The Locust

The Locust is the business model that sells to the consumer market.

Nearly all retailers are Locusts. Restaurants are Locusts. Businesses that transport people are
Locusts.

The Locust business needs expensive infrastructure to service, process, and manage an enormous
number of customers and transactions. These fixed assets make Locusts highly vulnerable to small
swings in capacity utilization. A 1 percent drop in customer traffic can be the difference between
profit and loss.

Examples

In 2008, Home Depot (NYSE: HD) recorded 1.4 billion customer transactions. The average sales
transaction was $56.

In 2008, Southwest Airlines (NYSE: LUV) flew 88.5 million "revenue passengers." The average
passenger fare was $119.

Through the fiscal year ending in the spring of 2008, 1-800-Flowers (NASDAQ: FLWS) fulfilled
approximately 11.5 million customer orders. The value of the average order was $65.
The Pig

The Pig is the most volatile of the four business model types.

It never has secure control of its revenue flows.

Its project nature means that the Pig works itself out of a job with its current client.

The Pig never knows when the next project will appear.

Examples

Jacobs Engineering (NYSE: JAC) is an $11 billion company that provides engineering and construction
services for industrial and governmental customers.

Huron Consulting Group (NASDAQ: HURN) provides a wide range of operational and financial
consulting services.

Ecology and Environment (NASDAQ: EEI)is an environmental consulting firm. Since its 1970
incorporation, EEI has completed over 35,000 environmental projects in 83 countries.

The Chicken

The Chicken is in many ways "the best" business model type.

In the Chicken model, each customer is an annuity. He is a source of revenue now and in the future.

While this revenue stream is stable and predictable, there are a couple of downsides to note:

Growth is constrained. Satisfying current customers (proven annuities) takes priority over adding
new ones.

Process innovations and change are often resisted. Maintaining process consistency, and hence
fulfillment of promises made to existing customers, takes precedence over potentially risky internal
modifications.

Examples

Automatic Data Processing (NYSE: ADP) provides payroll and tax filing services to over 585,000
customers.

Brinks Home Security (NYSE: CFL) installs and monitors home security systems. The firm has over one
million commercial and residential customers.

American Medical Alert (NASDAQ: AMAC) provides remote patient monitoring systems to both
individuals and organizations.

The Black Widow

The Black Widow business model serves the long term needs of an all-powerful customer.
The relationship is symbiotic. In exchange for steady work and long term viability, the Black Widow
must accept conditions and requirements imposed upon it by the customer.

The danger lies in the asymmetry within the relationship. The customer needs the Black Widow far
less than the Black Widow needs its dominant customer.

Examples

Wheel maker Superior Industries (NYSE: SUP) has historically depended upon Ford (NYSE: F) and
General Motors (NYSE: GM) for about 85% of total revenues.

Battery maker Greatbatch (NYSE: GB) earns about 65% of its revenues from two customers: Guidant
(owned by Boston Scientific (NYSE: BSX)) and St. Jude (NYSE: STJ).

Todd Shipyards (NYSE: TOD) earns 60% of its total revenues from the US government (the Navy and
the Coast Guard)

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