Transitional Business Models In A Nutshell

A transitional business model is used by companies to enter a market (usually a niche) to gain initial traction and prove the idea is sound. The transitional business model helps the company secure the needed capital while having a reality check. It helps shape the long-term vision and a scalable business model.

Tesla: from electric sport’s car to everyone’s electric car

It was 2006, when Tesla, with his co-founder Martin Eberhard, launched a sport’s car which broke down the trade-off between high performance and fuel efficiency.

Tesla, which for a few years had been building up an electric sport’s car ready to be marketed, finally pulled it off.

As Elon Musk would explain Back in 2012: “In 2006 our plan was to build an electric sports car followed by an affordable electric sedan, and reduce our dependence on oil…delivering Model S is a key part of that plan and represents Tesla’s transition to a mass-production automaker and the most compelling car company of the 21st century.”


Tesla had to find an effective market entry strategy that would enable it to validate the market.

The transitional business model in a nutshell

When companies like Tesla start to roll out their business models, they go through a phase of what I like to call the “transitional business model.”

A transitional business model is a model used for traction, in a market that doesn’t have to be big, or initially scalable.

If we break down business strategy in three core parts:

A transitional business model is a model that will serve the purpose of gaining initial traction and market validation.

Therefore, it will help for the sake of the market entry and it will help also shape the long-term vision as it gets rolled out. 

A transitional business model might seem obsolete in hindsight, yet that is the same model, which proves the viability of the idea while keeping it alive.

A transitional business model might not be scalable. Yet, that is the model that will help create an initial positioning, and get the funding (revenues, or capital) needed to roll out the scalable business model.

A transitional business model might not have a long-term vision, and yet it will help shape it.

Thus, a transitional business model works in the short-term to validate the market, to enable the technology and its ecosystem to mature while still having a reality check. 

This is the core premise of a renewed business playbook, that doesn’t just rely on growth capital. It moves by (also) securing growth capital, but then it validates the market, step by step. 

There are plenty of examples of transitional business models: 

  • Facebook, a former college social network would open up to anyone just later on, as it gained substantial traction. 
  • Netflix, moved from DVD rental company to streaming platform, only much later. 
  • Google, before building the most powerful advertising machine ever built, it sold advertising through its salespeople. 

Key takeaway

Strategies take years to roll out entirely, and they might seem trivial only in hindsight. A transitional business model helps validating a strategy, before it starts to get rolled out.

As strategies take years to fully release their potential. Before committing a whole business to the desired path, a transitional business model helps to understand whether that is the right direction.

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FourWeekMBA Business Toolbox

Business Engineering


Tech Business Model Template

A tech business model is made of four main components: value model (value propositions, missionvision), technological model (R&D management), distribution model (sales and marketing organizational structure), and financial model (revenue modeling, cost structure, profitability and cash generation/management). Those elements coming together can serve as the basis to build a solid tech business model.

Web3 Business Model Template

A Blockchain Business Model according to the FourWeekMBA framework is made of four main components: Value Model (Core Philosophy, Core Values and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics/incentives through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.

Asymmetric Business Models

In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.

Business Competition

In a business world driven by technology and digitalization, competition is much more fluid, as innovation becomes a bottom-up approach that can come from anywhere. Thus, making it much harder to define the boundaries of existing markets. Therefore, a proper business competition analysis looks at customer, technology, distribution, and financial model overlaps. While at the same time looking at future potential intersections among industries that in the short-term seem unrelated.

Technological Modeling

Technological modeling is a discipline to provide the basis for companies to sustain innovation, thus developing incremental products. While also looking at breakthrough innovative products that can pave the way for long-term success. In a sort of Barbell Strategy, technological modeling suggests having a two-sided approach, on the one hand, to keep sustaining continuous innovation as a core part of the business model. On the other hand, it places bets on future developments that have the potential to break through and take a leap forward.

Transitional Business Models

A transitional business model is used by companies to enter a market (usually a niche) to gain initial traction and prove the idea is sound. The transitional business model helps the company secure the needed capital while having a reality check. It helps shape the long-term vision and a scalable business model.

Minimum Viable Audience

The minimum viable audience (MVA) represents the smallest possible audience that can sustain your business as you get it started from a microniche (the smallest subset of a market). The main aspect of the MVA is to zoom into existing markets to find those people which needs are unmet by existing players.

Business Scaling

Business scaling is the process of transformation of a business as the product is validated by wider and wider market segments. Business scaling is about creating traction for a product that fits a small market segment. As the product is validated it becomes critical to build a viable business model. And as the product is offered at wider and wider market segments, it’s important to align product, business model, and organizational design, to enable wider and wider scale.

Market Expansion Theory

The market expansion consists in providing a product or service to a broader portion of an existing market or perhaps expanding that market. Or yet, market expansions can be about creating a whole new market. At each step, as a result, a company scales together with the market covered.



Asymmetric Betting


Growth Matrix

In the FourWeekMBA growth matrix, you can apply growth for existing customers by tackling the same problems (gain mode). Or by tackling existing problems, for new customers (expand mode). Or by tackling new problems for existing customers (extend mode). Or perhaps by tackling whole new problems for new customers (reinvent mode).

Revenue Streams Matrix

In the FourWeekMBA Revenue Streams Matrix, revenue streams are classified according to the kind of interactions the business has with its key customers. The first dimension is the “Frequency” of interaction with the key customer. As the second dimension, there is the “Ownership” of the interaction with the key customer.

Revenue Modeling

Revenue model patterns are a way for companies to monetize their business models. A revenue model pattern is a crucial building block of a business model because it informs how the company will generate short-term financial resources to invest back into the business. Thus, the way a company makes money will also influence its overall business model.

Pricing Strategies

A pricing strategy or model helps companies find the pricing formula in fit with their business models. Thus aligning the customer needs with the product type while trying to enable profitability for the company. A good pricing strategy aligns the customer with the company’s long term financial sustainability to build a solid business model.

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