Simple vs. complex business models

A simple business model addresses a value proposition through one particular product or service. A complex business model addresses a potentially broader value proposition through one or more products and services (SMITH ET AL., 2010). Multiple business models address multiple value propositions through one or more products and services. In order to understand this distinction of business models better, the table below provides definitions and examples:

Comparison of complexity of business models. Source: Antenna, 2018

It is not only important to assess the crucial elements of a business model as discussed in the previous sections (see factsheets on value proposition, value creation and value capture) but to consider also whether a business ought to operate with one or multiple business models. As a company starts out it may find that one single business model makes more sense to cater to a particular value proposition, while at later stages new value proposing markets might require entirely different business models. While a new business model might not be necessary in such case, modified or new products and services can entail complete reconfigurations of the existing business model so that it makes more sense to operate with multiple business models for the operations to function well (CHESBROUGH, 2010). Considering the way to go about commercialising new products and services can lead to more revenue streams and the option to diversify risk. For example, seasonality (people purchase less water during rainy season as additional sources of water are available as found by Spring Health) could make it useful for social enterprises to focus on differing markets to overcome low consumption and thus difficult cash flow periods.

Reflecting on simple or multiple business models is interesting for every safe water enterprise that is considering developing or launching new products, services, expanding to additional markets or would like to increase their revenue streams. In particular when reflecting on the development of new business models to commercialise additional products it is recommended to consider the aspect of simple or multiple business models, especially for safe water businesses working with bottom of the pyramid customers - which is per se a challenging environment asking for innovative ideas.

Methods to reflect on business model decisions - a participatory process with different stakeholders/employees of your company is key - workshop session where the strategy of the social business is discussed; applying the following methodologies:

• Design thinking including prototyping (after creating ideas to see whether it might be feasible or not):
  • Virtual course in design thinking
  • Design-thinking methods
  • Prototyping
• World Café
  • Moderated discussion (with internal or external moderator)
  • Group moderation and facilitation

These methodologies can be used to facilitate discussions. In order to take a decision on simple or multiple business models the following strategic aspects have to be considered:

• What are the advantages / disadvantages of a simple compared to a complex or multiple business model for your serving your specific value proposition in place?
• Make sure that the business models complement and do not substitute each other.
• What is the best solution in order to cater the value proposition in combination with improved value capture best?
• Is the company ready to invest in a new business model (money, time, human resources…)?
• Are there synergies in place that can be used addressing an additional value proposition?
• Abandon the view on the current business model and try to innovate
• Adopt a long-term perspective on your business activities, including a vision with milestones for 5, 10 and 20 years. Update this strategy every year. (CONVERSATION IN GROWTH, 2012)

The case study of TARA in India provides insights of how a multiple business model in the safe water sector can increase the likeliness to breaking even.