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How would be the major differences between a centralised platform business model , a central franchise model & a distributed model?

We seek to understand the major differences in those operating models for our online platform startup.
We are looking to see what would be the benefits or obstacles in terms of governance, revenue models, scalability and risk with a online collaboration platform model.

Filed under: Business Strategy: Franchising, Distribution

3 answers • 11 years ago

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Aaron Vidas, Founder + CEO, StrategyBox answered:

Before you weigh the pros and cons of different platforms structures it's important to think about who your customers are and how you want the business to grow.

I help companies find their most profitable customers and have worked with pre-revenue to high-growth $70M+ companies in the SaaS, consumer products and professional service spaces. We usually start our work by aligning around what the vision for the company is asking questions like "Where do we want to be in 3 years? Why?"

From there we think about how customers will encounter and use the product, asking:

- "Is it a business where relationships and high company involvement is needed after a sale is made?" A centralised business model is a good fit (more quality control).
- "Are we a service based business seeking to minimize risk while expanding?" Then a franchise model is better.

A business model/structure tumbles out having clear answers to these questions. One business structure is not inherently better than another. You're just picking the structure that best facilitates your business goals. Don't hesitate to contact me if you'd like to discuss your potential business model in more detail.

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Sean Goldsmith, International Franchise Facilitator answered:

What product or service are you selling, to who and where in the world?

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JD Carluccio, Entrepreneur,, Head of Product, Consultant answered:

For an Online collaborative platform (this are general concepts and don't apply to every case scenario)

Centralised platform
Governance: High control of the use of the platform - who and what they share, what they sell, adds, inbound links - comments. You can keep it tight
Revenue: depends if the platform focus on products, projects, content. It does not depend directly on the type of governance but in the mix between the business model + customers or users it serves
Scalability: small. Centralized platform are limited because users don't feel free to share/comment. It has less virality, it doesnt mean that your user base is small. The psychological effect of control (centralized) limits sometimes the creativity and imagination of the community that uses it
Risk: lower risk due to a more control.

Central Franchise
Governance: You control some features or general rules of how to use the platform but users buy the possibility of using it as they want. The lack of control can bring people that have their personal objectives different from your own vision. Be careful. Can get risky
Revenue: like before it depends, but usually its a double channel, of subscription (in case you create a top premium option) and a % of the money that comes through the users platforms (need to control payments)
Scalability: Higher. Unleash creativity and create different communities. You still need to help each of them identify their correct user base.
Risk: higher. bulling, illegal activities, troll. You loose control, some bad things could happen.

Distributed model
this one is so complex I can't even write it down :)

That said, this is a great question but also a very complicated one. Depending on what kind of products/users you are working with the strategy could totally change. If you want to go deep into this give me a call so I can understand more your product/company/team.

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