Guess which business model wins? Begin your evolution today and create the multiplier effect in your own startup organization. Activate your dormant networks. A study by HBR, neatly summarized by Pranay Sanghavi

1. BUSINESS MODEL WINNER
A study by HBR. Summarised by Pranay Sanghavi

2. A NEW
TREND
in the types of business

3. BUSINESS MODEL TYPES
1. Asset Builders
2. Service Providers
3. Technology Creators
4. Network Orchestrators

4. 1. ASSET BUILDERS
➤ These companies build, develop, and lease physical assets to
make, market, distribute, and sell physical things.
➤ Examples include Ford, Wal-Mart, and FedEx.

5. 2. SERVICE PROVIDERS
➤ These companies hire employees who provide services to
customers or produce billable hours for which they charge.
➤ Examples include United Healthcare, Accenture, and JP
Morgan.

6. 3. TECHNOLOGY CREATORS
➤ These companies develop and sell intellectual property such
as software, analytics, pharmaceuticals, and biotechnology.
➤ Examples include Microsoft, Oracle, and Amgen.

7. 4. NETWORK ORCHESTRATORS
➤ These companies create a network of peers in which the
participants interact and share in the value creation.
➤ They may sell products or services, build relationships, share
advice, give reviews, collaborate, co-create and more.
➤ Examples include eBay, Red Hat, and Visa, Uber, Tripadvisor,
and Alibaba.

8. CONCLUSION
S&P 500 Decade Analysis

9. WINNER IS… NETWORK ORCHESTRATORS
➤ Network Orchestrators outperform companies with other business
models on several key dimensions. These advantages include
➡ higher valuations relative to their revenue
➡ faster growth
➡ larger profit margins
➤ Network Orchestrators receive valuations two to four times higher, on
average, than companies with the other business models
➤ Network Orchestrators outperform companies with other business
models on both compound annual growth rate and profit margin
➤ Value creation performed by the network on behalf of the organization
reduces the company’s marginal cost
➡ TripAdvisor.com benefits from its customer’s reviews and AirBnb
leverages its network’s housing assets

10. “Leaders of more traditional
companies are left wondering why
these upstarts merit such high
valuations. Are they more profitable?
Do they see faster growth? Do they
have higher return on assets and
lower marginal costs?
YES.

11. NETWORK ORCHESTRATORS CREATE MORE VALUE.

12. FEW COMPANIES OPERATE AS NETWORK ORCHESTRATORS. WHY?
1. Today’s network-based business models require new
technologies and competencies.
➡ Most corporate leaders are skilled at building, owning, and
managing their own physical assets or people.
➡ Network Orchestrators, however, rely on intangibles such
as knowledge (Gerson Lehrman Group) or relationships
(Facebook), or other people’s assets (Uber) as well as new
“non-management” and “non-ownership” competencies
related to facilitating a network of individuals and their
individual assets and relationships

13. FEW COMPANIES OPERATE AS NETWORK ORCHESTRATORS. WHY?
2. Generally Accepted Accounting Principles (GAAP) categorize
some assets as “assets” (plant property and equipment), others
as expenses (people, training, and intellectual property) and
ignores others (customers, sentiment, and networks)
altogether, frequently resulting in the under-allocation of
capital to intangible assets.
➡ This is especially problematic given that, today, intangible
assets make up approximately 80% of corporate market
value.

14. FEW COMPANIES OPERATE AS NETWORK ORCHESTRATORS. WHY?
3. Standard industry designations result in siloed thinking,
leaving empty space where new business models can enter.
➡ Early 1990s. Most traditional retailers were slow to move
into the online space because they didn’t consider
themselves “technology companies
➡ The online market was left open, and in came a slew of new
players such as Amazon, eBay, and Zappos, who gobbled up
market share and changed the retail game
➡ The power of networks is creating a new cross-industry
transformation. Uber and Lyft are affecting the taxi
industry; how Airbnb is affecting the hotel industry

15. FEW COMPANIES OPERATE AS NETWORK ORCHESTRATORS. WHY?
4. business models are tightly integrated into all parts of a
company, and are therefore daunting to change
➡ Changing business model requires changing capital
allocation,
➡ But most companies follow the same allocation patterns
year after year, despite dramatic changes in the business
environment.

16. CO-CREATE
VALUE
Recommendations to Leaders

17. HOW TO BECOME A NETWORK ORCHESTRATOR?
➤ Assess your business model: Understand your current
model, preferences, biases of leadership team members,
capital allocation
➤ Inventory your network assets: Take stock of your
customers, employees, partners, suppliers, distributors, and
investors, and determine which have the greatest potential.
➤ Reallocate your capital to networks: Divert at least 5% to
10% of investment capital to activating your networks. Take
experimental approach, and adapt.
➤ Add network KPIs: Add indicators such as number of
participants, their sentiment, and level of engagement to
provide direction.

18. BOTTOMLINE
Begin your evolution today

19. Summarised by Pranay Sanghavi.
Original article here.