How to select the right business model to create a top product or service
Every business or company that you can think of has one thing in common — they all started with an idea. A good idea can solve a problem or increase the current value. It doesn’t matter whether an idea is put forward to tackle an unsolved problem or whether it simply involves applying an existing solution to a new context in order to upgrade certain products or services. It’s all about the idea that will inspire you to take action and create value by changing your environment. When you are stricken by a certain brilliant idea, and you experience that burst of energy and fulfillment, make sure you utilize that energy as a motivation source, because the hardest part of the work is just about to start.
Business model
Business model is the first guideline that will explain the whole concept of your idea and put it in a form that will be understandable to your partners, distributors, potential investors and every other stakeholder. The simplest explanation of business model is “the way you will make money,” but I like to observe it from more complex view which helps you to understand not just the source of cash flow but the whole economic value of your business.
How to pick the right business model
Developing a business model should be a process, and not a copy-paste from the internet. Sure, you can find a lot of “finished business models,” but going through the whole process will give you the opportunity to focus on the right details about your business and learn more as you progress. It will also give you an insight into potential problems and expose additional strengths. Once you are done, the final product of your work will probably look like something you can find online, but that is not the point — the point of doing this is to get the bigger picture of where you are and where you are heading. To guide you through the process of developing a business model, I will introduce you to the Business Model Canvas, a great way to set up your business model that will be tailored to your unique business idea.
The Business Model Canvas was developed by Alexander Osterwalder, co-founder of strategyzer.com and author of “Business Model Generation”, a book that sold a million copies in 30 languages. His canvas consists of nine components: customer segments, value propositions, channels, customer relationship, revenue streams, resources, activities, partnerships and costs.
Business Model Canvas
The Business Model Canvas was invented after an exhaustive study on literature on business models. There are a lot of definitions of business models and guidelines on how to conduct one, so the Business Model Canvas came as a solution that unites the most important parts of all existing business model guides. After the Business Model Canvas was invented, it was tested with entrepreneurs to make sure it works. This idea was firstly used by 3M and Deloitte and later adopted by the Lean Startup movement, and it has a lot of history in helping entrepreneurs to create unique business models while keeping everything simple.
The learn more about how the Business Model Canvas works, visit strategyzer.com, founded by Alexander Osterwalder himself.
New product/service development process
There are several approaches to building an innovative product or starting a new service. In this chapter we’ll cover the three most common ones; firstly, the “Build it and they will come” approach, then the less risky “Incremental planning“ approach, and lastly the “Build, test, fix” approach, which is most frequently used by startups.
Build it and they will come
This approach can usually be seen among new businesses where the novice founders have a strong passion for promoting a certain product or service, but lack the experience in marketing analysis. The assumptions that they have and make are often based on their individual perception and disregard the factual evidence of the market conditions for a certain product or service. The steps that the founders deal with in this approach include:
- Building a product or designing a new service based on nothing but mere assumptions about the future customers and market conditions
- Turning to investors for funding and getting turned down due to insufficient evidence that there really is a need for the product or service
- Advertising the product with a continual increase in advertising budget
- Getting frustrated when the people do not flock to buy the product or service
However, this approach is not destined to fail each time and surely, there will always be examples of people who used this approach and still achieved success. Some of them might have simply gotten lucky, while others may be really good at recognizing the human needs and trends in the industry — which ultimately gives them a small advantage when using this approach. Still, there are a lot more people who have even invested their life savings into building a product that no one wanted to buy.
The point being is that, in the era of digital marketing, where you can measure almost everything and where information is more accessible than ever, you shouldn’t make decisions based only on your subjective perception. Developing a new product without a detailed market research is risky and can be extremely expensive if it backfires.
We will continue to publish certain parts of my free e-book From Zero to Business Hero over time so you get the feeling on value of all the material covered thoroughly in it and invite you to check out the book for yourself at FromZerotoBusinessHero.com.
There is even a big giveaway worth $55K exclusive for the readers (page 125).
We hope you’ll like it as much as we’ve enjoyed working on it.
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