Types of Business Models and Organization Design

A business model is an outline of how a company plans to make money with its product that it delivers to customers in a specific market. A company makes money by applying its resources to specific processes to get to the desired profit formula. This is a simple illustration that has been employed by Professor Clayton Christensen from Harvard Business School. First, the company provides a value proposition then looks at its resources and tries to figure out what processes are needed to produce those products and services, reduce expenses, increase efficiency, etc… then it measures the expected profit. If the profit is not satisfactory, the company goes through the steps all over again and tries to change and play with the different variables until it reaches the desired profit formula.

Because there are many types of businesses, business models are constantly changing. Those business models are actually based on the idea in which the simplified solution can always be delivered to customers in a cost-effective way.

Because of that, there are three types of business models and each type deals with specific problems, products, and services. If you try to force a product into the wrong type of business model you will certainly fail as a business. This is another vital reason why as an Optometrist you can’t be doing everything for everybody. This explains why as a successful Optometrist you have to limit your work at what you do best.

Professor Øystein D Fjeldstad at BI Norwegian Business School defined many types of business models and organization designs. He emphasized value-adding, problem-solving, and subscription-based business models.

A value-adding model for example deals with providing products and services that their results are 100% predictable. For example, you prescribe an optical frame that provides with absolute certainty the corrected vision you received in the testing room.

A Problem-solving model or a solution shop business model provides consultancy independent of whether the customer will receive an added value or not. For example, an OCT will only show if a patient has a retinal problem or not but it does not correct the problem. A Topography will only show if a patient has keratoconus or not but it never corrects it and never perfects or adds value to the patient’s state. If we mix OCTs and topographies with optical dispensing as processes in the same business model that would be completely wrong. We will never be able to calculate our true profit formula. Because the price a patient will pay for any procedure will be full of overheads that we cannot eliminate and we cannot explain.

A third business model is a subscription business model employed in services that require a subscription like magazines and CE sessions.

A fourth business model we can think of, is the network business model where members of the network contribute content that creates value to other members and to the network itself. Certainly, the products created in a network business model can never be employed in the other two or three types of previous business models.