I am starting a new weekly reflection post about how to create and run a successful online business. I have yet to actually create an online business let alone one that succeeds but as I study about this topic I will put down my thoughts here. This week I started focusing on generating ideas and different business models. We do this kind of thinking everyday but to put it down on paper and create a formula of sorts was the really interesting part. There are many ways that we can brainstorm ideas:
- The Problem & Solution Method
- The Market-First Method
- The Personal Strengths Method
- The Mix & Match Method
- The Importation Method
- The Lateral Thinking Method
- The Godin Method (or The Edgecraft Method)
- The Christensen Method (or The Disruptive Innovation Method)
- The Borrowed Ideas Method
Each of these is described further on Mike Lee’s blog BizThoughts. I watch SharkTank on ABC every week and each of the business owners always start by explaining how they came up with their ideas and they fit in line with these methods. Most of the time their ideas came from a problem and they needed a solution or they wanted to combine two things that they use regularly into one product. Knowing these methods has helped me analyze the way I think and conceptualize what kind of business I want to create.
Once you have an idea the next step is to find a business model that will fit with your goals and needs. Now, what is a business model? Michael Rappa, a director at the Institute for Advanced Analytics at North Carolina State University defined it this way “In the most basic sense, a business model is the method of doing business by which a company can sustain itself — that is, generate revenue. The business model spells-out how a company makes money by specifying where it is positioned in the value chain.” He outlined the various Business Models on the Web that exist:
- Brokerage – brings buyers and sellers together and expedites transactions.
- Advertising – providing content and services mixed with advertising messages in the form of banner ads.
- Infomediary – data about consumers and their consumption habits.
- Merchant – wholesalers and retailers of goods and services.
- Manufacturer (Direct) – allow a manufacturer to reach buyers directly and shortens the distribution channel.
- Affiliate – provides purchase opportunities wherever people may be surfing.
- Community – revenue can be based on the sale of ancillary products and services or voluntary contributions; or revenue may be tied to contextual advertising and subscriptions for premium services.
- Subscription – Users are charged a periodic fee to subscribe to a service.
- Utility – The utility or “on-demand” model is based on metering usage, or a “pay as you go” approach.
What’s great about these business models is that they are not mutually exclusive. Amazon.com for example uses the Brokerage, Merchant, and Affiliate models if not others to generate revenue.
It seems to me that there isn’t necessarily a right or wrong answer when it comes to starting off a business; kind of a chicken or the egg scenario. You can start off by choosing your product and then finding the business model that fits best or ultimately you know how you want to do business but you’re just not sure what you want to sell. I think that for me I would choose the figure out a product and then the best way to sell it because it makes the whole process more customize-able and grow-able.
Something to keep in mind is Demand and Competition. This week I studied a little about Google AdWords and it can be a huge to help assess where your idea falls on that demand and competition curve. This week has been a great base for moving forward on my online business ventures.