marketplace.
So, what are you waiting for? Jump in!