Seven Business Model Assessment Questions
Score your business model's structural strength on seven dimensions
The Seven Business Model Assessment Questions provide a structured scoring framework for evaluating the structural quality of a business model design. Each question addresses a different dimension of business model strength, scored on a zero-to-ten scale, allowing teams to identify specific weaknesses and compare alternative models systematically.
The seven dimensions are: switching costs (how locked in are customers), recurring revenues (transactional versus automatic follow-up purchases), earn before spending (cash flow timing), game-changing cost structure (cost advantage versus competitors), others who do the work (value created by external parties for free), scalability (growth limits), and protection from competition (moats against competitors). Together, these dimensions capture whether a business model is designed to create sustainable competitive advantages.
The framework reinforces a critical lesson: great value propositions can fail without great business models. Two businesses with identical technologies and customer segments can produce radically different financial outcomes depending on how the business model is structured. The same diagnostic device sold transactionally might yield half a million in profit, while a consumable-strip recurring revenue model around the same device could yield twenty-three million. The assessment questions help teams find and design toward the stronger model.
- Some business models are better than others by design and will produce substantially different financial results from the same value proposition.
- A great value proposition without a financially sound business model will not survive, even if customers love the product.
- The best business models create structural advantages through switching costs, network effects, and recurring revenue rather than relying solely on product superiority.
- Business model design is a choice; the same technology, team, and market can support radically different models with different outcomes.
- Score Switching CostsEvaluate how difficult it is for customers to leave for a competitor. Score ten if customers are locked in for years through data, habits, or integration. Score zero if nothing prevents them from switching instantly.Pro tipApple's iPod strategy of getting users to copy their entire music library into iTunes is a classic example of creating switching costs through customer investment in the ecosystem.
- Score Recurring RevenuesAssess whether each sale leads to automatic follow-up revenue or requires entirely new selling effort. Score ten if all revenue is automatically recurring. Score zero if every sale is a standalone transaction.Pro tipNespresso transformed transactional coffee sales into recurring revenue by selling consumable pods for their proprietary machines. Look for ways to add consumable, subscription, or service layers.
- Score Earn Before SpendingDetermine whether you collect revenue before or after incurring costs. Score ten if you earn all revenue before costs. Score zero if you pay all costs before earning anything.Pro tipDell disrupted the PC industry by selling directly to consumers and earning revenue before assembling computers, eliminating inventory depreciation risk.
- Score Cost Structure AdvantageCompare your cost structure to competitors. Score ten if your costs are at least thirty percent lower. Score zero if they are at least thirty percent higher.Pro tipSkype and WhatsApp disrupted telecoms by using free internet infrastructure instead of expensive proprietary networks. Look for fundamentally different cost structures, not just efficiency improvements.
- Score Value from External PartiesEvaluate how much value in your business model is created for free by customers or third parties. Score ten if all value is created by external parties for free. Score zero if you bear all value creation costs.Pro tipFacebook's value comes from content produced for free by over a billion users. Platform and marketplace models often score highest on this dimension.
- Score ScalabilityAssess how easily you can grow without facing infrastructure, hiring, or support bottlenecks. Score ten for virtually unlimited growth potential. Score zero if growth requires proportional increases in resources and effort.Pro tipLicensing, franchising, and digital platforms are among the most scalable models. Service businesses with heavy human capital requirements are among the least.
- Score Protection from CompetitionEvaluate the moats your business model creates against competitors. Score ten for substantial, hard-to-overcome competitive barriers. Score zero if you have no structural protection.Pro tipPlatform models with network effects, like Apple's App Store, create powerful moats because the value of the platform increases with each additional participant, making it progressively harder for competitors to replicate.
Nespresso transformed the coffee industry by shifting from transactional coffee bean sales to a razor-blade model with proprietary espresso machines and single-serve pods. On the seven dimensions, they scored high on switching costs (proprietary pod format), recurring revenues (weekly pod purchases), and protection from competition (patents and brand).
IKEA combines flat-pack furniture design, customer self-service, in-house design capability, and a unique retail experience into a business model that has found remarkably few successful imitators despite decades of operation. The model scores well on cost structure advantage, scalability, and protection from competition.
The seven questions emerged from Osterwalder and Pigneur's extensive research into business model patterns for Business Model Generation and were refined for this book. Each question draws from real-world examples of companies that achieved outsized success through superior business model design rather than just superior products.
The questions were designed to be used in workshops as a quick but revealing diagnostic, shifting teams from exclusively thinking about customer value to also thinking about the structural economics that determine whether that value can be captured sustainably.