This is part 2 of my “Business Thinking for UX & UI Designers” series. If you’re interested, check out part 1 right here.
In the last article, we went over the basics of business thinking and two important concepts: industry and competitive analysis.
In this article, we’ll dive into the company level and talk about:
Let’s get started.
According to Investopedia, a business model refers to a company’s plan for making a profit.
Or, in other words, to make money.
At its core, a business model explains four things:
With these in mind, let’s go over the different types of business models.
Giving a product or service away for free. Then charging later when customers need more features or services to get the most use out of the product.
Example(s): Spotify, LinkedIn, Skype, and Mailchimp.
A platform where a fee or percentage of a sale is taken in without managing the inventory being exchanged in the sale.
Example(s): Airbnb and Etsy.
In exchange for a regular fee, customers have ongoing access to a product or service. This applies to both traditional brick-and-mortar businesses and online businesses alike.
Example(s): Netflix, Hulu, and Disney+.
Selling directly to customers by forgoing retail partners. This allows a manufacturer to lower costs and own the full relationship with the customer.
Example(s): Casper, Warby Parker, and Dell.
A company licenses the use of its business model, brand, and the rights to sell its products or services.
Example(s): Starbucks, McDonald's, Allstate, and H&R Block.
Selling products and services with minimal interaction between the company and the customer.
Example(s): IKEA, EasyJet, and SurveyMonkey.
A low profit-margin product that requires high-cost or high-regularity companion products.
Example(s): Xbox, printer, and ink companies.
A high profit-margin product that comes with low-cost companions product.
Selling two or more products together as a single unit, often for a lower price than they would charge selling the products separately.
Example(s): AT&T, Adobe Creative Suite, and Burger King.
Now, let’s go over how to understand and design business models. There are two diagrams you can use:
This diagram helps you answer four basic questions
This consists of four building blocks
While a business model describes how an organization creates and captures value, business strategies are how an organization aims to do those better than competitors.
In general, the business strategy explains how a company tries to beat the competition.
In the article “7 Things Every Designer Should Know About Business”, Alen Faljic goes over what is and what isn’t a strategy.
To gain a competitive advantage, there are three generic strategies companies use:
It’s important to note that these three business strategies explain how you compete in an existing market.
But, a Blue Ocean Strategy explains how you escape competition by creating new markets by combining cost-leadership and differentiation.
Some prime examples are Airbnb, Skype, Zappos, and Salesforce.
To evaluate the health of a company, here are four basic perspectives:
Traditional and cumulative view of company success. It looks at the monetary results of past decisions.
Focuses on the people who buy a company’s products and the value provided to them.
Efficiency is the focus here as well as how smoothly processes and teams are running.
This is all about employees. What are the key skills to be developed, the core processes needed to create products and services, and the cultural environment needed for success?
And that’s a wrap for part 2 of the series “Business Thinking for UX & UI Designers”!
In the next and final article, we’ll go over topics such as prototyping with numbers, design metrics, and more!
Thank you for being awesome and reading this far! :)
If you have any questions, feel free to reach out on LinkedIn, Twitter, or by email. Will love to set up a casual call and chat!