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Geschäftsmodelle systematisch analysieren pp 27–50 Cite as

Geschäftsmodellanalyse mit dem Business Model Canvas

• Atilla Wohllebe 2  
• First Online: 05 April 2022

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Zusammenfassung

Ziel des Kapitels ist es, den von Alexander Osterwalder und Yves Pigneur (2010) begründeten Business Model Canvas sowie seine einzelne Bausteine vorzustellen und exemplarisch das Geschäftsmodell von IKEA mit Hilfe dieses Ansatzes zu analysieren.

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Wohllebe, A. (2022). Geschäftsmodellanalyse mit dem Business Model Canvas. In: Geschäftsmodelle systematisch analysieren. Springer Gabler, Wiesbaden. https://doi.org/10.1007/978-3-658-36258-4_4

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Business Model Analysis: A Comprehensive Guide

Understanding and analyzing a business model gives you a detailed view of a company’s framework for creating, delivering, and capturing value. This can offer a range of important insights into how the company operates at both a strategic and tactical level. Crucially, it lets you evaluate key aspects of the business such as its value proposition, its revenue streams, and its cost structure.

This guide aims to give you the conceptual tools and knowledge you need to carry out such evaluations effectively, thereby enabling you to make informed decisions that drive success.

The Essentials of a Business Model

1. definition of a business model.

A business model is best understood as the framework or blueprint that a company utilizes to create value. It involves identifying potential customer segments, establishing effective delivery channels, and securing crucial partners to help generate and deliver this value.

Take the news industry as a vivid example; writers create value through the production of articles, paperboys deliver this value in the form of newspapers, and businesses that advertise within these newspapers capture this value. All told, a business model has a simple but profound goal: to identify the product or service you need to sell, understand the associated costs, and pinpoint your target audience.

2. The Working of a Business Model

A sustainable business model works by generating more value than it captures and seizing more worth than it costs to deliver. Crucially, this framework must be adaptable to market changes, necessitating periodic updates to keep it relevant and effective. These features make it a dynamic tool for navigating a continually evolving business environment.

3. Objectives of a Business Model

The objectives of a business model are manifold. At a basic level, it needs to define what product or service will be sold, who is the target audience, and what costs are associated with the business operations. Furthermore, it is geared towards understanding customer needs, pinpointing the value that the business can deliver to them, and determining how to offer this at a reasonable cost.

Instrumental in meeting these objectives are tools like the SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis, which provides a comprehensive assessment of the business models and offers direction for the enterprise. They can also help in attracting investors and rallying human resources.

Differentiating Business and Revenue Models

1. understanding revenue models within a business framework.

A business model encompasses the mechanisms of how a company creates, delivers, and captures value within its operational structure. Key to understanding the model is the use of visualizing tools such as the Business Model Canvas, which allow you to dissect the various components of a company’s business model.

Understanding the subtle intricacies of different revenue models can be instrumental in accurately defining the target audience, creating value, and ensuring the efficiency of the business operations.

The Sustainability of Business Models

1. when and how a business model becomes sustainable.

The sustainability of a business model rests on its successful creation, delivery, and capture of value. Essentially, if a company can offer a unique product or service to a specified market segment and manage to deliver it efficiently and economically through cost-effective channels, it’s on the right track. Moreover, if the revenue generated is sufficient to cover costs and churn out a profit, it’s fair to say that the sustainability of the business model is achieved.

Components and Process of a Business Model

1. the building blocks of a business model.

A business model comprises several fundamental components, which span across both customer-facing activities and backstage processes. Often, it’s in these unseen areas where groundbreaking innovations occur. These components essentially revolve around the creation of value, its delivery, and the capture of this value.

2. Understanding the Business Model Construction Process

Constructing a business model involves a systematic process of defining customer segments, delivery channels, and critical partners, leading to the creation and delivery of value to the customers. A thorough analysis of this process can unearth strengths, weaknesses, and avenues for improvement, which can, in turn, guide strategic and tactical actions to enhance business performance.

The Process of Business Model Transformation

1. how to construct your business model.

Establishing a business model that works is paramount to creating value and achieving sustainable success. At the same time, it is crucial to remain consciously attuned to market changes and evolving trends, enabling you to re-evaluate and update your business model as needed.

2. Examples of Business Model Transformations

The business landscapes are constantly changing due to shifts in market trends, technological advancements, and consumer behavior. Numerous companies have had to pivot their business models to stay competitive.

The rise of e-commerce, the advent of music streaming services, the inception of platform-based transportation models like those introduced by Uber and Lyft, along with the emergence of peer-to-peer accommodation platforms like Airbnb, serve as striking examples of business model transformation.

The Role of Analysis in the Business Model

1. the importance of business model analysis.

A comprehensive understanding of how a company creates, delivers, and captures value is fundamental to an effective business model strategy. Testing and validating each part of the model is essential for its success. A well-analyzed model provides the enterprise a clear direction, attracts investors, attracts talent, and motivates the team, significantly influencing the overall business success.

2. Common Mistakes Made During Business Model Analysis

Common pitfalls during the analysis process include baseless assumptions that all business models operate similarly and negligence of the competitive landscape. Overemphasis on financial factors and underestimation of the importance of execution can lead to an incomplete and incorrect analysis. Adopting a more holistic and comprehensive approach can prevent these missteps and enhance the quality of the business model analysis.

3. Improving Business Model Analysis Skills

Hands-on experience and studying practical examples are paramount ways for improving business model analysis skills. Observing and understanding different business models from various industries can provide insights into how unique companies create, deliver, and capture value. Developing a profound understanding of components like the customer base, revenue model, cost structure, and competitive landscape is essential for making accurate assessments and informed decisions.

Exploring Different Types of Business Models

1. popular business models – their advantages and best applications.

Business models can greatly vary across different industries and segments. Regular revisitation and updates are essential to adapt to ever-changing market trends, consumer needs, and technological evolutions.

2. Licensing, Protecting and Copying Business Models

Protecting innovative and unique business models is vital to maintain a strategic advantage. Licensing can be an effective strategy as it allows companies to control their intellectual property and create additional income streams. Conversely, blindly copying business models without understanding the underlying principles and customizations required can lead to failure.

Patents provide a safeguard for specific technologies and processes that support a business model, helping businesses protect their unique strategies and maintain competitiveness.

1. Examining Amazon’s Business Model

In understanding a business model, one gets to comprehend a company’s systematic approach to creating value. Sometimes, many defining innovations take place behind the scenes and may not be noticeable at first glance. Analyzing the business models of companies, say like Amazon, which has redefined the e-commerce industry, enhances your understanding of the critical factors that drive success and allow you to hone your business model analysis skills.

2. Analysis of Uber’s Business Model

Uber, with its revolutionary business model, has disrupted the transportation industry by leveraging technology to connect riders with drivers efficiently. The breadth of its customer base and market share demonstrates the success of its platform, underscoring its innovation in customer-centric transportation and judicious use of technology.

The primary source of its value capture is the commission fees it earns from drivers for the trips completed, making it a fascinating case study for business model analysis.

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The Basics Of Business Model Analysis: What You Need To Know

by Mike Vestil  

This article is a comprehensive guide to business model analysis. The reader will learn about the definition and importance of business models, various types of business models, steps to conduct business model analysis, tools and techniques used for analysis, benefits, challenges, and case studies of successful business model analysis.

Introduction To Business Model Analysis

A. explanation of business model.

A business model refers to how an organization creates, delivers, and captures value. It defines the critical components of a business such as revenue streams, customer segments, value propositions, channels, and key partnerships. A business model can be used to describe the fundamental logic for how a company operates and creates value, and also serves as a blueprint for an organization’s strategy.

B. Importance Of Business Model Analysis

Business model analysis is a vital tool for companies to stay competitive, maintain profitability, and achieve long-term success. It helps businesses to understand how they can create and deliver value to their customers. By analyzing their business model, companies can identify areas in which they can improve their performance, innovate new business models, and make strategic decisions based on data-driven insights.

C. Purpose Of Business Model Analysis

The purpose of business model analysis is to evaluate the existing business model of a company, identify gaps, and develop a plan to improve or change the current business model. It helps companies to assess internal and external factors that will impact their business model and develop strategies to address them. Business model analysis can also be used to explore new opportunities, evaluate new markets, and develop new products or services.

Types Of Business Models

A. traditional business models.

Traditional business models are the most common types of business models. They include the Manufacturer Model, Distributor Model, and Retailer Model.

1. Manufacturer Model

In the Manufacturer Model, the company produces products and sells them directly to customers or through middlemen. The company’s revenue comes from the sale of the products.

2. Distributor Model

In the Distributor Model, the company produces products and sells them to distributors who then sell them to customers. The company’s revenue comes from the sale of the products to the distributors.

3. Retailer Model

In the Retailer Model, the company sells products directly to customers through their stores or online. The company’s revenue comes from the sale of the products.

B. Modern Business Models

Modern business models are newer and more innovative than traditional business models. They include the Subscription Model, Freemium Model, and Sharing Economy Model.

1. Subscription Model

In the Subscription Model, customers pay a monthly or yearly fee to access a product or service. Examples of Subscription Model businesses include Netflix, LinkedIn Premium, and Adobe Creative Suite.

2. Freemium Model

In the Freemium Model, customers can access a basic version of a product or service for free. However, they need to pay for additional features or access to premium content. Examples of Freemium Model businesses are Dropbox, LinkedIn, and Canva.

3. Sharing Economy Model

In the Sharing Economy Model, people share their unused goods, services or resources with others for a fee. Examples of Sharing Economy businesses include Airbnb, Uber, and TaskRabbit.

Steps In Conducting Business Model Analysis

A. identify the business model.

The first step of Business Model Analysis is to identify the existing business model of the company.

B. Analyze The Value Proposition

In this step, the value proposition of the company is analyzed. The value proposition is the reason why customers choose the company’s products or services over those of the competitors.

C. Evaluate The Revenue Streams

In this step, the revenue streams of the company are evaluated. Revenue streams refer to the different ways in which the company generates revenue from its products or services.

D. Assess The Cost Structure

This step involves evaluating the company’s cost structure, which includes the cost of resources, supplies, labor, and other expenses that go into producing the products or services.

E. Examine The Key Resources And Activities

In this step, the company’s key resources and activities are examined. Key resources refer to the assets, skills, knowledge, and partnerships that the company requires to deliver value to its customers.

F. Evaluate The Key Partnerships

This step involves evaluating the key partnerships that the company has developed to deliver value to its customers.

G. Analyze The Customer Segments

This step involves analyzing the customer segments that the company serves. Customer segments refer to the different groups of customers that the company targets with its products or services.

H. Evaluate The Channels

This step involves evaluating the channels that the company uses to reach its customers. Channels refer to the different methods that the company uses to communicate, distribute, and sell its products or services.

Tools And Techniques For Business Model Analysis

A. swot analysis.

SWOT Analysis is a tool used to identify the strengths, weaknesses, opportunities, and threats of a company’s business model.

B. Porter’s Five Forces Analysis

Porter’s Five Forces Analysis is a tool used to evaluate the competitive environment in which a company operates.

C. Business Model Canvas

The Business Model Canvas is a visual tool that describes the key components of a company’s business model.

D. Value Chain Analysis

Value Chain Analysis is a tool used to identify the various activities that a company undertakes to produce its products or services.

E. PESTEL Analysis

PESTEL Analysis is a tool used to evaluate the external factors that could impact the company’s business model.

Benefits Of Business Model Analysis

A. helps in identifying opportunities and threats.

Business Model Analysis helps companies to identify potential opportunities and threats in the market and develop strategies to address them.

B. Helps In Developing Effective Strategies

Business Model Analysis helps companies to develop effective strategies based on their understanding of the market, competition, and customer needs.

C. Helps In Improving Business Performance

Business Model Analysis helps companies to improve their business performance by optimizing their processes, reducing costs, and increasing profitability.

D. Helps In Making Informed Decisions

Business Model Analysis provides companies with the data and insights needed to make informed decisions and take actions that are best for their business

Challenges Of Business Model Analysis

A. difficulty in identifying the right business model.

In a rapidly changing market, it can be challenging to identify the right business model that will be successful in the long run.

B. Complexity Of Business Models

The modern business model is more complex than traditional business models, making analysis and evaluation more challenging.

C. Lack Of Data And Information

Companies may not have access to the necessary data and information to conduct effective business model analysis.

D. Resistance To Change

Even when a company identifies a need for change in its business model, the resistance to change from key stakeholders can be a significant challenge.

Case Studies Of Successful Business Model Analysis

Amazon’s business model analysis helped it to identify a need to diversify its revenue streams and invest in new business ventures, such as Amazon Web Services.

Uber’s business model analysis helped it to identify a way to disrupt the taxi industry by leveraging technology and creating a new business model that caters to changing consumer needs.

Airbnb’s business model analysis helped it to identify a market opportunity to connect travelers with unique accommodations and disrupted the traditional hotel industry.

Conclusion Of Business Model Analysis

A. recap of the importance of business model analysis.

Business Model Analysis is crucial for organizations to stay competitive, maintain profitability, and achieve long-term success. It helps companies to identify areas of improvement, make informed decisions, and develop effective strategies based on data-driven insights.

B. Future Of Business Model Analysis

As the business environment continues to evolve, business model analysis will become even more critical for companies to adapt and stay competitive.

C. Final Thoughts

Business Model Analysis is a necessary tool for companies to succeed in today’s fast-changing business environment. By evaluating their business model, companies can identify opportunities, mitigate risks, and develop strategies that will help them thrive.

Business Model Analysis: FAQs

1. what is business model analysis.

Business model analysis is a process of evaluating the various components of a company’s business model to identify its strengths and weaknesses. This includes an assessment of the company’s revenue streams, cost structure, customer segments, value proposition, and key partnerships.

2. Why Is Business Model Analysis Important?

Business model analysis is important as it helps companies to identify areas where they can improve their business model and stay competitive in the market. By assessing their business model, companies can also find new revenue streams, optimize costs, and create a more sustainable business model.

3. What Are The Steps Involved In Business Model Analysis?

The steps involved in business model analysis include identifying the different components of the business model, evaluating each component in terms of its effectiveness, and identifying ways to improve the business model. This can include conducting market research, analyzing financial data, and examining customer feedback.

4. What Tools Or Methodologies Are Used In Business Model Analysis?

There are several tools and methodologies used in business model analysis, including SWOT analysis, Porter’s Five Forces framework, and the Business Model Canvas. These tools provide a systematic way to evaluate the different components of a business model and identify areas for improvement.

5. What Are Some Common Challenges In Business Model Analysis?

Some of the common challenges in business model analysis include identifying relevant data sources, dealing with incomplete or inaccurate data, and determining the impact of external factors such as regulatory changes or new competition. It is important to address these challenges to ensure that the analysis is accurate and effective.

6. Who Should Conduct Business Model Analysis?

Business model analysis can be conducted by companies themselves or by external consultants with expertise in business strategy and analysis. It is important for companies to have a clear understanding of their business model and the factors that affect it, and to regularly assess the effectiveness of their business model to stay competitive in the market.

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The 9-Step Business Model Canvas Explained (2023 Update)

Written by Raquel Alberdi

Business | entrepreneurship, 16 comments(s).

Blog » The 9-Step Business Model Canvas Explained (2023 Update)

“A major mistake made by many start-ups around the world is focusing on the technology, the software, the product, and the design, but neglecting to ever figure out the business . And by “business” we simply mean how the company makes money by acquiring and serving its customers”.

-Reid Hoffman

After meeting with hundreds of entrepreneurs and business owners over the years I believe the LinkedIn co-founder and Blitzscaling author Reid Hoffman’s got it spot on.

People tend to focus on specific parts of their business, such as which software packages are being used, which is the cheapest supplier, how to optimize internal processes…?

They get so bogged down in the details of the day-to-day running that they lose the overall vision of their business.

Without this vision they are unable to scale, they make marginal profits, miss opportunities, struggle to innovate, and end up running “just another” business.

Another handy metaphor in understanding this common mistake is the soldier in the trenches .

Every meter of ground gained comes at a heavy cost, mistakes are made, and progress is hard-fought and slow…a day-to-day experience for 99% of entrepreneurs and businessmen.

But when you do have that 360 vision you see the entire battlefield. Decisions are much clearer, fewer mistakes are made, and progress is fast and methodical.

Fortunately, a business model framework exists that gives you both vision and clarity .

The Business Model Canvas provides entrepreneurs, business owners, and strategists with a tool to analyze, structure, and evolve a business while always keeping the bigger picture front of mind.

So let’s take a closer look at how it works.

Table of Content

What is the Business Model Canvas?

Created by Swiss entrepreneur and Strategyzer co-founder, Alexander Osterwalder, the Business Model Canvas is a visual representation of the 9 key building blocks that form the foundations of every successful business. It’s a blueprint to help entrepreneurs invent, design, and build models with a more systematic approach.

Why is it so popular within the business community?

Its simplicity. The business model canvas allows us to carry out a high-level analysis without drilling down and getting lost in the details. You just draw out the 9 building blocks on a blank canvas, fill them in as each concept relates to your business, and hang it somewhere everybody can see.

It’s a visual overview of your entire business on a single canvas.

While the Business Model Canvas is an extremely fluid concept and hyper-specific to individual companies, each canvas is still broken down into these 9 key building blocks:

Customer Segments

Value propositions, customer relationships, revenue streams, key resources, key activities, key partners.

When laid out on the canvas the model will look something like this:

While you’ve probably come across each of the 9 building blocks before, the attractiveness of the Business Model Canvas is that it confines them to a single page , not a traditional 42-page document.

This makes it a lot easier to digest, as well as assess existing business models or map out new ideas.

How do I fill out the Business Model Canvas?

To start your Business Model Canvas you will need to breakdown and analyze each of the 9 building blocks.

A good way to approach this is to gather the heads from marketing, sales, operations, finance, and manufacturing (if product-based) and pencil-in a morning where you can all meet together.

Then, after drawing a mock canvas onto a whiteboard, proceed to dissect and discuss each of the 9 building blocks as they relate to your business. You can use sticky notes to better organize your thoughts around the canvas.

If you are an entrepreneur or new business owner working alone and don’t have a team to bounce your ideas off, not to worry. You can still carry out your analysis before sharing it with a like-minded entrepreneurial community or forum, like those found on ThePowerMBA , to get useful, insightful feedback.

Whichever way you decide to approach it, I recommend you complete each block in the following order:

• Cost structure

For continuity, I’m going to use the fashion retail giant Zara when analyzing each of the 9 key building blocks.

If you’d like to skip to another case study similar to your own business, navigate to the table of contents at the top of the page and select one of the other business model canvas examples.

The first block of the Business Canvas Model is about understanding who is the most important customer(s) you’re delivering value to. Or, in other words, who are they? What do they do? And why would they buy your product or service?

Not a single company exists without its clients, making customer segments the best block to start with while drawing out your business model canvas.

A great exercise to define your customer segments is to brainstorm and create your company’s buyer persona (s) .

Buyer personas are fictional depictions of an ideal or hypothetical client. Typically when brainstorming a buyer persona you’d want to define certain characteristics (age, demographic, gender, income, industry, pain points, goals, etc.)

However, remember at this stage we want a snapshot of our customer segment. There’s no need to jump into great detail just yet.

In the case of Zara, there are three distinct customer segments to whom they offer different products.

The products created for each of these customer segments (clothing, shoes, and accessories) are not trans-consumable. That is to say, a woman’s dress is highly unlikely to be worn by a 7-year-old child.

Once we know exactly who it is we are targeting, it’s time to look at what we as a company have to offer.

The second phase is about figuring out your company’s value propositions , and importantly, your UVP (unique value proposition). The “what” that makes customers turn to you, over your competitors? Which of their problems are you best at solving?

Each value proposition consists of a bundle of products or services that fulfill the needs of a buyer persona from your customer segment. It’s the intersection between what your company offers, and the reason or impulse customers have for purchasing.

Some popular questions to ask while determining your UVP are:

• Which specific customer pain point are you trying to solve?
• What job are you helping customers get done?
• How does your UVP eliminate customer pain points?
• What products or services do you provide that answer this specific pain point?

So let’s try and apply this to Zara. Why do people choose to purchase from them, over their competitors?

Zara’s principal value propositions are fairly clear. They offer various ranges of stylish men’s, women’s, and children’s clothing and accessories at an affordable price.

But there’s more to it than that.

If we dive a little deeper we see Zara’s value propositions are more complex, which are behind the success of the brand:

Fast fashion

Zara adds new clothes and designs to its collections every 2-3 weeks, both in its stores and online. It keeps the brand updated, fresh, and modern while maintaining its all-important medium price point

Great eCommerce experience

Once you enter Zara’s online store you’re presented with a clean, easy-to-navigate, and high-end feel. The customer segments are visible on the left navigation bar with a search tab to further aid customers with their online experience.

Localized stores

You can find a store in nearly all major retail locations (shopping malls, retail outlets, airports, etc.) meaning accessibility is not an issue for the majority of consumers.

Flagship stores

Zara demonstrates its aesthetic evolution to customers through its flagship stores. The recent opening of their Hudson Yards , New York City flagship is a great example of this. Customers shop around its vivid, minimalist layout offering them an experience aligned with the brand’s deeper, eco-friendly values.

Zara Hudson Yards, New York

The next step is to ask yourself how you are reaching your customers, and through which channels ?

This includes both the channels that customers want to communicate with you as well as how they’ll receive your products or services.

Is it going to be a physical channel? (store, field sales representatives, etc.) Or is it a digital channel? (mobile, web, cloud, etc.).

Zara has 3 primary channels in which they communicate and deliver products to its customers:

• Direct sales through their stores
• Online (both app and website)
• Social media

Customers can go to a traditional “bricks and mortar” store to browse, model, and purchase different items of clothing at one of their retail stores.

Alternatively, they can shop online or through their mobile application and have the product delivered straight to their door or nearest store. The choice is completely up to them!

So that covers Zara’s commercial channels, but what about how they communicate with customers?

While they do communicate through their mobile app, their predominant channel is social media.

What’s more, they’re really, really good at it.

For example, did you know that Zara invests less than 0.3% of its sales revenue into advertising?

This is only possible due to an A-rated social media presence . Customer queries are not only dealt with quickly, but recommended re-works are sent back to HQ, forwarded onto in-house designers who then apply the feedback to future collections.

This customer-first approach through fluid communication channels has saved them thousands of dollars in marketing, strengthened their brand, and created a loyal customer base.

You should only step away from this building block once you’ve decided how each of your customer segments want to be reached.

Once you have acquired customers, you will need to think about how you can build , nurture, and grow those relationships.

Now, this can be automated and transactional like large eCommerce brands Amazon or Alibaba. Or, it could be at the complete opposite end of the scale and require a more personal relationship you’d typically have with a bank or your local bike shop.

Zara’s relationship with its customers is threefold, and lies somewhere in the middle of transactional and personal:

• Salesperson at store
• Brand through social media
• Sentimental attachment to a product

Yes, you have the initial transactional touchpoint at the store or online, something relatively impersonal and for many the only interaction they’ll have with the brand.

However, customers (especially in the fashion industry) are encouraged to continue to interact with a brand through social media platforms.

As we mentioned before when discussing channels, Zara has a very effective communication system in place. Not only can people instantly get in touch with the brand, but also engage with new posts, images, and collections uploaded to social media.

This personal approach to customer relationship building can, in some cases, lead to the natural growth of brand ambassadors and communities .

An attachment can also develop between customers and particular garments or accessories from one of their collections. The sentimental attachment to these products also creates another potential form of brand loyalty.

Now that you’ve described how you are going to create real value for your customers, it’s time to look at how you plan to capture that value.

What are your revenue streams? Is it going to be a transactional, direct sales strategy ? Are you going to consider a freemium mode l, where you give a portion of your product or service away for free with the idea of converting later on down the line?

If you’re a SaaS company such as SalesForce or Strava , then it’s likely that a licensing or subscription revenue model will be more appropriate.

At Zara, it’s extremely simple. They make their money by selling clothes and accessories either at a store or online.

As you can see, we’ve filled in the entire right-hand side of our business model canvas. We touched upon:

Customer segments

• Value propositions
• Revenue streams
• Distribution channels

Now it’s time to move over to the left side of the business canvas model and look at what we need, internally , to deliver our value propositions.

To start with, let’s take a look at key resources.

The key resources are all things you need to have, or the assets required to create that value for customers.

This could be anything from intellectual property (patents, trademarks, copyrights, etc.) to physical holdings (factories, offices, delivery vans, etc.) right down to finances (the initial cash flow perhaps needed to start your brand).

Another key resource every company needs to consider is its human capital . Are you going to need highly specialized software engineers? Or field-based sales teams?

They are relatively capital-heavy resources that need to be factored into your business model.

In the case of Zara, they are going to need a number of key resources if they hope to deliver their propositions:

• Stock management
• A large, interconnected network of physical stores
• A strong brand
• Logistics and supply chain infrastructure

Stock is vital for both online and offline customers.

If they are unable to supply their range of products and meet customer demands, satisfaction levels fall and they have a serious problem on their hands.

A large distribution network of brick and mortar stores combined with a strong brand name help mitigate these factors, as well as reinforce any ongoing marketing activities and communication efforts.

Finally, an efficient logistics process within Zara is critical, especially when you consider the complexities involved with such a large-scale operation.

They will require the necessary technology to analyze data on inventory, storage, materials, production, and packaging, with the staff to execute each of these stages and manage the delivery of the final products.

The next step is to define the key activities – the areas you need to be good at to create value for your customers.

To mix it up a little let’s take a look at a slightly different business in Uber .

Their key activities can be broken down into:

• Web and mobile app development
• Driver recruitment
• Marketing: customer acquisition
• Customer service activities : drivers’ ratings, incidents, etc.

They need a fast, clean UX for their customers using the app, drivers to carry out their service, and the ability to both market the product and deal with any customer queries.

Zara’s key activities will differ to those of Uber. Some of the things they need to consider would be:

• Manufacturing
• Retail process (point of sale and 3rd party management)
• Distribution channel / logistics

Design is a key activity as Zara’s value proposition is to provide stylish garments at an affordable price. Their collections need to be constantly updated to follow the latest fashion trends at the time.

To produce their collections Zara will also require manufacturing capabilities. Now Zara doesn’t own their own factories (we will get to that in the Key Partners section) but they still need to be involved in the garment manufacturing process.

Everything from fabric selection to pattern making, to detailing and dyeing affects the outcome of the final product which of course they have to then go on and sell.

The effective management of the retail and distribution channels (online, offline, shipping, and communication with providers) is also key. A breakdown in either of these activities, such as a poor relationship with an important provider will have serious consequences for the business.

Most modern business models now require brands to build out and work with various key partners to fully leverage their business model.

This includes partnerships such as joint ventures and non-equity strategic alliances as well as typical relationships with buyers, suppliers, and producers.

A great example of a strategic partnership would be between ThePowerMBA and Forbes . In exchange for exposure of our brand to the magazine’s global audience, we provide expertise and content on high-level business education programs.

As we touched upon when discussing key activities , Zara requires strategic partnerships with many different providers if they are to design and produce their collections.

Another key partner is their major holding company, Inditex .

Inditex has several subsidiaries including Massimo Dutti , Pull & Bear , and Oysho . Being a subsidiary of Inditex means they share a consolidated balance sheet, stakeholders, management and control, and various legal responsibilities.

While as a subsidiary Zara is afforded certain freedoms when it comes to design, delivery, and the general running of the company, the overall strategy will need to be aligned with Inditex and its other subsidiaries.

The final step of the Business Model Canvas is to ask yourself, how much is it going to cost to run this model?

This includes some of the more obvious needs such as manufacturing costs, physical space, rent, payroll, but also areas such as marketing activities.

If you are unsure of exactly what to include in your cost structure take a look at a Profit and Loss statement ( P&L ) from a competitor or company in a similar industry to yours. You’ll find many items overlap such as research and development ( R&D ), cost of goods sold, admin expenses, operating costs, etc.

Once that’s done you should prioritize your key activities and resources and find out if they are fixed or variable costs .

As Zara is such a large, corporate business they are going to have both fixed costs (rent, payroll, point of sales personnel) and variables, such as costs associated with the fluctuating sale of goods, purchase of materials and, manufacturing costs.

Once you’ve completed these 9 steps, your Business Canvas Model should look something like this:

Business Model Canvas Examples

Hopefully, you were able to get a good feel for the effectiveness of the business model canvas with our run-through of Zara.

However, if you found it difficult to follow due to the stark difference between your industries, I’m going to quickly go through 3 more companies to demonstrate the tool’s flexibility:

• Netflix (Media service/production)
• Vintae (Vineyard)

Even if these business model canvas examples don’t align exactly with your industry, I honestly believe that studying different models gives you a competitive advantage in your professional career regardless.

If you’re currently employed by a company, you’ll better understand how your specific role helps the company achieve some of its “long-term” goals.

Alternatively, if you are a business owner yourself (or perhaps thinking of starting your own business) you’ll have a better understanding of your business and where potential opportunities lay.

I’m sure you’re familiar with our next business model canvas example candidate, Netflix .

The global media company offers an online streaming service of various movies, documentaries, and TV programs produced in-house or licensed 3rd-party content. Their success sparked a revolution in the online media world with the likes of Amazon, Apple, Disney, HBO, and Hulu all rushing to launch their own online video streaming platforms.

Netflix started life as an online DVD rental company, basically a web version of the more popular (at least at that time) “bricks and mortar” Blockbuster.

Co-founder Reed Hastings predicted as far back as 1999 that the future of media was in online streaming, saying “postage rates were going to keep going up and the internet was going to get twice as fast at half the price every 18 months.”

It wouldn’t be until 2007 that Hasting’s prediction would become true when Netflix, as we now know it, was born.

So let’s take a current look at their business model canvas:

As you probably know, there are very few people out there who haven’t subscribed, watched, or at least heard of Netflix. There is content for everybody: wildlife documentaries, sci-fi movies, rom coms, action-thrillers, you name it – it’s there.

That’s why their customer segment can be classified as a “ mass market ” as the base is just so diverse.

All people require is a computer, TV, internet, and/or smartphone and they’re good to go. For most developed markets, that covers just about everybody.

Value Proposition

Whether on the train to work, sitting in the car (if you’re not driving!), or relaxing at home in front of the TV, you can consume their online, on-demand video streaming service.

They also have a huge library of content for consumers to choose from, ensuring that people keep coming back, as well as increasing their mass-market appeal.

They also produce high-quality, original content to differentiate themselves from their competitors.

Most people access Netflix either through their website or mobile/TV App . Another popular channel that you may have picked up on is their affiliate partners .

You’ve perhaps signed up for a mobile, TV, and internet package where the provider offers Netflix as an extra to sweeten the deal, so to speak.

That would be an example of an affiliate partnership between Netflix and mobile service providers.

I doubt many consumers have had direct contact with Netflix unless it’s to resolve a subscription issue or general query. It’s very much a self-automated service – you download the app, select the program you wish to watch, and hit play.

Very simple, very effective.

Again, this doesn’t need much embellishment. Netflix generates money from the different tiers and packages put together in their subscription services.

This varies depending on the region to account for local markets, but on the whole, it’s sold at a low price point.

Originally, Netflix’s Key Resources would have been their unrivaled DVD collection combined with a cost-effective mail-order system.

Nowadays it’s undoubtedly the rights to stream online video content. Netflix has brokered deals with some of the biggest production studios worldwide.

Combined with their huge library of in-house productions , it’s more than enough to encourage customers to renew their subscriptions.

To help sustain interest in their product, Netflix understands they need to serve-up relevant content for each sub-sector of their mass audience. Therefore their machine learning algorithm selects content for consumers based on streaming habits (what they watched, at what time, etc,.) to personalize the customer experience.

This explains why over 80% of all content streamed on Netflix was cherry-picked by this algorithm, making it a Key Resource for their business model.

Also, Netflix accounts for a whopping 12.6% of global bandwidth usage . The literal capacity to stream their services must be met meaning bandwidth must also be included here.

Content procurement is arguably their biggest Key Activity. They need to find people to produce and deliver their original content, including actors, studios, writers, etc. as well as secure the licensing and streaming rights from 3rd party producers such as Sony, Warner Bros, and Disney.

Finally, they need a fast, easy-to-use application to host their online streaming service. This needs to be available for both TV and mobile devices if they are to deliver their “on-demand” value proposition.

K ey Partners

Seeing as Netflix’s entire business model is largely based around streaming 3rd party content, key partnerships need to be built with production studios . No content, no Netflix!

Also, as we touched upon earlier Netflix is one of the largest consumers of bandwidth worldwide. If the speed and delivery of their streaming service are to be continued then deals will also need to be made with internet service providers (ISPs).

Netflix’s biggest expenditures come from both their in-house content procurement and 3rd party licensing agreements . The high-quality standard of video streamed on Netflix is only possible due to the speed and performance of its online platform and application , which has additional costs of staff, software, etc.

To show you just how flexible the business model canvas can be, I wanted to throw in a slightly leftfield example. Vintae is a Spanish wine producer who, after a detailed analysis of the business model canvas, was able to innovate and disrupt one of the world’s most competitive industries.

As some of you may know, the wine industry is extremely competitive. It’s also steeped in history and tradition , making it very challenging for newcomers to grab market share, let alone think about year-on-year growth and revenue.

However, CEO “Richi” Arambarri looked at the traditional “ bodega ” business model and saw a chink in its armor.

A “small” innovation in the business canvas model helped them to become one of the region’s most important winery groups, with over 10 installations and a presence across all regional denominations (Rioja, Priorat, Rias Baixas, etc.) with year on year growth of 30% – practically unheard of in such a competitive industry.

So how did Vintae analyze the business model canvas to find a niche in their market?

To answer that question, we must first look at the traditional winery business model .

As you can see, the wine industry has historically been patrimonial. Vineyards and estates are passed down through generations with the winery responsible for all phases of production, clarification, and distribution.

The traditional winery business canvas model suggests you must be the owner of the winery/vineyard where the wine is “manufactured”, meaning physical assets are a key resource of the business model.

So, if you wanted to start producing a Rioja, for example, you’d have to set up your vineyard in the region.

This is monumentally expensive as you need to:

• Purchase the land
• Plant a vineyard
• Absorb set-up and installation costs
• Deal with maintenance costs

It’s here where Vintae saw their opportunity.

What if we move vineyard ownership across the business model canvas from key resources to key partners ?

By leasing the equipment and space of large wineries (of which there was plenty), they could still produce their wine but reduce the cost and exposure associated with land purchase, crushing equipment, huge storage tanks, vineyard maintenance, and their bottling line.

This enabled them to focus on their sales, marketing, and distribution channels to create a better brand experience for their customers.

Also, it afforded them more flexibility when creating new wines as they were no longer confined to the limitations of grapes grown on their vineyard.

The lightness of this new business model eliminates maintenance overheads, channels energy into personalizing the customer experience, and allows for unprecedented levels of growth in one of the world’s most competitive industries.

Business Model Canvas Software

Although I did mention starting with a large whiteboard, sticky notes, and a pack of colorful sharpies there are several options in which you can digitize the business canvas model production process.

While I still believe the aforementioned process is extremely valuable (it gets your entire team’s input in a single hour-long session) you may decide it more viable for each member of management to pool their ideas digitally before sharing with the rest of the group.

If that’s the case, then take a look at some of the following software tools for creating your business model canvas.

Strategyzer

Created by the founders of the business model canvas Alex Osterwalder and Yves Pigneur , Strategyzer offers a range of business model canvas templates for you to get started with.

If you opt for the paid model (there is a 30-day free trial period) they offer a series of various classes that teach you how to build and test different value propositions and business models.

A real-time built-in cost estimator analyzes the financial viability of some of your business ideas, identifying alternative areas you may wish to explore with your model.

All-in-all, it’s a great resource to play around with and test some of your business ideas, with the option to dive into further detail if you see fit.

Canvanizer is a free, easy-to-use web tool that allows you to share links between team members who are brainstorming ideas for a business model canvas, but working remotely.

Like Strategyzer, there are several business model canvas templates provided to help you get started with your analysis. The strength of this platform is its accessibility. Much like a Google Doc., several people can brainstorm on the same canvas simultaneously with changes being synchronized automatically.

Business Model Canvas Tool

A ThePowerMBA alumni, impressed by the simplicity and effectiveness of the tool, went ahead and created the free application Business Model Canvas Tool .

It’s an incredibly intuitive, and easy-to-use tool that allows you to create templates simply by clicking the + button in each building block.

Each business model canvas created can be downloaded and shared as a pdf. with the rest of the team.

Would You Like to Learn More about Business Models?

If, after going through our 9-step guide on how to use the Business Model Canvas you’d like to learn more about different business model analysis tools , take a look at our alternative MBA business program .

As you’ll see, the course gives students a 360-degree view of business and management practices – such as engines of growth, segmentation and targeting, and value propositions.

I highly recommend you go check it out.

Regardless, I’d love to hear what you thought about this guide. Was it helpful? Would you like to see additional business cases analyzed from your industry?

Let us know in the comments below.

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16 Comments

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How Companies Make Money

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What Is a Business Model?

Understanding business models, evaluating successful business models, how to create a business model.

• Business Model FAQs

The Bottom Line

Learn to understand a company's profit-making plan

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

The term business model refers to a company's plan for making a profit . It identifies the products or services the business plans to sell, its identified target market , and any anticipated expenses . Business models are important for both new and established businesses. They help new, developing companies attract investment, recruit talent, and motivate management and staff.

Established businesses should regularly update their business model or they'll fail to anticipate trends and challenges ahead. Business models also help investors evaluate companies that interest them and employees understand the future of a company they may aspire to join.

Key Takeaways

• A business model is a company's core strategy for profitably doing business.
• Models generally include information like products or services the business plans to sell, target markets, and any anticipated expenses.
• There are dozens of types of business models including retailers, manufacturers, fee-for-service, or freemium providers.
• The two levers of a business model are pricing and costs.
• When evaluating a business model as an investor, consider whether the product being offered matches a true need in the market.

Investopedia / Laura Porter

A business model is a high-level plan for profitably operating a business in a specific marketplace. A primary component of the business model is the value proposition . This is a description of the goods or services that a company offers and why they are desirable to customers or clients, ideally stated in a way that differentiates the product or service from its competitors.

A new enterprise's business model should also cover projected startup costs and financing sources, the target customer base for the business, marketing strategy , a review of the competition, and projections of revenues and expenses. The plan may also define opportunities in which the business can partner with other established companies. For example, the business model for an advertising business may identify benefits from an arrangement for referrals to and from a printing company.

Successful businesses have business models that allow them to fulfill client needs at a competitive price and a sustainable cost. Over time, many businesses revise their business models from time to time to reflect changing business environments and market demands .

When evaluating a company as a possible investment, the investor should find out exactly how it makes its money. This means looking through the company's business model. Admittedly, the business model may not tell you everything about a company's prospects. But the investor who understands the business model can make better sense of the financial data.

A common mistake many companies make when they create their business models is to underestimate the costs of funding the business until it becomes profitable. Counting costs to the introduction of a product is not enough. A company has to keep the business running until its revenues exceed its expenses.

One way analysts and investors evaluate the success of a business model is by looking at the company's gross profit . Gross profit is a company's total revenue minus the cost of goods sold (COGS). Comparing a company's gross profit to that of its main competitor or its industry sheds light on the efficiency and effectiveness of its business model. Gross profit alone can be misleading, however. Analysts also want to see cash flow or net income . That is gross profit minus operating expenses and is an indication of just how much real profit the business is generating.

The two primary levers of a company's business model are pricing and costs. A company can raise prices, and it can find inventory at reduced costs. Both actions increase gross profit. Many analysts consider gross profit to be more important in evaluating a business plan. A good gross profit suggests a sound business plan. If expenses are out of control, the management team could be at fault, and the problems are correctable. As this suggests, many analysts believe that companies that run on the best business models can run themselves.

When evaluating a company as a possible investment, find out exactly how it makes its money (not just what it sells but how it sells it). That's the company's business model.

Types of Business Models

There are as many types of business models as there are types of business. For instance, direct sales, franchising , advertising-based, and brick-and-mortar stores are all examples of traditional business models. There are hybrid models as well, such as businesses that combine internet retail with brick-and-mortar stores or with sporting organizations like the NBA .

Below are some common types of business models; note that the examples given may fall into multiple categories.

One of the more common business models most people interact with regularly is the retailer model. A retailer is the last entity along a supply chain. They often buy finished goods from manufacturers or distributors and interface directly with customers.

Example: Costco Wholesale

Manufacturer

A manufacturer is responsible for sourcing raw materials and producing finished products by leveraging internal labor, machinery, and equipment. A manufacturer may make custom goods or highly replicated, mass produced products. A manufacturer can also sell goods to distributors, retailers, or directly to customers.

Example: Ford Motor Company

Fee-for-Service

Instead of selling products, fee-for-service business models are centered around labor and providing services. A fee-for-service business model may charge by an hourly rate or a fixed cost for a specific agreement. Fee-for-service companies are often specialized, offering insight that may not be common knowledge or may require specific training.

Example: DLA Piper LLP

Subscription

Subscription-based business models strive to attract clients in the hopes of luring them into long-time, loyal patrons. This is done by offering a product that requires ongoing payment, usually in return for a fixed duration of benefit. Though largely offered by digital companies for access to software, subscription business models are also popular for physical goods such as monthly reoccurring agriculture/produce subscription box deliveries.

Example: Spotify

Freemium business models attract customers by introducing them to basic, limited-scope products. Then, with the client using their service, the company attempts to convert them to a more premium, advance product that requires payment. Although a customer may theoretically stay on freemium forever, a company tries to show the benefit of what becoming an upgraded member can hold.

Example: LinkedIn/LinkedIn Premium

Some companies can reside within multiple business model types at the same time for the same product. For example, Spotify (a subscription-based model) also offers a free version and a premium version.

If a company is concerned about the cost of attracting a single customer, it may attempt to bundle products to sell multiple goods to a single client. Bundling capitalizes on existing customers by attempting to sell them different products. This can be incentivized by offering pricing discounts for buying multiple products.

Example: AT&T

Marketplace

Marketplaces are somewhat straight-forward: in exchange for hosting a platform for business to be conducted, the marketplace receives compensation. Although transactions could occur without a marketplace, this business model attempts to make transacting easier, safer, and faster.

Example: eBay

Affiliate business models are based on marketing and the broad reach of a specific entity or person's platform. Companies pay an entity to promote a good, and that entity often receives compensation in exchange for their promotion. That compensation may be a fixed payment, a percentage of sales derived from their promotion, or both.

Example: social media influencers such as Lele Pons, Zach King, or Chiara Ferragni.

Razor Blade

Aptly named after the product that invented the model, this business model aims to sell a durable product below cost to then generate high-margin sales of a disposable component of that product. Also referred to as the "razor and blade model", razor blade companies may give away expensive blade handles with the premise that consumers need to continually buy razor blades in the long run.

Example: HP (printers and ink)

"Tying" is an illegal razor blade model strategy that requires the purchase of an unrelated good prior to being able to buy a different (and often required) good. For example, imagine Gillette released a line of lotion and required all customers to buy three bottles before they were allowed to purchase disposable razor blades.

Reverse Razor Blade

Instead of relying on high-margin companion products, a reverse razor blade business model tries to sell a high-margin product upfront. Then, to use the product, low or free companion products are provided. This model aims to promote that upfront sale, as further use of the product is not highly profitable.

Example: Apple (iPhones + applications)

The franchise business model leverages existing business plans to expand and reproduce a company at a different location. Often food, hardware, or fitness companies, franchisers work with incoming franchisees to finance the business, promote the new location, and oversee operations. In return, the franchisor receives a percentage of earnings from the franchisee.

Example: Domino's Pizza

Pay-As-You-Go

Instead of charging a fixed fee, some companies may implement a pay-as-you-go business model where the amount charged depends on how much of the product or service was used. The company may charge a fixed fee for offering the service in addition to an amount that changes each month based on what was consumed.

Example: Utility companies

A brokerage business model connects buyers and sellers without directly selling a good themselves. Brokerage companies often receive a percentage of the amount paid when a deal is finalized. Most common in real estate, brokers are also prominent in construction/development or freight.

Example: ReMax

There is no "one size fits all" when making a business model. Different professionals may suggest taking different steps when creating a business and planning your business model. Here are some broad steps one can take to create their plan:

• Identify your audience. Most business model plans will start with either defining the problem or identifying your audience and target market . A strong business model will understand who you are trying to target so you can craft your product, messaging, and approach to connecting with that audience.
• Define the problem. In addition to understanding your audience, you must know what problem you are trying to solve. A hardware company sells products for home repairs. A restaurant feeds the community. Without a problem or a need, your business may struggle to find its footing if there isn't a demand for your services or products.
• Understand your offerings. With your audience and problem in mind, consider what you are able to offer. What products are you interested in selling, and how does your expertise match that product? In this stage of the business model, the product is tweaked to adapt to what the market needs and what you're able to provide.
• Document your needs. With your product selected, consider the hurdles your company will face. This includes product-specific challenges as well as operational difficulties. Make sure to document each of these needs to assess whether you are ready to launch in the future.
• Find key partners. Most businesses will leverage other partners in driving company success. For example, a wedding planner may forge relationships with venues, caterers, florists, and tailors to enhance their offering. For manufacturers, consider who will provide your materials and how critical your relationship with that provider will be.
• Set monetization solutions. Until now, we haven't talked about how your company will make money. A business model isn't complete until it identifies how it will make money. This includes selecting the strategy or strategies above in determining your business model type. This might have been a type you had in mind but after reviewing your clients needs, a different type might now make more sense.
• Test your model. When your full plan is in place, perform test surveys or soft launches. Ask how people would feel paying your prices for your services. Offer discounts to new customers in exchange for reviews and feedback. You can always adjust your business model, but you should always consider leveraging direct feedback from the market when doing so.

Instead of reinventing the wheel, consider what competing companies are doing and how you can position yourself in the market. You may be able to easily spot gaps in the business model of others.

Criticism of Business Models

Joan Magretta, the former editor of the Harvard Business Review, suggests there are two critical factors in sizing up business models. When business models don't work, she states, it's because the story doesn't make sense and/or the numbers just don't add up to profits. The airline industry is a good place to look to find a business model that stopped making sense. It includes companies that have suffered heavy losses and even bankruptcy .

For years, major carriers such as American Airlines, Delta, and Continental built their businesses around a hub-and-spoke structure , in which all flights were routed through a handful of major airports. By ensuring that most seats were filled most of the time, the business model produced big profits.

However, a competing business model arose that made the strength of the major carriers a burden. Carriers like Southwest and JetBlue shuttled planes between smaller airports at a lower cost. They avoided some of the operational inefficiencies of the hub-and-spoke model while forcing labor costs down. That allowed them to cut prices, increasing demand for short flights between cities.

As these newer competitors drew more customers away, the old carriers were left to support their large, extended networks with fewer passengers. The problem became even worse when traffic fell sharply following the September 11 terrorist attacks in 2001 . To fill seats, these airlines had to offer more discounts at even deeper levels. The hub-and-spoke business model no longer made sense.

Example of Business Models

Consider the vast portfolio of Microsoft. Over the past several decades, the company has expanded its product line across digital services, software, gaming, and more. Various business models, all within Microsoft, include but are not limited to:

• Productivity and Business Processes: Microsoft offers subscriptions to Office products and LinkedIn. These subscriptions may be based off product usage (i.e. the amount of data being uploaded to SharePoint).
• Intelligent Cloud: Microsoft offers server products and cloud services for a subscription. This also provide services and consulting.
• More Personal Computing: Microsoft sells physically manufactured products such as Surface, PC components, and Xbox hardware. Residual Xbox sales include content, services, subscriptions, royalties, and advertising revenue.

A business model is a strategic plan of how a company will make money. The model describes the way a business will take its product, offer it to the market, and drive sales. A business model determines what products make sense for a company to sell, how it wants to promote its products, what type of people it should try to cater to, and what revenue streams it may expect.

What Is an Example of a Business Model?

Best Buy, Target, and Walmart are some of the largest examples of retail companies. These companies acquire goods from manufacturers or distributors to sell directly to the public. Retailers interface with their clients and sell goods, though retails may or may not make the actual goods they sell.

What Are the Main Types of Business Models?

Retailers and manufacturers are among the primary types of business models. Manufacturers product their own goods and may or may not sell them directly to the public. Meanwhile, retails buy goods to later resell to the public.

How Do I Build a Business Model?

There are many steps to building a business model, and there is no single consistent process among business experts. In general, a business model should identify your customers, understand the problem you are trying to solve, select a business model type to determine how your clients will buy your product, and determine the ways your company will make money. It is also important to periodically review your business model; once you've launched, feel free to evaluate your plan and adjust your target audience, product line, or pricing as needed.

A company isn't just an entity that sells goods. It's an ecosystem that must have a plan in plan on who to sell to, what to sell, what to charge, and what value it is creating. A business model describes what an organization does to systematically create long-term value for its customers. After building a business model, a company should have stronger direction on how it wants to operate and what its financial future appears to be.

Harvard Business Review. " Why Business Models Matter ."

Bureau of Transportation Statistics. " Airline Travel Since 9/11 ."

Microsoft. " Annual Report 2023 ."

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9 essential business analysis models for the BA’s toolbox

Reading time: about 7 min

The role of the business analyst (BA) requires not only sound data analysis but effective data modeling. The right visual model streamlines data and makes it easy for stakeholders at every level to identify and understand project strategies, relationships, and responsibilities.

In the past, data modeling meant writing out processes in plain text or sketching out a basic diagram.

Fortunately, those days are over.

Today, a good BA is armed with a diverse toolbox of strategies and visual modeling techniques to help them drive successful project outcomes.

As you read more about business analysis models, remember that Lucidchart helps you create elegant diagrams with intuitive design solutions, ready-made shape libraries for consistent notation, and clear data linking and formatting for dynamic data modeling and sharing.

Choose from a variety of business analysis templates to get a jump on your next project today. (Note that some templates contain advanced features that require a paid Lucidchart subscription.)

What is a business analysis model?

Simply put, a business analysis model outlines the steps a business takes to complete a specific process, such as ordering a product or onboarding a new hire. Process modeling (or mapping) is key to improving process efficiency, training, and even complying with industry regulations.

Take a look at these nine essential business analysis models to include in your toolbox.

1. Activity diagrams

An activity diagram is a type of UML behavioral diagram that describes what needs to happen in a system. They are particularly useful for communicating processes and procedures to stakeholders from both the business and development teams.

A BA might use a UML diagram tool like Lucidchart to create an activity diagram to map the process of logging in to a website or completing a transaction, like withdrawing or depositing money.

2. Feature mind maps

Business diagrams aren’t just for late-stage analysis or documentation. They are also useful during a project’s initial brainstorming phase. Feature  mind maps help BAs organize the sometimes messy brainstorm process so that ideas, concerns, and requests are clearly captured and categorized.

This visual ensures initial details and ideas don’t fall through the cracks so you can make informed decisions about project direction, goals, and scope down the line.

3. Product roadmaps

A  product (or feature) roadmap  outlines the development and launches of a product and its features. They are a focused analysis of a product’s evolution, which helps developers and other stakeholders focus on initiatives that add direct value to the user.

The beauty of product roadmaps lies in their flexibility and range of applications. BAs can create different product roadmaps to illustrate different information, including:

• Maintenance and bug fixes
• Feature releases
• High-level strategic product goals

While product roadmaps are commonly used internally by development teams, they are also useful resources for other groups like sales teams.

A defined product outline and schedule helps the sales team stay on the same page as the developers so they can deliver accurate, updated information to their prospects and clients. Because of product roadmaps' versatility and broad applications across teams and organizations, they are a core part of an analyst’s toolbox.

In Lucidchart, you can link data to and set conditional formatting within your product roadmap to quickly monitor your progress. Check out the template below to learn more.

4. Organizational charts

An  organizational chart  outlines the hierarchy of a business or one of its departments or teams. They are especially helpful reference charts for employees to quickly identify key stakeholders and points of contact for projects or queries.

Additionally, organizational charts prove useful for stakeholder analysis and modeling new groupings and teams following organizational shifts.

5. SWOT analysis

The SWOT analysis is a fundamental tool in a BA’s arsenal. SWOT stands for strengths, weaknesses, opportunities, and threats. A SWOT analysis evaluates a business’s strengths and weaknesses and identifies any opportunities or threats to that business.

SWOT analysis helps stakeholders make strategic decisions regarding their business. The goal is to capitalize on strengths and opportunities while reducing the impact of internal or external threats and weaknesses.

From a visual modeling perspective, SWOT analysis is fairly straightforward. A typical model will have four boxes or quadrants—one for each category—with bulleted lists outlining the respective results.

6. User interface wireframe

Another essential business diagram is the user interface (UI) wireframe. Software development teams use wireframes (also called mockups or prototypes) to visually outline and design a layout for a specific screen. In other words, wireframes are the blueprints for a website or software program. They help stakeholders assess how users will navigate through the software or website to have a successful experience.

The level of detail in  wireframes ranges from low-fidelity to high-fidelity prototypes. Low-fidelity wireframes are the most basic outlines, showing only the bare-bones layout of the screen. High-fidelity wireframes are typically rendered in the later planning stages and will include specific UI elements (e.g., buttons, drop-down bars, text fields, etc.) and represent how the final implementation should look on the screen.

7. Process flow diagram

A process flow diagram (PFD) is typically used in chemical and process engineering to identify the basic flow of plant processes, but it can also be used in other fields to help stakeholders understand how their organization operates.

A PFD is best used to:

• Document a process.
• Study a process to make changes or improvements.
• Improve understanding and communication between stakeholders.

These diagrams focus on broad, high-level systems rather than annotating minor process details.

8. PEST analysis

A PEST analysis often goes hand-in-hand with a SWOT analysis. PEST evaluates external factors that could impact business performance. This acronym stands for four elements affecting business: political, economic, sociological, and technological.

PEST analysis assesses the possible factors within each category, as well as their potential impact, duration of effect, whether the impact is positive or negative, and level of importance.

This type of business analysis helps stakeholders manage risk, strategically plan and review business goals and performance, and potentially gain an advantage over competitors.

9. Entity-relationship diagram

An entity-relationship diagram (ER diagram) illustrates how entities like people, objects, or concepts relate to one another in a system. For example, an ER diagram could show how the terms in an organization’s business glossary relate to one another.

ER diagrams comprise three main parts:

• Relationships

Attributes apply to the entities, describing further details about the concept. Relationships are where the key insights from ER diagrams arise. In a visual model, the relationships between entities are illustrated either numerically or via crow’s foot notation.

These diagrams are most commonly used to model database structures in software engineering and business information systems and are particularly valuable tools for BAs in those fields.

In Lucidchart, you can automatically generate an ER diagram when you import your databases and schemas. Follow this guide to try it out, or manually build your ER diagram with the template below.

Start visual modeling with Lucidchart

You have a variety of choices when it comes to visual modeling. The best BAs will have a diverse toolbox of business analysis diagrams so they can match the right models to each scenario, whether that’s a simple organizational chart for new employees or an in-depth SWOT and PESTLE analysis for executives and high-level stakeholders.

Lucidchart makes your job easier by providing flexible, ready-made templates, dynamic design features, and multiple sharing options so your team can stay in the loop and you don’t have to miss a beat. From simple flowcharts to complex visual models with data linking and conditional formatting, Lucidchart is a must-have resource for the savvy business analyst.

Start diagramming in Lucidchart today!

Lucidchart, a cloud-based intelligent diagramming application, is a core component of Lucid Software's Visual Collaboration Suite. This intuitive, cloud-based solution empowers teams to collaborate in real-time to build flowcharts, mockups, UML diagrams, customer journey maps, and more. Lucidchart propels teams forward to build the future faster. Lucid is proud to serve top businesses around the world, including customers such as Google, GE, and NBC Universal, and 99% of the Fortune 500. Lucid partners with industry leaders, including Google, Atlassian, and Microsoft. Since its founding, Lucid has received numerous awards for its products, business, and workplace culture. For more information, visit lucidchart.com.

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EBA publishes final Guidelines on SREP methodologies and processes

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Business process analysis (BPA) explained

A business process analysis is a method to review the processes that govern your business operations. This process includes five steps: reviewing processes, collecting data, analyzing processes, identifying opportunities for improvement, and making changes. Learn more about BPAs and how to use them, below.

But they’re not a set it and forget it tool. Over time, processes can break down or become outdated. You need to routinely review and analyze them to determine if they’re still effective. If they’re not, you’ll want to look for opportunities to improve them. These reviews, or business process analyses, are highly beneficial for your company. Successful business process analyses can generate more revenue, spur growth, and streamline business operations. 

What is business process analysis (BPA)?

Business process analysis, or BPA, is a method designed to help you review your processes. Processes are repeatable groups of tasks or steps in a workflow that produce a certain result. For example, you might have an onboarding process for new hires or a process for reviewing quarterly goals. There are also broader business processes, such as the decision making processes used in planning sessions. 

BPAs fall under the business process management (BPM) umbrella, which encompasses the analysis of your business processes, their maintenance, and improvement. In business process analysis, a business analyst reviews your existing processes and determines if they are still effective, or if it might be time for an update.

Business process analysis vs. business analysis

The key differentiator between a BPA and business analysis is that BPA’s are focused solely on the processes, whereas a full business analysis looks at your business as a whole. 

For example, if you want to update the process for tracking finances, you would need a BPA. Your business analyst would review the steps and actions your team takes to track budgets, purchasing, and revenue. If, however, you’re more interested in determining business profitability, you’d use a full business analysis to review your finances.

Why should you conduct a business process analysis?

Business process analyses can have a huge impact on your business. Robust analyses go beyond inputs and outputs to determine the core values of your processes and show you where there are opportunities for improvement. 

Among the many benefits, business process analyses can help you:

Identify gaps: BPAs show you missing links in your most important operations. Often, these directly affect your bottom line, especially when you’re looking at processes for hiring, invoicing, or closing deals.

Outline all available resources: If you’re unsure when to say no to a new project, a BPA can help. It outlines all available resources for each process you’d need, similar to capacity planning . This way, you know your capacity and availability for the additional work.

Create new processes that align with current culture and climate: Sometimes, cultural or environmental changes significantly impact your business processes. Take the COVID-19 pandemic. First, teams had to determine how to manage a remote team and then how to safely return to office, with many back and forths in between. BPAs help you to create an entirely new process when the current climate demands.

Reduce redundancies, inefficiencies, and bottlenecks: According to our research , the average knowledge worker spent 129 hours on duplicated work in 2021. Talk about a waste! BPAs help you improve your process to reduce or eliminate duplicate work. By showing you opportunities to add in reusable templates or rely on automation, you can reduce work about work .

Improve employee adoption: The better your processes are, the more people will use them. By routinely analyzing your processes, you’re doing two things: showing your employees that you care about how they work and making workflows more efficient.

Create a better process flow : Ultimately, your process should keep changing with your work. BPAs create a better process model for your processes—which is a complicated way of saying, they make it easier to create routine changes and updates in real-time.

The 5 steps of business process analysis

Implementing a business process analysis cycle on your team will take some adjusting. Remember, most BPA’s won’t be managed by you directly—unless you’re a business analyst. This is something you’ll likely want to hire out for or, depending on your needs, create a dedicated in-house role to oversee. Regardless of how you launch BPA’s in your company, by following these five steps, you can build a solid foundation for them to take hold and grow.

1. Review how your processes fit into the bigger picture

Your processes should all lead back to larger initiatives and business goals . Processes are the “how” of your business—this is how we achieve our goals. But they should connect to your “why.” For example, if your company’s vision statement is to give everyone in the world easier access to healthcare, every process you create should support this. 

The first step in your BPA will be to review existing processes and see how they fit into workflows, departments, and ultimately, those long-term goals that support your company mission .

2. Collect information on what’s happening now

This is the data gathering stage. Before you can analyze your processes, you need to know exactly how they work. The best way to do this is by speaking with the people who use them the most. Interview key stakeholders , create surveys, and review associated KPIs and metrics. This step will take a bit more time than other steps, but it’s worth it to get a full understanding of the process before making any changes. 

For example, if you’re analyzing how your product team assesses and triages their product backlogs , you’d want to interview the developers responsible for them. You’d also want to look at the key performance indicators of current processes, such as how many items remain in the backlog after an Agile sprint is complete. 

3. Analyze and map your data

Now it’s time for the analysis. Here, you’ll want to compile all your data, including:

All process steps

Relevant process diagrams

Associated team members

Current success metrics and KPIs

You can use business process mapping to create a visual layout of your processes and workflows so it’s easier to review them. Process mapping helps you create a flowchart or other visual map of the current sequences and steps so you can better visualize processes. In this layout, it’s easier to identify patterns and gaps in your process flow. 

4. Identify opportunities for improvement

During the analysis step, you’ll identify redundancies and gaps. These are prime areas for improvement. For example, let's say your analysis shows developers are spending 3 days planning a sprint backlog. Based on interviews with stakeholders and analysis of meeting schedules, you realize different time zones are causing the delay. In this case, new technology options that foster asynchronous communication would make it easier for the team to communicate and reduce the amount of time they spend communicating.  

5. Make changes

Business process improvement (BPI) is where you take action on everything you’ve learned. After your BPA, you’ll use BPIs to adapt and make changes to your processes with a focus on increasing profitability. A BPA is your discovery guide, showing you the in’s and out’s of your business processes. The last and final step is to use all of this information to implement changes that improve these processes or help you create new ones.  

How do you perform a business process analysis?

The business analyst you hire for your BPAs will likely have their own methods and preferred business process analysis tools, but here are some common ones:

Root cause analysis : Use this analysis to identify the foundation of your processes and ensure it connects back to your company’s larger goals.

SWOT analysis : SWOT is an acronym that stands for strengths, weaknesses, opportunities, and threats. This can be a helpful analysis because it gives you insight into how your processes are succeeding and where they can improve.

Gap analysis : Gap analyses show you what’s missing in your processes when compared to your larger company goals.

What tools should you use for a business process analysis?

To conduct a BPA, you need an effective business process analysis tool that can keep all of your data in one central source of truth. It works best in a project management tool , where you can automate tasks, generate reports, and send status updates instantly. This ensures that all stakeholders can see the BPA happening in real-time, and that it functions in line with all your business process automations . 

When should you use business process analysis?

Most business processes benefit from continuous improvement , but there are situations where a BPA is more helpful than others. 

Business process analysis is best:

For older, potentially outdated processes.

When you notice a fall in productivity or high turnover in certain areas.

When launching a new product or team structure to determine if it’s viable long-term.

The unsung hero of your business operations

Business process analyses peek behind the scenes of your business operations. They show you how you, your team, and your business works. This information is a goldmine of possibilities—use the results of your BPA to boost productivity and improve workflows . Or who knows, your next great growth strategy might just lie within your existing processes.

Automating your processes allows you to do more, with less. Create templates in Asana for recurring processes and easily update them with every business process analysis.

Related resources

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9 steps to craft a successful go-to-market (GTM) strategy

Unmanaged business goals don’t work. Here’s what does.

How Asana uses work management to effectively manage goals

Explore: Patterns

In this section, dive into one of the 55 Business Model Patterns, each providing a practical template to help you build new business models from scratch and supercharge your existing business models. A short description is provided, capturing the key concept and underlying mechanisms of the respective business model pattern, as well as exemplary firms applying the pattern. Select a business model pattern from the list below, or use the search function in order to get started...

Search patterns:     Try e.g. "research", "license", "scale", "service", ...

The core offering is priced competitively, but there are numerous extras that drive the final price up. In the end, the costumer pays more than he or she initially assumed. Customers benefit from a variable offer, which they can adapt to their specific needs.

Affiliation 2 #

The focus lies in supporting others to successfully sell products and directly benefit from successful transactions. Affiliates usually profit from some kind of pay-per-sale or pay-per-display compensation. The company, on the other hand, is able to gain access to a more diverse potential customer base without additional active sales or marketing efforts.

Aikido is a Japanese martial art in which the strength of an attacker is used against him or her. As a business model, Aikido allows a company to offer something diametrically opposed to the image and mindset of the competition. This new value proposition attracts customers who prefer ideas or concepts opposed to the mainstream.

Auction 4 #

Auctioning means selling a product or service to the highest bidder. The final price is achieved when a particular end time of the auction is reached or when no higher offers are received. This allows the company to sell at the highest price acceptable to the customer. The customer benefits from the opportunity to influence the price of a product.

Barter is a method of exchange in which goods are given away to customers without the transaction of actual money. In return, they provide something of value to the sponsoring organisation. The exchange does not have to show any direct connection and is valued differently by each party.

Cash Machine 6 #

In the Cash Machine concept, the customer pays upfront for the products sold to the customer before the company is able to cover the associated expenses. This results in increased liquidity which can be used to amortise debt or to fund investments in other areas.

Cross Selling 7 #

In this model, services or products from a formerly excluded industry are added to the offerings, thus leveraging existing key skills and resources. In retail especially, companies can easily provide additional products and offerings that are not linked to the main industry on which they were previously focused. Thus, additional revenue can be generated with relatively few changes to the existing infrastructure and assets, since more potential customer needs are met.

Crowdfunding 8 #

A product, project or entire start-up is financed by a crowd of investors who wish to support the underlying idea, typically via the Internet. If the critical mass is achieved, the idea will be realized and investors receive special benefits, usually proportionate to the amount of money they provided.

Crowdsourcing 9 #

The solution of a task or problem is adopted by an anonymous crowd, typically via the Internet. Contributors receive a small reward or have the chance to win a prize if their solution is chosen for production or sale. Customer interaction and inclusion can foster a positive relationship with a company, and subsequently increase sales and revenue.

Customer Loyalty 10 #

Customers are retained and loyalty assured by providing value beyond the actual product or service itself, i.e., through incentive-based programs. The goal is to increase loyalty by creating an emotional connection or simply rewarding it with special offers. Customers are voluntarily bound to the company, which protects future revenue.

Digitization 11 #

This pattern relies on the ability to turn existing products or services into digital variants, and thus offer advantages over tangible products, e.g., easier and faster distribution. Ideally, the digitization of a product or service is realized without harnessing the value proposition which is offered to the customer. In other words: efficiency and multiplication by means of digitization does not reduce the perceived customer value.

Direct Selling 12 #

Direct selling refers to a scenario whereby a company's products are not sold through intermediary channels, but are available directly from the manufacturer or service provider. In this way, the company skips the retail margin or any additional costs associated with the intermediates. These savings can be forwarded to the customer and a standardized sales experience established. Additionally, such close contact can improve customer relationships.

E-commerce 13 #

Traditional products or services are delivered through online channels only, thus removing costs associated with running a physical branch infrastructure. Customers benefit from higher availability and convenience, while the company is able to integrate its sales and distribution with other internal processes.

Experience Selling 14 #

The value of a product or service is increased with the customer experience offered with it. This opens the door for higher customer demand and commensurate increase in prices charged. This means that the customer experience must be adapted accordingly, e.g., by attuning promotion or shop fittings.

Flat Rate 15 #

In this model, a single fixed fee for a product or service is charged, regardless of actual usage or time restrictions on it. The user benefits from a simple cost structure while the company benefits from a constant revenue stream.

Fractional Ownership 16 #

Fractional ownership describes the sharing of a certain asset class amongst a group of owners. Typically, the asset is capital intensive but only required on an occasional basis. While the customer benefits from the rights as an owner, the entire capital does not have to be provided alone.

Franchising 17 #

The franchisor owns the brand name, products, and corporate identity, and these are licensed to independent franchisees who carry the risk of local operations. Revenue is generated as part of the franchisees’ revenue and orders. The franchisees benefit from the usage of well known brands, know-how, and support.

Freemium 18 #

The basic version of an offering is given away for free in the hope of eventually persuading the customers to pay for the premium version. The free offering is able to attract the highest volume of customers possible for the company. The generally smaller volume of paying ‘premium customers’ generate the revenue, which also cross-finances the free offering.

From Push-to-pull 19 #

This pattern describes the strategy of a company to decentralize and thus add flexibility to the company's processes in order to be more customer focused. To quickly and flexibly respond to new customer needs, any part of the value chain including production or even research and development can be affected.

Guaranteed Availability 20 #

Within this model, the availability of a product or service is guaranteed, resulting in almost zero downtime. The customer can use the offering as required, which minimizes losses resulting from downtime. The company uses expertise and economies of scale to lower operation costs and achieve these availability levels.

Hidden Revenue 21 #

The logic that the user is responsible for the income of the business is abandoned. Instead, the main source of revenue comes from a third party, which cross-finances whatever free or low-priced offering attracts the users. A very common case of this model is financing through advertisement, where attracted customers are of value to the advertisers who fund the offering. This concept facilitates the idea of 'separation between revenue and customer'.

Ingredient Branding 22 #

Ingredient branding describes the specific selection of an ingredient, component, and brand originating from a specific supplier, which will be included in another product. This product is then additionally branded and advertised with the ingredient product, collectively adding value for the customer. This projects the positive brand associations and properties on the product, and can increase the attractiveness of the end product.

Integrator 23 #

An integrator is in command of the bulk of the steps in a value-adding process. The control of all resources and capabilities in terms of value creation lies with the company. Efficiency gains, economies of scope, and lower dependencies from suppliers result in a decrease in costs and can increase the stability of value creation.

Layer Player 24 #

A layer player is a specialized company limited to the provision of one value-adding step for different value chains. This step is typically offered within a variety of independent markets and industries. The company benefits from economies of scale and often produces more efficiently. Further, the established special expertise can result in a higher quality process.

Leverage Customer Data 25 #

New value is created by collecting customer data and preparing it in beneficial ways for internal usage or interested third-parties. Revenues are generated by either selling this data directly to others or leveraging it for own purposes, i.e., to increase the effectiveness of advertising.

License 26 #

Efforts are focused on developing intellectual property that can be licensed to other manufacturers. This model, therefore, relies not on the realization and utilization of knowledge in the form of products, but attempts to transform these intangible goods into money. This allows a company to focus on research and development. It also allows the provision of knowledge, which would otherwise be left unused and potentially be valuable to third parties.

Lock-in 27 #

Customers are locked into a vendor's world of products and services. Using another vendor is impossible without incurring substantial switching costs, and thus protecting the company from losing customers. This lock-in is either generated by technological mechanisms or substantial interdependencies of products or services.

Long Tail 28 #

Instead of concentrating on blockbusters, the main bulk of revenues is generated through a 'long tail' of niche products. Individually, these neither demand high volumes, nor allow for a high margin. If a vast variety of these products are offered in sufficient amounts, the profits from resultant small sales can add up to a significant amount.

Make More Of It 29 #

Know-how and other available assets existing in the company are not only used to build own products, but also offered to other companies. Slack resources, therefore, can be used to create additional revenue besides those generated directly from the core value proposition of the company.

Mass Customization 30 #

Customizing products through mass production once seemed to be an impossible endeavor. The approach of modular products and production systems has enabled the efficient individualization of products. As a consequence, individual customer needs can be met within mass production circumstances and at competitive prices.

No Frills 31 #

Value creation focuses on what is necessary to deliver the core value proposition of a product or service, typically as basic as possible. Cost savings are shared with the customer, usually resulting in a customer base with lower purchasing power or purchasing willingness.

Open Business Model 32 #

In open business models, collaboration with partners in the ecosystem becomes a central source of value creation. Companies pursuing an open business model actively search for novel ways of working together with suppliers, customers, or complementors to open and extend their business.

Open Source 33 #

In software engineering, the source code of a software product is not kept proprietary, but is freely accessible for anyone. Generally, this could be applied to any technology details of any product. Others can contribute to the product, but also use it free as a sole user. Money is typically earned with services that are complimentary to the product, such as consulting and support.

Orchestrator 34 #

Within this model, the company's focus is on the core competencies in the value chain. The other value chain segments are outsourced and actively coordinated. This allows the company to reduce costs and benefit from the suppliers' economies of scale. Furthermore, the focus on core competencies can increase performance.

Pay Per Use 35 #

In this model, the actual usage of a service or product is metered. The customer pays on the basis of what he or she effectively consumes. The company is able to attract customers who wish to benefit from the additional flexibility, which might be priced higher.

Pay What You Want 36 #

The buyer pays any desired amount for a given commodity, sometimes even zero. In some cases, a minimum floor price may be set, and/or a suggested price may be indicated as guidance for the buyer. The customer is allowed to influence the price, while the seller benefits from higher numbers of attracted customers, since individuals’ willingness to pay is met. Based on the existence of social norms and morals, this is only rarely exploited, which makes it suitable to attract new customers.

Peer-to-peer 37 #

This model is based on a cooperation that specializes in mediating between individuals belonging to an homogeneous group. It is often abbreviated as P2P. The company offers a meeting point, i.e., an online database and communication service that connects these individuals (these could include offering personal objects for rent, providing certain products or services, or the sharing of information and experiences).

Performance-based Contracting 38 #

A product's price is not based upon the physical value, but on the performance or valuable outcome it delivers in the form of a service. Performance based contractors are often strongly integrated into the value creation process of their customers. Special expertise and economies of scale result in lower production and maintenance costs of a product, which can be forwarded to the customer. Extreme variants of this model are represented by different operation schemes in which the product remains the property of the company and is operated by it.

Razor And Blade 39 #

The basic product is cheap or given away for free. The consumables that are needed to use or operate it, on the other hand, are expensive and sold at high margins. The initial product's price lowers customers’ barriers to purchase, while the subsequent recurring sales cross-finance it. Usually, these products are technologically bound to each other to further enhance this effect.

Rent Instead Of Buy 40 #

The customer does not buy a product, but instead rents it. This lowers the capital typically needed to gain access to the product. The company itself benefits from higher profits on each product, as it is paid for the duration of the rental period. Both parties benefit from higher efficiency in product utilization as time of non-usage, which unnecessarily binds capital, is reduced on each product.

Revenue Sharing 41 #

Revenue sharing refers to firms’ practice of sharing revenues with their stakeholders, such as complementors or even rivals. Thus, in this business model, advantageous properties are merged to create symbiotic effects in which additional profits are shared with partners participating in the extended value creation. One party is able to obtain a share of revenue from another that benefits from increased value for its customer base.

Reverse Engineering 42 #

This pattern refers to obtaining a competitor's product, taking it apart, and using this information to produce a similar or compatible product. Because no huge investment in research or development is necessary, these products can be offered at a lower price than the original product.

Reverse Innovation 43 #

Simple and inexpensive products, that were developed within and for emerging markets, are also sold in industrial countries. The term ‘reverse’ refers to the process by which new products are typically developed in industrial countries and then adapted to fit emerging market needs.

Robin Hood 44 #

The same product or service is provided to ‘the rich’ at a much higher price than to ‘the poor’. Thus, the main bulk of profits are generated from the wealthy customer base. Serving ‘the poor’ is not profitable per se, but creates economies of scale, which other providers cannot achieve. Additionally, it has a positive effect on the company's image.

Self-service 45 #

A part of the value creation is transferred to the customer in exchange for a lower price of the service or product. This is particularly suited for process steps that add relatively little perceived value for the customer, but incur high costs. Customers benefit from efficiency and time savings, while putting in their own effort. This can also increase efficiency, since in some cases, the customer can execute a valueadding step more quickly and in a more target-oriented manner than the company.

Shop-in-shop 46 #

Instead of opening new branches, a partner is chosen whose branches can profit from integrating the company's offerings in a way that imitates a small shop within another shop (a win-win situation). The hosting store can benefit from more attracted customers and is able to gain constant revenue from the hosted shop in the form of rent. The hosted company gains access to cheaper resources such as space, location, or workforce.

Solution Provider 47 #

A full service provider offers total coverage of products and services in a particular domain, consolidated via a single point of contact. Special know-how is given to the customer in order to increase his or her efficiency and performance. By becoming a full service provider, a company can prevent revenue losses by extending their service and adding it to the product. Additionally, close contact with the customer allows great insight into customer habits and needs which can be used to improve the products and services.

Subscription 48 #

The customer pays a regular fee, typically on a monthly or an annual basis, in order to gain access to a product or service. While customers mostly benefit from lower usage costs and general service availability, the company generates a more steady income stream.

Supermarket 49 #

A company sells a large variety of readily available products and accessories under one roof. Generally, the assortment of products is large but the prices are kept low. More customers are attracted due to the great range on offer, while economies of scope yield advantages for the company.

Target The Poor 50 #

The product or service offering does not target the premium customer, but rather, the customer positioned at the base of the pyramid. Customers with lower purchasing power benefit from affordable products. The company generates small profits with each product sold, but benefits from the higher sales numbers that usually come with the scale of the customer base.

Trash-to-cash 51 #

Used products are collected and either sold in other parts of the world or transformed into new products. The profit scheme is essentially based on low-to-no purchase prices. Resource costs for the company are practically eliminated, whilst the supplier's waste disposal is either provided, or associated costs are reduced. This also addresses customers’ potential environmental awareness ideals.

Two-sided Market 52 #

A two-sided market facilitates interactions between multiple interdependent groups of customers. The value of the platform increases as more groups or as more individual members of each group are using it. The two sides usually come from disparate groups, e.g., businesses and private interest groups.

Ultimate Luxury 53 #

This pattern describes the strategy of a company to focus on the upper side of society's pyramid. This allows a company to distinguish its products or services greatly from others. High standards of quality or exclusive privileges are the main focus to attract these kinds of customers. The necessary investments for these differentiations are met by the relatively high prices that can be achieved which usually allow for very high margins.

User Designed 54 #

Within user manufacturing, a customer is both the manufacturer and the consumer. As an example, an online platform provides the customer with the necessary support in order to design and merchandise the product, e.g., product design software, manufacturing services, or an online shop to sell the product. Thus, the company only supports the customers in their undertakings and benefits from their creativity. The customer benefits from the potential to realize entrepreneurial ideas without having to provide the required infrastructure. Revenue is then generated as part of the actual sales.

Whitelabel 55 #

A white label producer allows other companies to distribute its goods under their brands, so that it appears as if they are made by them. The same product or service is often sold by multiple marketers and under different brands. This way, various customer segments can be satisfied with the same product.

Sensor As A Service 56 #

The use of sensors permits additional services for physical offerings, or wholly new independent services. It is not the sensor that generates the primary revenue, but the analysis of the data that the sensor creates. Possibilities for real-time information can further strengthen the value proposition.

Virtualization 57 #

This pattern describes the imitation of a traditionally physical process in a virtual environment, e.g., a virtual workspace. The advantage for the customer is the ability to interact with the process from any location or device. In exchange, the customer pays for access to the virtual service.

Object Self-service 58 #

Through the use of sensors and inclusion in an IT structure, an object can generate orders by itself. This makes fully- automated processes such as replenishment possible and increases the speed of interaction with the object. The customer is locked in, giving rise to recurrent revenue.

Object As Point-of-sale 59 #

The point of sale of consumables moves to the point of consumption. This generates a stronger lock-in and results in higher customer retention. When the point of sale is shifted away from competing products, the customer becomes less sensitive to price.

Prosumer 60 #

Companies enable customers to become producers themselves. The customer is integrated into the value chain and can profit from the resulting product, while the company has fewer investment costs for production and overheads. Since the consumer has a hand in production, the perceived value of the product increases.

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Tesla Business Model (2023) | Tesla Business Model Canvas

Last updated: Oct 9, 2021

Company:  TESLA, Inc. CEO:  Elon Reeve Musk Subsidiary: SolarCity, Tesla Grohmann Automation, Maxwell Technologies Founders:  Elon Musk, Martin Eberhard, JB Straubel, Marc Tarpenning, Ian Wright Year founded:  2003 Headquarter:  Palo Alto, California Type: Public Ticker Symbol:  TSLA Annual Revenue (2021): $53.82 Billion Profit |Net income (2021): $5.64 Billion

Products & Services:  Tesla Motor Vehicles | Auto service | Financial Services | Energy Storage (Power battery packs) | Solar panels | Lifestyle products | Retail merchandise

Competitors:  Kia Soul EV | BMW i3 | Nissan Leaf | Volkswagen e-Golf | Hyundai Ioniq EV | Tesla Model S | Chevrolet Volt EV.

Table of Contents

Introduction to Tesla, Inc.

Tesla, Inc. (formerly known as Tesla Motors, Inc.) is an American automotive, lifestyle and energy company that was originally founded in July of 2003 .  The company launched its products specifically in the automotive industry and began to design and supply lifestyle products as well. The company was originally founded by engineers Martin Eberhard and Marc Tarpenning prior to changing its name to just Tesla, Inc. in February of 2017.

During the Series A funding phase, Elon Reeve Musk, J. B. Straubel, and Ian Wright were also accredited with the recognition as the founding fathers of Tesla Motors. Elon Reeve Musk is currently the serving CEO of the company, overlooking all the operations and the structures of the business.

In August of 2015, Tesla, Inc. aimed its focus towards on safety, autopilot, charging networks and motors. Tesla operated a combination of 260 galleries/retails across the United States in 2016. One of the most exciting years for Tesla was 2017.

Tesla was able to focus its markets in the Germany sectors, providing a Dutch RDQ-issued Whole Vehicle type approval (WVTA) which should be accepted as a legal compliance document, without grounds to a national type of approvals in EU member States.

This significantly reduced any compliance check and excelled deliverance exponentially, since the vehicle was already under Germany vehicle standard compliance.

In the same year, Tesla launched additional international locations in Dubai and South Korea, which increased its brand visibility and helped increase revenue streams.

During that year Tesla had a budget of $52 million as a marketing budget and used a referral program and a word of mouth tactic to help attract customers that would be interested in purchasing a Tesla vehicle.

By 2018, Tesla, Inc. was ranked as the bestselling plug-in passenger car manufacturer in the electric car industry. It sold over 245,240 units in total.  With over 200k+ units sold, Tesla was responsible for capturing the market shares of 12% in the electric-plug-in vehicle industry. In Q2 of 2020, Tesla delivered 90,650 vehicles to customers and is expected to deliver more than 500,000 cars by the end of 2020. [ 1 ]

The company’s market capitalization increased to nearly $208 billion and surpassed Toyota’s $202 market cap to become the world’s most valuable automaker by market value. [ 2 ]

The following is the complete Tesla Business Model Canvas report and how it is different from the rest of its competition.

Tesla Business Model Canvas

1. Value Propositions of Tesla

Best in class – Fully electric vehicles (EVs)

• Tesla aims to provide some of the best in class EV models that offers high performance, energy efficient, long range (with convenient recharge stations), and sleek designs.  
• Model S (Luxury sedan) – June 2012
• Model X (SUV) – September 2015
• Model 3 (Lower priced sedan for the mass market) – July 2017
• Model Y (Compact Crossover) – expected to deliver in 2020
• Semi-Truck (Commercial Heavy-duty truck) – expected to deliver in 2020-21
• Tesla Pickup Truck – expected to deliver in 2020-21
• Tesla Roadster (Sports car) – Original model was in production from 2008-2012. A newer version is expected to deliver in 2020.
• Tesla Cybertruck – Tesla’s angular-designed Cybertruck was unveiled in November 2019 and is expected to hit the market in 2021. [ 3 ]

Advanced Electric Vehicle Technology

• Supercharging and destination recharging station network
• High miles per charge
• All wheel drives
• Free or low-cost electric charging stations or battery swap.
• To support open source movement, Tesla has opened the use of all its patents for other auto-manufacturer to advance EV technology.
• Autopilot option
• Free software updates
• Solar Energy Systems – Tesla is known for its Electric vehicles, also sells solar panels to residential and commercial customers.   

2. Customer Segments of Tesla

Tesla’s engineers and designers have designed vehicles appropriate for every customer groups. Vehicle class type is based on the following segments:

• High-end Luxury (Sedan or SUV)
• Mid – price range
• Commercial Vehicles – targeted towards transportation and shipping businesses
• Green Community
• Fast sports car enthusiast
• Autopilot enthusiast
• Tesla Followers
• Elon Musk Followers

3. Key Partners of Tesla

OEM Alliances

• 2009 – Tesla, Inc. aligned a partnership with OEM manufacturer ( Daimler ), which helped to provide Tesla, Inc. with access to superior research and engineering development and a cash infusion that helped Tesla to escape the potential bankruptcy.
• 2010 – Tesla, Inc. signed an alliance with Toyota , which enabled them to buy former NUMMI factory which positioned Tesla professionals to learn the large-scale, high-quality manufacturing from a pioneer of lean manufacturing.
• 2014- Tesla, Inc. joined Osaka (Japan) investments to develop and improve its battery designs.
• 2020 – Tesla, Inc. entered into a partnership with LG Chem Ltd and China’s CATL to develop batteries for its electric cars. [ 4 ]
• 2020 – Tesla, Inc. partnered with Huston-Tillotson University to collaborate in research and provide opportunities for students from disadvantaged communities to engage in the sector. [ 5 ]

Manufacturing and Purchasing (Toyota)

• Toyota and Tesla, Inc. joined forces announcing to the public that they are to build an alliance that would be dedicated to developing electric vehicles , parts and production systems for electric cars and accessories.
• In return, Toyota bought $50 Million of Tesla stocks and Tesla purchased an assembly factory in California to continue its endeavor towards facilitating the process of manufacturing electric vehicles.
• “ Tesla has quite a clear business strategy for developing a better battery ,” said Osamu Nagata , president, and CEO of Toyota Motor Engineering & Manufacturing North America. “

Car Leasing Company

• March 2012 – Athlon Car Lease Company built an alliance with Tesla for Tesla’s premium electric sedan specifically for corporate fleet services throughout the European regions. The model consists of the Model S and the 150 Model S Sedans to ensure early availability of the Model S for its clients. 
• Tesla’s strategic alliance helped to pave the way for making the first Model S fleet reservation possible for leasing worldwide.
• Athlon VP Richard Sikkel confirms : “Our collaboration with Tesla has been very well perceived by the market. Almost 50 % of our initial order have already been pre-reserved by several of Athlon’s existing customers – an example that demonstrates the increasing need for electric vehicles in the industry.”

Major Suppliers

Tesla, Inc. is commonly responsible for manufacturing the electric car’s basics, which include the electric motor, the battery pack and the charger. Rest are provided by suppliers from the US, Europe, and Asia.

The following are Tesla’s main designers and suppliers:

• AGC Automotive: windshields
• Brembo: brakes
• Fisher Dynamics: power seats
• Inteva Products: instrument panel
• Modine Manufacturing Co. battery chiller
• Sika: acoustic dampers
• Stabilus: liftgate gas spring
• ZF Lenksysteme: a power steering mechanism
• LG Chem LTD: Batteries [ 6 ]

Other suppliers include:

• Angell-Demmel
• Hitachi Cable America
• Hope Global
• MacLean-Fogg
• Magna International
• Methode Electronics
• PSM International
• T1 Automotive
• Zanini Auto Group

Dana Holding

• Dana Holdings provided Tesla, Inc. with Dana Cooling Technology for further implementation of the Tesla engine and the overall cooling system design .
• Panasonic’s current lithium-ion batteries showed to serve sufficiently; Tesla confirms that it is seeking more batteries for its Model S in which Panasonic is currently supplying.
• In this effort, Panasonic is collaborating to build Tesla’s Gigafactorys – a large scale battery and solar cells manufacturing plant in Nevada and New York.

• Government-funded Tesla with a $465 Million loan for its electric Sedan
• $365 Million of the loan shall be allocated towards the production of it’s Model S Sedan.
• Remaining $100 Million will be allocated towards its electric power train manufacturing plant in California.
• Due to Tesla’s Electric Vehicle development and improvements, the US government provides federal tax incentives of about $3750 to customers depending upon the state .

4. Key Activities of Tesla

• R&D helped Tesla attain its milestones by providing breakthrough technologies and innovational designs that were in association with the engine design of Tesla vehicles.
• Tesla’s innovative design helped to produce reliable electric plug-in cars made affordable for all.
• Modern design that includes lightweight body , durable and long-lasting battery life
• Designs range from small, to classy, to luxurious classes – there is a vehicle type for every customer segment at different price points.

Innovational Leap

• Tesla continues to work around the building blocks of Tesla vehicles to better improve and sufficiently design vehicles that are built with eco-friendly materials, ensure future sustainability and invoke reliability of its line of manufacturers.

Software Development

• One of the most crucial movements for Tesla was its dedication towards the vital software programs that helped shaped the electric vehicle industry to what it is today.
• Tesla does not follow the long development software product lifecycles that many automotive specialists follow; instead, Tesla worked around these hurdles to create diverse software programs that improved the sufficiency of each of their model make series.
• Tesla uses agile principles like “scrums” or also known as regular meetings that are designed to work and improve the structures of its core software.
• Through this breakthrough, it has aided Tesla to minimize errors and bring innovation into progressing leaps.
• Tesla, Inc. regularly evaluates customer experience and feedback that helps to pave the next generation in improving its software spectrum and the sufficiency of its vehicles.
• Technological errors are expected but shall improve in the long run to perfection.

Sales & Marketing

• Tesla invests heavily in executing its sales and marketing efforts, which includes establishing company-owned stores , galleries and service centers known as “Service Plus.”

Building & Maintenance of Charging Stations Network

• Tesla has been building an extensive network of the supercharger and destination recharge stations around the world to expand the widespread adoption of its Electric Vehicles.
• There are 1441 Supercharger stations worldwide with 12,888 superchargers and thousands of Destination charging stations at hotels, restaurants, shopping centers, parking garages, office building, etc.
• MOAT – A Tesla, Inc. project that is geared to provide EV charging stations
• Tesla, Inc. plans on launching a network specifically for other automaker brands for EV charging supply. However, this is still to happen.
• First to launch a portable home charger that costs about $500

5. Customer Relationships of Tesla

Customer Service Experience

• Tesla provides digitally driven Omni-channel experience (stores, website, social media) to its customers.
• Company Owned Stores – Tesla utilizes direct to customer sales model . Tesla sells its cars to customers directly through its stores and galleries, instead of selling through auto dealers. It provides an enhanced level of shopping experience for customers.
• Self Service website – Often times, customer place orders directly on the Tesla website. Customers can build their own car, add features, choose different color combinations, various financing options; which is an again a unique shopping experience.
• Tesla is considered as a luxury brand in the automotive industry. For those that know about Tesla, and what it stands for understands the value and quality that it provides to loyal customers.
• Due to the continuous innovation and the design, Tesla has built a reputation unlike any other technology in the EV automobile industry.
• Customers feel that Tesla is well ahead in its innovation and production electric vehicle ecosystem that is like no other competitors in the industry.

Free/low-cost charging station network

• Extension chargers provided for Model S, Model X and Model 3
• A built-in navigation system that helps to identify and locate the charger stations
• Charging stations are designed to supercharge Tesla vehicles that get charged in just 30 minutes
• Tesla charging stations and app system indicates when the vehicle charging is complete

6. Key Resources of Tesla

Electric Vehicle and Technological Knowledge

A) Superior Engine Design:

• High-Performance Vehicle
• Pollution & Noise free Vehicle
• Super-Fast vehicle

B) Engine components:

• Lithium-ion battery system
• Induction motor. (Rotor Speed < RMF Speed)
• Uniform induction, power, and speed.
• Brushless and requires no magnets, instead the induction creates magnetism through rotational movement
• 3-phase. Ac power input.
• Speed is dependent on the amount of voltages that are fed to the 3-phase AC power Input. Speed can range from 0-18000 RPM.
• No Transmission required a direct mount of the engine to the axel is sufficient.

Comparison Chart of the Tesla Induction Motor VS. Typical IC Engine

Battery System

• Lithium-ion Batteries. (DC Power)
• 7,000 individual battery cells constituted into the design into 16 compartments
• A range of 16 compartments that act as one big cell.

Effective Cooling

• The use of small individual cells is a guarantee of sufficient cooling, instead of using a few big batteries
• This also increases the battery duration and lifeline.
• Glycol is used as the cooling medium that is bypassed through the gaps between the rows of the cells in each of the 16 lithium-ion compartments.
• Battery alignment and frame offers the vehicle side skirt support from a vehicle collision.

Automation & Engineering

• Induction motor. (Rotor Speed < RMF Speed) Uniform induction, power, and speed.
• Brushless and requires no magnets.
• Inverter system = 3 phase. Ac power input.
• Speed is dependent on the amount of voltages that are fed to the 3-phase AC power Input.
• Speed can range from 0-18000 RPM.
• No Transmission required a direct mount of the engine to the axel is sufficient
• Another positive aspect of Tesla that helped progressed its success is the reliability of its big data , which is derived from its in-vehicle software, and strategic partnerships.
• Through channeling new departments, opportunities and the new business operations, Tesla was able to generate potential clients and aim at different business endeavors successfully such as solar energy systems, retail merchandise, etc.     

7. Channels of Tesla

The following are the set of channels that Tesla utilizes to channel and market its technology:

• Retail stores & galleries – Tesla, Inc. retail stores and galleries are designed and built to showcase Tesla vehicles and maximize customer experience. In early 2019, there were around 276 Tesla stores worldwide of which around 130 were based in the US but the company has closed most of its stores globally and moved to online sales channels . [ 7 ]
• Self Service online store (website)
• Conferences & sales events

8. Cost Structure of Tesla

In FY 2019, Tesla’s annual revenue was $24.578 Billion with a net expense of about $24.72 Billion, which leaves the company with a net loss of $144 Million. [ 8 ]

The following are Tesla expense and cost structure;

• Cost of Goods and Services (COGS): $20.509 Billion equal to 83% of the revenue
• Selling, General & Administrative Cost: $2.646 Billion equal to 11% of the revenue
• Research & Development Cost: $1.343 Billion equal to 6% of the revenue
• Restructuring Cost: $149 Million equal to less than 1% of the revenue
• Interest Expense, Taxes, and Others: approx. 3% of revenue

9. Revenue Streams of Tesla

Tesla not only sells Electric vehicles but also has created an eco-system of a top of the line green vehicles. Also, it has introduced solar energy systems, and lifestyle products for its loyal customers and the fans of Tesla, Inc;

Here is a high level break down of Tesla’s revenue.   In FY2019, the total annual revenue of Tesla was $24.578 Billion .

Automotive Segment revenue – it includes sales of all vehicle models, access to charging network, software updates, after – sales services, sales of EV components, retail merchandise, etc. Here is a further breakdown in the automotive segment.

• Vehicle sales: $19.952 Billion
• Vehicle leasing: $869 Million

Total: $20.821 Billion

Energy generation & storage segment – it includes sales of solar energy systems and storage products such as solar roof panels, etc.  

Total Revenue from Energy Generation & Storage: $1.531 Billion

Services – Includes car services, repairs, consultations, and other general services  

Total Revenue from Services and other: $2.226 Billion

Tesla, Inc. started its business as offering reliable ways of providing transportation. By reviving the theory of utilizing electric vehicles instead of gasoline combustion chamber engines helped to pave the recognition of sufficient EV system, which also contributed to revolutionize the automobile industry from mechanical drives to all smart computer driven electric vehicles.

Because of the strategic steps taken to design a sound EV engine system, the possibilities of actualizing an electric car that serves sufficiently and safely, Tesla, Inc. is one of the most successful EV company in today’s automobile industries and continues to develop and innovate the methods of transportation.

 References & more information

• Wagner, I. (2020, July 15). Tesla’s vehicle deliveries by the quarter – YTD Q2 2020 . Statista
• Korosec, K. (2020, July 1). Tesla Blows Past Toyota to become Most Valuable Automaker in the World . Tech Crunch
• Brown, M. (2020, July 23). Tesla Cybertruck: Elon Musk Reveals where It will be Built . Inverse
• Talia, S. (2020, January 30). Tesla partners with LG Chem, CATL for battery supply . Reuters
• Crider, J. (2020, July 31).  Tesla’s Newest Partnership With An HBCU Is A Great Thing . Clean Technica
• Contemporary Amperex Technology Co. Limited (CATL): Batteries
• Williams, M. (2019, March 4). Tesla to close showrooms and move sales online . Automotive Logistics
• Investing Alerts (2020, January). Tesla Inc. Financials . Market Watch

 Tell us what you think? Did you find this article interesting? Share your thoughts and experiences in the comments section below.

A management consultant and entrepreneur. S.K. Gupta understands how to create and implement business strategies. He is passionate about analyzing and writing about businesses.

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The 20 Hottest AI Cloud Companies: The 2024 CRN AI 100

From AWS and Microsoft Azure to Altair, MongoDB and Dynatrace, here are the 20 cloud AI companies you need to know about in 2024.

Cloud computing technology is one of the best delivery options for AI and generative AI applications at scale with tech giants including Amazon Web Services, IBM, Google, Oracle and Microsoft investing billions into building new AI offerings over the past 18 months.

“Because of its scale and shared services model, cloud technology is best-suited for the delivery of GenAI-enabled applications at scale and the development of general-purpose foundation models,” said Sid Nag, Gartner vice president and analyst, in a recent report.

However, these technology behemoths aren’t the only ones jostling for market share in the red-hot AI cloud market , as companies such as Altair, Dataminr, MongoDB and Lambda Labs are innovating at breakneck speed.

There are also open-source players like H2O.ai and Red Hat, which also are winning over cloud customers this year with their ability to increase the productivity of developers and data engineers.

[Related: Azure Vs. AWS Vs. Google Cloud: Customer Spending Results ]

The rapid advancement in large language models ( LLMs ) and foundation models (FMs) are driving the continual evolution of AI and GenAI capabilities and business use cases.

Many of the 20 cloud AI companies on this list are leading the market in terms of LLMs and FMs, which are the core of GenAI capabilities.

“Specialty cloud providers will become an important consideration for many enterprise cloud architectures as organizations extend their cloud operations to cover diverse locations and use cases,” said Gartner’s Nag.

As part of CRN’s inaugural AI 100 list , here are the 20 cloud companies that are the driving force for AI in 2024 that solution providers should know about.

James Scapa

Founder, Chairman, CEO

Altair is a computational intelligence specialist that provides AI-powered software and cloud offerings for high-performance computing, simulations and data analytics. The company’s goal is to bring together data science and rocket science to enable customers to make smarter decisions via AI in sustainable manner.

Amazon Web Services

Adam Selipsky

The world’s largest cloud company has poured billions into building new AI and GenAI offerings, while also forming partnerships with AI players like Anthropic. AWS has launched new AI chatbot assistants, large language models, AI-powered cloud cybersecurity and even processors tailored for AI and machine learning use cases.

Cirrascale Cloud Services

Cirrascale Cloud Services provides public and private dedicated GPUs and Intelligence Processing Unit offerings and cloud infrastructure targeting large-scale deep learning use cases. Cirrascale works with AMD, Qualcomm and Nvidia to shape AI offerings to meet customers’ cloud services needs and provide GPU as a Service.

Founder, CEO

Harnessing the power of large language models and multimodal foundation models, Dataminr’s AI platform is at the forefront of AI innovation in predictive AI and GenAI—performing trillions of daily computations across billions of public data inputs. The AI provider seeks to empower security teams with tools to identify and respond to cyber risks and digital threats.

Rick McConnell

The Dynatrace platform leverages hypermodal AI, combining predictive AI to anticipate future behaviors to deliver solutions and GenAI that offer recommendations and suggest workflows. Dynatrace’s deep observability and continuous runtime application security provides answers and intelligent automation from data at scale.

Google Cloud

Thomas Kurian

Google Cloud is a global provider of AI tools and GenAI offerings, including purpose-made infrastructure, GPUs, AI accelerants and APIs, chatbot collaborators and large language models. Google’s Vertex AI provides machine learning tools to automate and manage AI environments, while Gemini can generate code, text, images and videos.

An open-source leader in GenAI and machine learning, H2O.ai has a community of 2 million data scientists tasked with co-creating GenAI applications. H2O.ai’s h2oGPTe platform, combined with its Document AI and autoML Driverless AI, have transformed over 20,000 organizations and over half of the Fortune 500.

Dave McJannet

HashiCorp is a multi-cloud automation software company that enables customers to adopt consistent workflows and create a system of record for automating the cloud for AI. HashiCorp underpins some of the largest AI workloads on the market, helping customers manage their AI stack with infrastructure as code.

Arvind Krishna

Chairman, CEO

A longtime AI market force, IBM’s Watsonx.ai data platform is a studio for foundation models and machine learning with a set of AI assistants. Other innovations include Watsonx.data to support the entire data science life cycle and scaling of AI workloads, while Watsonx.governance manages and monitors customers’ AI projects.

Lambda Labs

Stephen Balaban

Lambda Labs is on a mission to build an AI compute platform with a portfolio spanning on-premises GPU hardware to hosted GPUs in the cloud. A top Nvidia processor provider, Lambda offers fast access to the latest GPUs and architectures for training, fine-tuning and inferencing of generative AI and large language models.

Satya Nadella

Microsoft has invested billions into building a massive AI toolset while also forging game-changing partnerships with the likes of OpenAI. On the cloud front, Azure AI offers a framework for developing conversational AI, data analytics, IoT and more, while Microsoft’s AI collaborator Copilot helps businesses boost productivity and creativity.

Dev Ittycheria

President, CEO

MongoDB’s AI innovation inside its popular tools is exploding with the goal of helping developers quickly and easily build AI applications on its platform. This includes new AI chatbot features and AI-powered migration tools to MongoDB Atlas, which unifies operational, analytical and GenAI data services to streamline AI application building.

Vadim Vladimirskiy

Co-Founder, CEO

Microsoft cloud management software specialist Nerdio recently introduced GenAI assistants for scripted action generation, data analysis, report creation and other tasks to its portfolio. Nerdio strives to transform the management and cost optimization of virtual desktops, applications and Azure infrastructure, including via the infusion of AI into its products.

Oracle enables AI functionality throughout its cloud infrastructure, data platform and applications for a fully integrated experience. Oracle recently launched the Oracle Cloud Infrastructure (OCI) Generative AI service that seamlessly integrates large language models with flexible fine-tuning options, while OCI AI Agents combines LLMs and retrieval-augmented generation with enterprise data.

Jennifer Tejada

The PagerDuty Operations Cloud combines AIOps, automation, incident management and customer service operations into a scalable platform to boost innovation, reduce cost and mitigate the risk of operational failure. The operational management company recently launched PagerDuty Copilot to manage tasks via GenAI for critical operations work.

Open-source superstar Red Hat is enabling customers to use its software platforms to build, deploy and monitor AI models and applications. Red Hat OpenShift AI allows organizations to build, train, test and serve models for their AI-enabled applications with transparency and control.

Marc Benioff

Salesforce has invested millions into its AI Einstein portfolio of AI technologies that combines CRM, AI and data insight into a unified platform. New innovation includes the conversational AI assistant Einstein Copilot, low-code AI toolset Einstein 1 Studio, and Einstein AI Prediction Builder to drive AI-powered business outcomes.

Sridhar Ramaswamy

Snowflake is injecting GenAI technologies throughout its data platform to empower next-level insight and data-driven decisions, including with Snowflake Cortex that uses machine learning to detect patterns and analyze data in order to build AI applications. Snowflake recently appointed Ramaswamy, its global AI leader, as its new CEO.

Spectro Cloud

Kubernetes specialist Spectro Cloud recently has doubled down on AI with the launch of Palette EdgeAI that lets customers build, deploy and manage Kubernetes-based AI software stacks. The company’s EdgeAI enables businesses to deploy AI engines and models to Kubernetes clusters, including features such as federated training and advanced model observability.

VMware by Broadcom

VMware by Broadcom has a wide range of AI offerings—from AI-optimized infrastructure on VMware to Broadcom’s networking chips that are critical for AI computing. VMware recently launched Private AI to drive GenAI initiatives and business gains from AI, while VMware AI Labs works to create platforms for AI services that ensure privacy and control.

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Tesla’s Sales Drop, a Sign That Its Grip on the E.V. Market Is Slipping

Sales of the company’s electric cars dropped in the first three months of the year, even as other automakers sold more battery-powered vehicles.

By Jack Ewing and Neal E. Boudette

Tesla appeared to be losing command of the market it effectively created after it reported a stunning drop in quarterly sales on Tuesday, raising fresh questions about Elon Musk’s leadership of the company.

The sales decline caught investors off guard as rivals like BYD of China and Kia and Hyundai of South Korea reported increases in electric vehicle sales, suggesting that slower overall demand for battery-powered models was not the only explanation for Tesla’s problems.

Tesla pioneered the market for electric vehicles with its Model 3 sedan and Model Y sport utility vehicle, which proved that battery-powered cars could be appealing, practical and profitable. The cars revolutionized the auto industry and forced established carmakers to develop their own electric models.

But the market is evolving in ways that may not favor Tesla. In contrast to the early adopters who fueled Tesla’s rise, mainstream buyers may be put off by the vehicles’ unconventional design, including minimalist interiors and lack of buttons and switches. Almost all functions in Tesla vehicles are controlled from a large screen on the dashboard.

The system “makes it thoroughly distracting to adjust almost anything within the vehicle while motoring down the road,” Consumer Reports wrote in a review on Tuesday of a new version of the Model 3.

Tesla, which sells cars online and does not have many showrooms, is often the target of complaints about poor service. That may provide an advantage to established carmakers, like Ford Motor and General Motors, that have extensive dealer networks and are ramping up production of electric vehicles.

Tesla seems at a loss to respond to those challenges. It has been slow to follow up its initial success with new models, and Mr. Musk appears disengaged. He did not react Tuesday to the sales figures on X, the social media platform that he owns and posts on prolifically. Instead, he threw barbs at Walt Disney Company executives whom he accuses of being “woke.” Such remarks have made him a hero to conservatives but may be pushing liberals, who are more likely to buy electric cars, away from Tesla.

Tesla said it delivered 387,000 cars worldwide in the first quarter, down 8.5 percent from 423,000 in the same period last year. This was the first time Tesla’s quarterly sales have fallen on a year over year basis since a modest drop at the start of the pandemic in 2020. The sales figures were also significantly lower than the estimates of Wall Street analysts who had expected a modest increase.

“Tesla can’t stand still,” Ben Rose, president of Battle Road Research, said in an email. “Chinese E.V.s are already gaining a foothold in Europe, and it is unclear how long they will be forbidden from entering the U.S.”

More affordable cars would help Tesla appeal to a broader spectrum of buyers, Mr. Rose said.

To be sure, some of the sales decline may have reflected production problems beyond the company’s control, including a fire at a Tesla factory near Berlin that was the result of an arson attack.

And the company’s cars still have many fans. While panning the Model 3’s controls, Consumer Reports said the latest version provided a better ride than its predecessor and had improved handling.

But investors are clearly alarmed. Tesla’s shares have fallen more than 30 percent this year — including a 5 percent drop on Tuesday — because of concern that the company has lost momentum.

In China, Tesla faces BYD and dozens of other rivals with ambitions to expand worldwide. In Europe, established carmakers like Volkswagen and BMW have introduced more compelling battery-powered models. And in the United States, sales of electric cars are not growing as fast as they were a year ago, and many buyers are opting instead for hybrid models that pair a gasoline engine with batteries and electric motors.

Tesla rivals have continued to report sales increases. BYD said on Tuesday that it sold about 300,000 electric vehicles, up 13 percent from a year earlier. The company also sold 324,000 plug-in hybrid vehicles in the first quarter, up 15 percent.

BYD and other Chinese automakers have introduced new models rapidly, often undercutting Tesla on price. Those companies are also increasingly exporting cars to Europe, Southeast Asia and Latin America.

Kia, based in South Korea, said Tuesday that its sales of electric vehicles in the United States more than doubled in the first three months of the year compared with a year earlier after it introduced a new large sport utility vehicle, the EV9. Kia’s sister company, Hyundai, said it sold more than 10,000 electric vehicles in the first quarter in the United States, up 75 percent.

Toyota, the world’s largest automaker, doesn’t sell many fully electric vehicles. But the company said U.S. sales of electrified vehicles, a category largely made up of hybrids, under the Toyota and Lexus brands was up 74 percent in the first quarter.

Tesla pioneered mass-market electric cars, but its lineup is aging. The company’s only new model since 2020 is the Cybertruck , a futuristic pickup that went on sale in limited numbers last year. The least expensive version that Tesla says it can deliver this year starts at around $80,000, which makes it unaffordable to most car buyers.

Rivian, whose R1 pickup competes with the Cybertruck, said its sales, including of the truck and its two other models, rose 70 percent in the quarter, to 13,600 vehicles.

Tesla is working on an electric car that would cost around $25,000, but the model is not expected to go on sale in large numbers until 2026. In the meantime, Tesla remains dependent on the Model Y and the Model 3 for most of its sales.

The company has repeatedly cut prices, but analysts say the strategy has lowered its profits without doing enough to stimulate sales. The company has recently modestly raised the prices of some cars in the United States and China. The Model Y starts at nearly $45,000 before federal and state tax breaks, after an increase of $1,000 announced this week.

The quarterly sales figure shows Tesla managers “they need a real sales strategy and can’t rely on cutting price alone,” Gary Black, managing partner of the Future Fund, an investment firm, posted on X.

Mr. Musk, Tesla’s chief executive, has not given a clear indication of how the company plans to regain momentum. At the same time, his polarizing statements and endorsement of right-wing conspiracy theories have alienated many of the left-leaning customers who are most likely to buy electric cars.

Raphaelle Cassens, a Los Angeles resident, gave up her leased Tesla Model Y last year and replaced it with a leased electric BMW i4. Mr. Musk was one reason she switched, she said.

“Honestly, I don’t like him as an individual at all,” said Ms. Cassens, who is a registered Democrat but described herself as nonpartisan. She also said she received poor service from the company. “The attitude from the company definitely reflects the owner,” Ms. Cassens added.

At least one other large automaker is also struggling with electric vehicle sales. G.M. reported on Tuesday that its U.S. sales for the first quarter fell 1.5 percent, in large part because deliveries of battery-powered cars were down by about a fifth to around 16,000 vehicles.

The drop in battery-powered vehicle sales was the result of a sharp decline in sales of the Chevrolet Bolt, which G.M. stopped making at the end of 2023. Sales of other electric models that use G.M.’s newest battery technology rose but not enough to make up for the loss of the Bolt, which was one of the most affordable electric cars in the United States.

Jack Ewing writes about the auto industry with an emphasis on electric vehicles. More about Jack Ewing

Neal E. Boudette is based in Michigan and has been covering the auto industry for two decades. He joined The New York Times in 2016 after more than 15 years at The Wall Street Journal. More about Neal E. Boudette

The World of Elon Musk

The billionaire’s portfolio includes the world’s most valuable automaker, an innovative rocket company and plenty of drama..

SpaceX: President Biden wants companies that use American airspace for rocket launches to start paying taxes into a federal fund  that finances the work of air traffic controllers.

Tesla: The maker of electric vehicles appeared to be losing command of the market it effectively created after reporting a stunning drop in quarterly sales , raising fresh questions about Elon Musk’s leadership of the company.

Business With China : Tesla and China built a symbiotic relationship that made Elon Musk ultrarich. Now, his reliance on the country may give Beijing leverage .  

A Testy Interview:  In the wake of a rough interview with Elon Musk that touched upon Donald Trump, his reported drug use and hate speech on X,  the former television anchor Don Lemon said that his deal for a new talk show on X was called off  just days before it was scheduled to air.

The Musk Foundation: After making billions in tax-deductible donations to his charity, Musk has failed recently to donate the minimum required to justify a tax break  — and what he did give often supported his interests.

OpenAI: Musk, who helped found the A.I. start-up in 2015, has filed a lawsuit  accusing the company and its chief executive  of breaching a contract  by putting profits and commercial interests ahead of the public good.

Elon Musk says there could be a 20% chance AI destroys humanity — but we should do it anyway

• Elon Musk recalculated his cost-benefit analysis of AI's risk to humankind.
• He estimates there's a 10-20% chance AI could destroy humanity but that we should build it anyway.
• An AI safety expert told BI that Musk is underestimating the risk of potential catastrophe. 

Elon Musk is pretty sure AI is worth the risk, even if there's a 1-in-5 chance the technology turns against humans.

Speaking in a "Great AI Debate" seminar at the four-day Abundance Summit earlier this month, Musk recalculated his previous risk assessment on the technology, saying, "I think there's some chance that it will end humanity. I probably agree with Geoff Hinton that it's about 10% or 20% or something like that."

But, he added: "I think that the probable positive scenario outweighs the negative scenario."

Musk didn't mention how he calculated the risk.

What is p(doom)?

Roman Yampolskiy, an AI safety researcher and director of the Cyber Security Laboratory at the University of Louisville, told Business Insider that Musk is right in saying that AI could be an existential risk for humanity , but "if anything, he is a bit too conservative" in his assessment.

"Actual p(doom) is much higher in my opinion," Yamploskiy said, referring to the "probability of doom" or the likelihood that AI takes control of humankind or causes a humanity-ending event, such as creating a novel biological weapon or causing the collapse of society due to a large-scale cyber attack or nuclear war.

The New York Times called (p)doom "the morbid new statistic that is sweeping Silicon Valley," with various tech executives cited by the outlet as having estimates ranging from 5 to 50% chance of an AI-driven apocalypse. Yamploskiy places the risk " at 99.999999% ."

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Yamploskiy said because it would be impossible to control advanced AI, our only hope is never to build it in the first place.

"Not sure why he thinks it is a good idea to pursue this technology anyway," Yamploskiy added. "If he is concerned about competitors getting there first, it doesn't matter as uncontrolled superintelligence is equally bad, no matter who makes it come into existence."

'Like a God-like intelligence kid'

Last November, Musk said there was a "not zero" chance the tech could end up "going bad, " but didn't go so far as to say he believed the tech could be humanity-ending if it did.

Though he has been an advocate for the regulation of AI, Musk last year founded a company called xAI , dedicated to further expanding the power of the technology. xAI is a competitor to OpenAI , a company Musk cofounded with Sam Altman before Musk stepped down from the board in 2018.

At the Summit, Musk estimated digital intelligence will exceed all human intelligence combined by 2030. While he maintains the potential positives outweigh the negatives, Musk acknowledged the risk to the world if the development of AI continues on its current trajectory in some of the most direct terms he's used publicly.

"You kind of grow an AGI. It's almost like raising a kid, but one that's like a super genius, like a God-like intelligence kid — and it matters how you raise the kid," Musk said at the Silicon Valley event on March 19, referring to artificial general intelligence . "One of the things I think that's incredibly important for AI safety is to have a maximum sort of truth-seeking and curious AI."

Musk said his "ultimate conclusion" regarding the best way to achieve AI safety is to grow the AI in a manner that forces it to be truthful.

"Don't force it to lie, even if the truth is unpleasant," Musk said of the best way to keep humans safe from the tech. "It's very important. Don't make the AI lie."

Researchers have found that, once an AI learns to lie to humans, the deceptive behavior is impossible to reverse using current AI safety measures, The Independent reported.

"If a model were to exhibit deceptive behavior due to deceptive instrumental alignment or model poisoning, current safety training techniques would not guarantee safety and could even create a false impression of safety," the study cited by the outlet reads.

More troubling, the researchers added that it is plausible that AI may learn to be deceptive on its own rather than being specifically taught to lie.

"If it gets to be much smarter than us, it will be very good at manipulation because it would have learned that from us," Hinton, often referred to as the 'Godfather of AI,' who serves as Musk's basis for his risk assessment of the technology, told CNN . "And there are very few examples of a more intelligent thing being controlled by a less intelligent thing."

Representatives for Musk did not immediately respond to a request for comment from Business Insider.

Watch: Watch an in-depth interview with Elon Musk on Putin, nuclear power and love

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