From the two business models, “The Five Component Model” and “The Business Model Canvas”, I personally prefer the last of those two. You may ask why? Well, to me the canvas model seems more thorough. The model is based on research, and it is suggested that the model is made in teams. I see myself as a team player, and I like the idea that several people collaborate on designing a business model. The questions are fairly straightforward, yet very in-depth questions. They touch all segments of your business, creating a more thorough business model.

The two models are two completely different models. Here are two main differences:

• The five-component model doesn’t include a representation of the main business goals, e.g. strategic business objectives, critical success factors and key performance indicators, which a holistic business model approach should include. The canvas model offer insight in many areas of business, including: customers, financing, infrastructure, and value-propositions (for example, overall customer experience and outcome)
• The five-component model doesn’t have a clear cause and effect linkages between the competencies, desired outcomes and measurements. Thereby the business model can’t help with possible strategic decisions. The business model canvas is a better fit due to its in-depth questions, making it easier to strategize the decisions of the business.

To add to these differences, I’m a bit surprised that neither of the two business models includes corporate structure & responsibility, which, in my opinion, a business model should include.

A perfect example of listening to customers, and steer your business in a direction that serves what the customers want, is the Greif Packaging case. An internal entrepreneur decided to listen carefully to its customers. He saw there were unmet need and new sources of value to be accessed. Greif converted its business model into a “trip-leasing” company for special chemicals. Their customers didn’t want all the hassle of buying and owning steel drums; they just wanted to move toxic chemicals from A to B efficiently.

Speaking of changing a business model, it is also worth mentioning that businesses have the opportunity grow and expand their business through either franchising or licensing. The primary difference between a franchisee and a licensee is that franchisees can expect to have a much closer relationship with their parent company than their licensee counterparts. Franchisees typically retain rights to the parent company’s trademark and logo. This is important because it is a visible representation of the connection between franchisor and franchisee.

In many ways, franchisees are the public face of the company and so their relationship with the franchisor will be close. For that reason, franchisors usually provide a certain level of training and support to franchisees and their employees. Franchisees can also expect a certain amount of territorial exclusivity as well as controls over the products and services they offer.

The relationship between licensees and the licensing company is looser than the relationship between franchisors and franchisees. In most cases, the licensee does not retain rights to use the company’s trademark. Instead, the licensee is expected to establish its own identity in the marketplace.

Similarly, licensees usually don’t receive exclusive territorial rights. This means that the licensing company is free to sell similar licenses and products to other people in the same geographic area. Licensees also don’t receive much in the way of training or ongoing support from the licensing company.

On the upside, license opportunities are often less expensive than franchises in both the upfront investment and ongoing fees. Once the licensee launches the operation, the relationship with the licensing company is frequently limited to purchasing products whereas franchisees can expect to pay royalties on a go-forward basis.