Candle

Description

  • Creates or produces something
  • Sells or monetises its own products or services directly as a retail or rental company, maintaining a direct relationship with the person who buys from it, the end user
  • A candle-based business is a “centralised” offering in the same way that a candle has its own flame, has its own wax, burns, and shines its own light

Customer relationship

  • A direct commercial relationship selling your product or service to your customers, and therefore total quality control of delivery

Decision of business model type

  • Are you best off with a direct relationship with the end user, controlling the quality of your product, but more restricted when it comes to scaling your business?
  • If you are in a business that has a physical retail outlet that needs its own relationship with the customer, you may value the ability to sense and respond directly to your clients, despite the temptation to have indirect affiliates

Benefits

  • Can control the revenue flow, due to your direct relationship with the end user
  • Another upside is that the relationship is something you can nurture and grow, remembering that in many cases the best customers are existing customers

Limitations

  • Have a limited market reach because it’s just you, you’re one candle, whereas a mirror can be reflecting as many candles as you like
  • Relatively high marketing costs because you are actually the person who’s funding every single thing that goes to market
  • More difficult to scale

Examples of companies

  • Apple
  • Banks

How revenue is generated

  • Rent/Lease
  • Retail
  • Interest
Mirror

Description

  • Someone else creates something and then amplifying that
  • Not necessarily producing anything themselves
  • They use the capabilities of others instead, and then reflect those things back to their users and consumers
  • Selling or monetising its products and services through a licensed third party, who can be viewed as an enablement framework to allow this
  • These are companies that could shine their own light, and could have their own wax, but they choose to enable other organisations, outlets, entrepreneurs, retailers, distribution functions, or their own franchise holders to be their light
  • In this arrangement, the creator of the product or service doesn’t have a direct commercial customer relationship with the end user
  • This model is characterised by an independent corner shop or general store, or a small online retailer that purely sells and distributes a variety of other people’s products
  • Could be a franchise organisation

Customer relationship

  • Indirect sales relationship with your customer. That also means a total assumptive guidance of quality control via your third party distributors

Decision of business model type

  • Can you dispense with a direct end-customer relationship and therefore scale your enterprise more easily?
  • If you’re in a business where you’ve created something that other people could use which doesn’t include a physical product, then a mirror model would suit best
  • Ultimately, if you can actually afford to lose the end-user relationship, but gain increased market reach, then move more towards the mirror-type models

Benefits

  • Have increased market reach as using affiliates, franchises, or similar, you can gain access to various markets that you wouldn’t necessarily be able to get to on your own as a candle
  • Because of that, you also have lower marketing costs in theory
  • Highly scalable

Limitations

  • Limited control of revenue because you can’t always control the source of what it is you are selling, and nor can you dictate the uses of funds when it’s out in the market
  • Another disadvantage is that it is harder to evaluate how much the customers are actually attracted to what you provide, as there is no direct relationship with the end consumer
  • It can be difficult for companies distributing their products and services through third-party franchises to control the quality of such offerings

Examples of companies

  • AirBnb
  • Uber
  • Facebook
  • IKEA

How revenue is generated

  • Licencing
  • Subscription
  • Advertising
  • Fee-for-Service
  • Donation
Hybrid

Description

  • Hybrid business models are gradations and points along the spectrum between both candle and mirror business, leading to hybrid models along a spectrum from pure candle to pure mirror
  • A company that can sell directly, shining its own light, but which also enables other people to be the purveyors of their light

Customer relationship

  • Some elements of the model requiring a direct relationship with the customer, and some having no end customer touch-point at all

Decision of business model type

  • Perhaps your product offering is best suited to you operating as a hybrid mixture of both?

Examples of companies

  • Amazon

How revenue is generated

  • Commission
  • White-Labelling