This presentation discusses profit models and was created by Ziya Boyacigiller, a leading angel investor and mentor in Turkey. It outlines 22 different profit models, including customer solutions, product pyramids, installed base, brand, and low cost business models. Examples are provided for each model to illustrate how companies have designed their business to target profit growth rather than just unit volume growth. The presentation encourages businesses to shift their focus to identifying more valuable opportunities and strategic control points in the value chain.

1. On Profit Models…
Ziya G. Boyacigiller
This presentation was created and given by Ziya
Boyacigiller who was leading Angel Investor and a loved
mentor to many young entrepreneurs in Turkey. We have
shared it on the web for everyone’s benefit. It is free to
use but please cite Ziya Boyacigiller as the source when
you use any part of this presentation. For more about
Ziya Boyacigiller’s contributions to the start-up Ecosystem
of Turkey, please go to www.ziyaboyacigiller.com

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The Profit Zone
How strategic business design will lead you
to tomorrow’s profits
Adrian J. Slywotzky, David J. Morrison

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Market Share Triumphs (!)
• Intel had a high share of memory chips.
• WordPerfect had a high share of word
processor software.
• DEC had a high share of minicomputers
• Kmart had a high share of urban discount
merchandising

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Am I targeting for
Unit Volume Growth?
Conventional Thinking:
1. Gain market share.
2. Profitability will follow.

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Think:
Am I targeting for Profit
Growth?

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Re-Inventor’s Thinking:
A. How can we add value to the customer’s
products / services / business practices?
B. Will the customer allow us to keep some of that
value as profits?
C. Where is the profit zone today?
Where will it be tomorrow?
D. How can we gain market share in that space?

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Shift Focus to
Identify Bigger/More Value

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Value Shift:
Why Good Companies
“Lose It”

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Dimensions of
Business Model Design

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Value Chain

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Strategi
c
Control
Point
Index

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Strategy:
Knowing What to Do, and
What Not to Do

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What is
the value
of my
business
?

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The 22 Profit Models
Or, 22 ways to
make money…

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Profit Models & Examples

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1. Customer Solutions Profit
Invest to know the customer, develop a solution, develop
the relationship (EDS, Broadcom)

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2. Product Pyramid Profit
Base is low-price high-volume, top is high-price low-
volume. (swatch, mattel)
firewall

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3. Multicomponent Profit
Segmentation dependent profitability (hotels, beverages).

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4. Switchboard Profit
For high cost buyer seller markets, reduce costs for everyone
(schwab, expedia.com, hotels.com)

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5. Time Profit
First mover advantage (Time To Market) (intel, sony)

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6. Blockbuster Profit
Small portion of successful products pays for all costs (VC,
films, music, pharmaceuticals)

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7. Profit-Multiplier Profit
Generate additional revenue from same product (disney,
honda)

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8. Entrepreneurial Profit
Overcome size related problems by focusing organization into
smaller units (ABB, Microsoft)

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9. Specialization Profit
Focus strategy (Home Depot, Bebek Bademezmesi)

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10. Installed Base Profit
Razor blade model (copiers, printers, elevators, landscaping)

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11. De Facto Standard Profit
Network effect model (Intel, Microsoft, Oracle)

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12. Brand Profit
Brand means reduced risk, trust, image you like,
etc. (HP, BMW, Sony…)

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13. Specialty Product Profit
New product model (pharmaceuticals, intel, …)
S= specialty
C=commodity

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14. Local Leadership Profit
When physical proximity to customers or suppliers is
important (Starbucks, grocery stores, building materials,…

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15. Transaction Scale Profit
When business is transaction based and costs go down in
tandem with size of transactions (travel, real estate, UPS)

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16. Value Chain Position
Profit
All links of the value chain are not equally profitable.
Best links enable the value chain to exist, are well
protected from competition, and focus on core
competancy/capacity value. (intel/microsoft, read/write
heads, Dolby)

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17. Cycle Profit
When business is designed to function through industry
cycles – keep/raise price when cycle is up (memory chips,
chemicals)

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18. After Sale Profit
Where profit in service and support is higher than in
the product (GE, cell phones)

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19. New Product Profit
When industry is driven by constant change
resulting in new products (PCs, cars, cell phones)

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20. Relative Market Share
Profit
When cost advantage results from high volume purchases,
and experience curve (P&G, amazon.com, wall-mart)

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21. Experience Curve Profit
When experience enables low cost position (emerson
electric, micron)

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22. Low Cost Business Profit
When business focus is on costs and expenses (Tandy,
South West Airlines, Wall-Mart)