Simplify Business Models

There's something pure about the simple "two-party sale" business model: a customer pays money to a producer to purchase a product. It's a one-time transaction. The entire value the producer gets is the agreed price. The entire value for the customer is the product. The producer gets the money outright, and the customer gets the product outright. Assuming there is no fraud or defect in the product or the payment, there is no more to the transaction.

It's pure because it's easy to understand. And as either a customer or a producer, it's easy to "calculate" the value you need out of the transaction. Producers can figure out what minimum price they need to make enough profit to continue their operations, and what maximum price the market will bear. Each customer can imagine the use they have for the product, and decide what cash value they're willing to part with to get it. There are very few variables, and each party can understand the variables they need to enter into a transaction.

It's Often Not That Simple

There are few businesses with such simple models. The stickers and adware on new PCs are ugly, user-hostile reminders that the PC-maker has other customers than the person who buys the computer. Product placement in TV and movies are reminders that producers had other customers than the audience to please.

The principle is that another source of revenue represents another customer with unique needs. This means your project isn't just serving a single "job to be done". Whenever you get away from the pure model of 1 customer and 1 producer per transaction, you get complicated interactions of what jobs different people are hiring your product to do. Like waves in a pool they can interact in interesting ways.

Advertising Complicates Transactions

Advertising makes for an antagonistic interaction of the jobs to be done by each customer. Take blogging as an example. The advertiser is a customer of the blogger, along with the reader. The reader pays no money for articles, but he does pay with his attention. Attention won't pay the blogger's bills, but it can be resold to advertisers. The advertiser gets no real value from the producer's product, but they will pay for the reader's attention. Except the reader doesn't need the advertisement. At all.

Without the reader, the advertiser doesn't care. Without the advertiser, the producer can't get enough cash out of readers. It's a tenuous balance.

Is it any wonder that some customers get ignored with all these interacting expectations? I have always been involved in businesses with complex customer-producer relationships, and the complexity has been problematic in each one. Even if serving one customer doesn't directly hurt another (and often it does), it will at the very least take focus.

No one expects all relationships to be easy, but I will keep this in mind for the next business that I start: I would like a clear relationship where all my customers have the same job to be done.

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Posted by Steve on 2012-05-24 20:27:00