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What Is a Business Model?

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Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

new product business model

The term business model refers to a company's plan for making a profit . It identifies the products or services the business plans to sell, its identified target market , and any anticipated expenses . Business models are important for both new and established businesses. They help new, developing companies attract investment, recruit talent, and motivate management and staff.

Established businesses should regularly update their business model or they'll fail to anticipate trends and challenges ahead. Business models also help investors evaluate companies that interest them and employees understand the future of a company they may aspire to join.

Key Takeaways

  • A business model is a company's core strategy for profitably doing business.
  • Models generally include information like products or services the business plans to sell, target markets, and any anticipated expenses.
  • There are dozens of types of business models including retailers, manufacturers, fee-for-service, or freemium providers.
  • The two levers of a business model are pricing and costs.
  • When evaluating a business model as an investor, consider whether the product being offered matches a true need in the market.

Investopedia / Laura Porter

A business model is a high-level plan for profitably operating a business in a specific marketplace. A primary component of the business model is the value proposition . This is a description of the goods or services that a company offers and why they are desirable to customers or clients, ideally stated in a way that differentiates the product or service from its competitors.

A new enterprise's business model should also cover projected startup costs and financing sources, the target customer base for the business, marketing strategy , a review of the competition, and projections of revenues and expenses. The plan may also define opportunities in which the business can partner with other established companies. For example, the business model for an advertising business may identify benefits from an arrangement for referrals to and from a printing company.

Successful businesses have business models that allow them to fulfill client needs at a competitive price and a sustainable cost. Over time, many businesses revise their business models from time to time to reflect changing business environments and market demands .

When evaluating a company as a possible investment, the investor should find out exactly how it makes its money. This means looking through the company's business model. Admittedly, the business model may not tell you everything about a company's prospects. But the investor who understands the business model can make better sense of the financial data.

A common mistake many companies make when they create their business models is to underestimate the costs of funding the business until it becomes profitable. Counting costs to the introduction of a product is not enough. A company has to keep the business running until its revenues exceed its expenses.

One way analysts and investors evaluate the success of a business model is by looking at the company's gross profit . Gross profit is a company's total revenue minus the cost of goods sold (COGS). Comparing a company's gross profit to that of its main competitor or its industry sheds light on the efficiency and effectiveness of its business model. Gross profit alone can be misleading, however. Analysts also want to see cash flow or net income . That is gross profit minus operating expenses and is an indication of just how much real profit the business is generating.

The two primary levers of a company's business model are pricing and costs. A company can raise prices, and it can find inventory at reduced costs. Both actions increase gross profit. Many analysts consider gross profit to be more important in evaluating a business plan. A good gross profit suggests a sound business plan. If expenses are out of control, the management team could be at fault, and the problems are correctable. As this suggests, many analysts believe that companies that run on the best business models can run themselves.

When evaluating a company as a possible investment, find out exactly how it makes its money (not just what it sells but how it sells it). That's the company's business model.

Types of Business Models

There are as many types of business models as there are types of business. For instance, direct sales, franchising , advertising-based, and brick-and-mortar stores are all examples of traditional business models. There are hybrid models as well, such as businesses that combine internet retail with brick-and-mortar stores or with sporting organizations like the NBA .

Below are some common types of business models; note that the examples given may fall into multiple categories.

One of the more common business models most people interact with regularly is the retailer model. A retailer is the last entity along a supply chain. They often buy finished goods from manufacturers or distributors and interface directly with customers.

Example: Costco Wholesale

Manufacturer

A manufacturer is responsible for sourcing raw materials and producing finished products by leveraging internal labor, machinery, and equipment. A manufacturer may make custom goods or highly replicated, mass produced products. A manufacturer can also sell goods to distributors, retailers, or directly to customers.

Example: Ford Motor Company

Fee-for-Service

Instead of selling products, fee-for-service business models are centered around labor and providing services. A fee-for-service business model may charge by an hourly rate or a fixed cost for a specific agreement. Fee-for-service companies are often specialized, offering insight that may not be common knowledge or may require specific training.

Example: DLA Piper LLP

Subscription

Subscription-based business models strive to attract clients in the hopes of luring them into long-time, loyal patrons. This is done by offering a product that requires ongoing payment, usually in return for a fixed duration of benefit. Though largely offered by digital companies for access to software, subscription business models are also popular for physical goods such as monthly reoccurring agriculture/produce subscription box deliveries.

Example: Spotify

Freemium business models attract customers by introducing them to basic, limited-scope products. Then, with the client using their service, the company attempts to convert them to a more premium, advance product that requires payment. Although a customer may theoretically stay on freemium forever, a company tries to show the benefit of what becoming an upgraded member can hold.

Example: LinkedIn/LinkedIn Premium

Some companies can reside within multiple business model types at the same time for the same product. For example, Spotify (a subscription-based model) also offers a free version and a premium version.

If a company is concerned about the cost of attracting a single customer, it may attempt to bundle products to sell multiple goods to a single client. Bundling capitalizes on existing customers by attempting to sell them different products. This can be incentivized by offering pricing discounts for buying multiple products.

Example: AT&T

Marketplace

Marketplaces are somewhat straight-forward: in exchange for hosting a platform for business to be conducted, the marketplace receives compensation. Although transactions could occur without a marketplace, this business model attempts to make transacting easier, safer, and faster.

Example: eBay

Affiliate business models are based on marketing and the broad reach of a specific entity or person's platform. Companies pay an entity to promote a good, and that entity often receives compensation in exchange for their promotion. That compensation may be a fixed payment, a percentage of sales derived from their promotion, or both.

Example: social media influencers such as Lele Pons, Zach King, or Chiara Ferragni.

Razor Blade

Aptly named after the product that invented the model, this business model aims to sell a durable product below cost to then generate high-margin sales of a disposable component of that product. Also referred to as the "razor and blade model", razor blade companies may give away expensive blade handles with the premise that consumers need to continually buy razor blades in the long run.

Example: HP (printers and ink)

"Tying" is an illegal razor blade model strategy that requires the purchase of an unrelated good prior to being able to buy a different (and often required) good. For example, imagine Gillette released a line of lotion and required all customers to buy three bottles before they were allowed to purchase disposable razor blades.

Reverse Razor Blade

Instead of relying on high-margin companion products, a reverse razor blade business model tries to sell a high-margin product upfront. Then, to use the product, low or free companion products are provided. This model aims to promote that upfront sale, as further use of the product is not highly profitable.

Example: Apple (iPhones + applications)

The franchise business model leverages existing business plans to expand and reproduce a company at a different location. Often food, hardware, or fitness companies, franchisers work with incoming franchisees to finance the business, promote the new location, and oversee operations. In return, the franchisor receives a percentage of earnings from the franchisee.

Example: Domino's Pizza

Pay-As-You-Go

Instead of charging a fixed fee, some companies may implement a pay-as-you-go business model where the amount charged depends on how much of the product or service was used. The company may charge a fixed fee for offering the service in addition to an amount that changes each month based on what was consumed.

Example: Utility companies

A brokerage business model connects buyers and sellers without directly selling a good themselves. Brokerage companies often receive a percentage of the amount paid when a deal is finalized. Most common in real estate, brokers are also prominent in construction/development or freight.

Example: ReMax

There is no "one size fits all" when making a business model. Different professionals may suggest taking different steps when creating a business and planning your business model. Here are some broad steps one can take to create their plan:

  • Identify your audience. Most business model plans will start with either defining the problem or identifying your audience and target market . A strong business model will understand who you are trying to target so you can craft your product, messaging, and approach to connecting with that audience.
  • Define the problem. In addition to understanding your audience, you must know what problem you are trying to solve. A hardware company sells products for home repairs. A restaurant feeds the community. Without a problem or a need, your business may struggle to find its footing if there isn't a demand for your services or products.
  • Understand your offerings. With your audience and problem in mind, consider what you are able to offer. What products are you interested in selling, and how does your expertise match that product? In this stage of the business model, the product is tweaked to adapt to what the market needs and what you're able to provide.
  • Document your needs. With your product selected, consider the hurdles your company will face. This includes product-specific challenges as well as operational difficulties. Make sure to document each of these needs to assess whether you are ready to launch in the future.
  • Find key partners. Most businesses will leverage other partners in driving company success. For example, a wedding planner may forge relationships with venues, caterers, florists, and tailors to enhance their offering. For manufacturers, consider who will provide your materials and how critical your relationship with that provider will be.
  • Set monetization solutions. Until now, we haven't talked about how your company will make money. A business model isn't complete until it identifies how it will make money. This includes selecting the strategy or strategies above in determining your business model type. This might have been a type you had in mind but after reviewing your clients needs, a different type might now make more sense.
  • Test your model. When your full plan is in place, perform test surveys or soft launches. Ask how people would feel paying your prices for your services. Offer discounts to new customers in exchange for reviews and feedback. You can always adjust your business model, but you should always consider leveraging direct feedback from the market when doing so.

Instead of reinventing the wheel, consider what competing companies are doing and how you can position yourself in the market. You may be able to easily spot gaps in the business model of others.

Criticism of Business Models

Joan Magretta, the former editor of the Harvard Business Review, suggests there are two critical factors in sizing up business models. When business models don't work, she states, it's because the story doesn't make sense and/or the numbers just don't add up to profits. The airline industry is a good place to look to find a business model that stopped making sense. It includes companies that have suffered heavy losses and even bankruptcy .

For years, major carriers such as American Airlines, Delta, and Continental built their businesses around a hub-and-spoke structure , in which all flights were routed through a handful of major airports. By ensuring that most seats were filled most of the time, the business model produced big profits.

However, a competing business model arose that made the strength of the major carriers a burden. Carriers like Southwest and JetBlue shuttled planes between smaller airports at a lower cost. They avoided some of the operational inefficiencies of the hub-and-spoke model while forcing labor costs down. That allowed them to cut prices, increasing demand for short flights between cities.

As these newer competitors drew more customers away, the old carriers were left to support their large, extended networks with fewer passengers. The problem became even worse when traffic fell sharply following the September 11 terrorist attacks in 2001 . To fill seats, these airlines had to offer more discounts at even deeper levels. The hub-and-spoke business model no longer made sense.

Example of Business Models

Consider the vast portfolio of Microsoft. Over the past several decades, the company has expanded its product line across digital services, software, gaming, and more. Various business models, all within Microsoft, include but are not limited to:

  • Productivity and Business Processes: Microsoft offers subscriptions to Office products and LinkedIn. These subscriptions may be based off product usage (i.e. the amount of data being uploaded to SharePoint).
  • Intelligent Cloud: Microsoft offers server products and cloud services for a subscription. This also provide services and consulting.
  • More Personal Computing: Microsoft sells physically manufactured products such as Surface, PC components, and Xbox hardware. Residual Xbox sales include content, services, subscriptions, royalties, and advertising revenue.

A business model is a strategic plan of how a company will make money. The model describes the way a business will take its product, offer it to the market, and drive sales. A business model determines what products make sense for a company to sell, how it wants to promote its products, what type of people it should try to cater to, and what revenue streams it may expect.

What Is an Example of a Business Model?

Best Buy, Target, and Walmart are some of the largest examples of retail companies. These companies acquire goods from manufacturers or distributors to sell directly to the public. Retailers interface with their clients and sell goods, though retails may or may not make the actual goods they sell.

What Are the Main Types of Business Models?

Retailers and manufacturers are among the primary types of business models. Manufacturers product their own goods and may or may not sell them directly to the public. Meanwhile, retails buy goods to later resell to the public.

How Do I Build a Business Model?

There are many steps to building a business model, and there is no single consistent process among business experts. In general, a business model should identify your customers, understand the problem you are trying to solve, select a business model type to determine how your clients will buy your product, and determine the ways your company will make money. It is also important to periodically review your business model; once you've launched, feel free to evaluate your plan and adjust your target audience, product line, or pricing as needed.

A company isn't just an entity that sells goods. It's an ecosystem that must have a plan in plan on who to sell to, what to sell, what to charge, and what value it is creating. A business model describes what an organization does to systematically create long-term value for its customers. After building a business model, a company should have stronger direction on how it wants to operate and what its financial future appears to be.

Harvard Business Review. " Why Business Models Matter ."

Bureau of Transportation Statistics. " Airline Travel Since 9/11 ."

Microsoft. " Annual Report 2023 ."

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Guide to business model innovation: Strategies and examples

new product business model

In an ever-changing world, business model innovation is something every product manager and entrepreneur should focus on.

Guide To Business Model Innovation: Strategies And Examples

Business models that were solid a few months back might be irrelevant today, especially if we look at ever-increasing technological advances. If I had a penny for every business model that has had to pivot due to the advent of ChatGPT, I could retire today.

In this guide, I’ll show you how you can demystify business model innovation by simply asking the right questions.

What is a business model?

Let’s start with a high-level overview of what a business model actually is. You’ve probably already seen Strategyzer’s famous business model canvas at least once:

Business Model Canvas Template

This business model canvas is one of the most common approaches to describing a business model. It includes answers to nine key questions:

  • Customer segments — For whom are you creating value?
  • Value proposition — What value do you deliver to customers?
  • Channels — How are you reaching your customers?
  • Customer relationship — What type of relationship do you establish with your customers?
  • Key partners — Who are your key partners and suppliers?
  • Key activities — What do you need to do to deliver the value proposition for your customers?
  • Key resources — What key resources do your value proposition and distribution channels require?
  • Revenue streams — How much value do you capture from your value delivery activities?
  • Cost structure — How much does maintaining the business model cost you?

If you can get a good answer to all these questions, the overall strategy for your business is solid and self-supporting.

However, the business innovation canvas is just a template. Depending on the maturity of your company, you might need something more lightweight or more robust.

Ultimately, what you need is clarity regarding three critical areas of business operation:

  • Value creation — What value do you offer to the market?
  • Value delivery — How do you ensure the market discovers your value proposition?
  • Value capture — How do you benefit from delivering that value?

Business Model Innovation

In this article, I’ll focus on the more lightweight approach to business model innovation. It’ll make it more applicable for product managers, who often work only on a product-oriented part of the business model.

What is business model innovation?

Building a business model is similar to everything we do in a product and agile environment. Any guesses?

Yes! We do it iteratively!

In the past, we often worked thoroughly to establish a very detailed business model, probably got a company loan for that, and then spent years executing that model. In the modern world, this approach doesn’t work. Things just change too fast.

Today, business models are not planned; they are discovered. The best approach is to adjust, inspect, and adapt your business model iteratively:

Business Model Innovation Is A Circular Process

That’s what business model innovation is. It’s a never-ending, iterative process of discovering the best business model given current micro and macro circumstances.

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Strategies to innovate on your business model

Now let’s try to put the theory into practice. Although there is no “right” approach to iterating on one business model, the lightweight process I prefer involves repeatedly asking three high-level questions:

  • Can we improve the value we deliver to the market ?
  • Can we improve the way we reach our customers ?
  • Can we improve the way we capture the value along the way ?

Innovating on the value proposition

This part is the most well-known to product managers. To some extent, PMs are hired to focus chiefly on this area of the business model.

Start by visualizing your current value creation process. I like to use a double-layered value proposition model for that (my own framework).

A core value proposition includes:

  • Customer profile — Who is your target persona? What gains do they want? What pains do they experience?
  • Value canvas — How do you deliver value for your customer? Which pains do you relieve, and which gains do you create?

A category value proposition includes:

  • Market standards and benchmarks — You should meet these to be relevant
  • General performance expectations of the market — No matter how great the value proposition of your app is, people won’t use it if it takes 20 seconds to load
  • Category rules — What are the must-haves for a given type of product? For example, good luck building an email app without a labeling option

Once you have visualized your business model, start challenging it. Use quantitative data, qualitative knowledge, and market expertise to determine how to deliver more value to the market.

The most common approaches to delivering more value include:

  • Pivoting customer segments — Maybe the persona you target isn’t the right fit after all?
  • Expanding customer segments — Even if your target segment is properly defined, at some point, the market gets saturated. Maybe it’s time to expand?
  • Focusing on different pain points — Are the pain points you target most relevant for your customers?
  • Expanding offering — Can you deliver more valuable services to your customers?
  • Shrinking offering — Cutting out the noise and doubling down on your best solutions might also be a sound decision.
  • Innovating on current offering — Maybe iterating on the current offering is the most optimal way?

What you should focus on depends heavily on the data you have and the context you operate in. But if I were to give a universal tip, focus on properly balancing small bets (improving the current business model) and big bets (pivoting the business model) for the most optimal outcomes.

Innovating on value distribution

Innovating on value distribution is all about searching for the most optimal channel for acquiring users and maximizing that channel’s potential.

Let’s assume you acquire users through LinkedIn ads (performance marketing). You should revisit this strategy regularly and ask yourself two questions.

  • Embracing tactics to minimize CAC.
  • Hiring performance marketing professionals / external agencies to help you boost your reach.
  • Experimenting with new platforms.
  • Trying programmatic advertising.
  • Experiment with setting up a blog
  • Use the data you have to automatically generate new pages at a sale
  • Build virality mechanics into the app

My main tip here is the same as in the previous chapter: in an ideal scenario, you would continuously improve on both your current growth channel (small bets) while also exploring other growth channels (big bets) — especially if you haven’t reached product-channel fit yet.

Innovating on value capture

Capturing value might sound fancy, but let’s be honest — in most cases, it’s all about generating revenue.

You should regularly revisit how your product and business generate money from its operation. While the exact questions you should be asking yourself depend on your particular model, the four questions I believe every PM should ask themselves regularly are:

  • Do we have the most optimal revenue model?
  • Is the way we charge the best way?
  • Do we charge at an optimal price point?
  • Can we boost our revenue with better bundling and packaging?

1. Do we have the most optimal revenue model?

It’s a big question. If you are a subscription product , should you be a subscription product? Maybe you should try ad-based revenue, or combine both?

2. Is the way we charge the best way?

The way you charge is more important than how much you actually charge. Ideally, you should charge per value received (i.e., the number of transactions). Or, if this is impossible, per some proxy metrics (e.g., the number of seats), or a flat monthly fee. Is it the best way?

3. Do we charge at an optimal price point?

Different segments have different willingness to pay and price sensitivity . Finding the best price points to charge requires a lot of quantitative research, but it’s worth it.

In the end, increasing the price by 10 percent might be the fastest way to grow revenue or the fastest way to lose all your customers.

4. Can we boost our revenue with better bundling and packaging?

If you have a more mature product with various types of plans, consider bundling/unbundling them and experimenting with different plan settings.

Maybe there’s a gap between your tier 1 and tier 2 offering, leaving a lot of money on the table. Or, perhaps you should add to your most premium offering  a standalone, pay-per-use feature.

Sometimes, moving a feature from one plan to another can knock your revenue through the roof.

Business model innovation examples

Now that we’ve thoroughly explored the concept of business model innovation, let’s dive into some real-world examples. These cases highlight the impact that innovative business models can have on a company’s success or failure.

Netflix: Streaming revolution

One of the most well-known examples of successful business model innovation is Netflix. The company started as a DVD rental service by mail, but it quickly identified the potential of streaming technology.

By shifting its focus to on-demand streaming, Netflix transformed the way we consume entertainment and effectively disrupted the traditional cable TV industry. This strategic shift allowed the company to grow exponentially and become a global entertainment powerhouse.

Uber: Ride-sharing disruption

By leveraging then-nascent mobile app technology, Uber created a platform that connects drivers with passengers looking for a ride. This peer-to-peer model revolutionized the transportation industry, challenging traditional taxi services and expanding to other services like food delivery.

Although Uber faced regulatory hurdles and controversies along the way, it remains a prime example of how business model innovation can create a new market.

Blockbuster: A cautionary tale

On the flip side, Blockbuster’s failure to innovate its business model serves as a cautionary tale. As a movie and video game rental chain, Blockbuster was once the go-to place for home entertainment. However, the company failed to adapt to the digital age and recognize the potential of streaming services, ultimately leading to its decline.

Had Blockbuster been more agile and open to business model innovation, it might have remained a significant player in the entertainment industry.

LEGO: Reinventing the brick

LEGO, the iconic toy company, faced near bankruptcy in the early 2000s due to a lack of focus and an overly complex product portfolio. To turn things around, LEGO embraced business model innovation by refocusing on its core product — the beloved plastic brick — and expanding into new markets.

By capitalizing on brand partnerships, digital gaming, and even theme parks, LEGO successfully transformed its business model and remains a beloved brand worldwide.

Zipcar: Car-sharing pioneer

Zipcar was an early pioneer of the car-sharing model. By allowing members to rent cars by the hour or day, Zipcar offered a convenient and cost-effective alternative to traditional car ownership.

Although the company faced challenges and was eventually acquired by Avis Budget Group, its innovative business model inspired a wave of car-sharing services that continue to reshape urban transportation.

Business model innovation sounds like a big, daunting endeavor. In reality, though, it can be as complex or as straightforward as you want it to be.

I believe in simplicity. The more robust the innovation process is, the more neglected and deprioritized it often gets.

When it comes to business model innovation, I encourage you to think about it simply as an iterative process of asking the right questions. Start with the three main questions:

  • Can we improve the value we deliver to the market?
  • Can we improve the way we reach our customers?
  • Can we improve the way we capture the value along the way?

Then, step by step, go a bit deeper and ask more detailed questions.

On the one hand, you must innovate your business model in a conscious, iterative manner to stay competitive. But on the other hand, you don’t have to do it all at once. In fact, you shouldn’t.

Revisit the main questions and focus on the part of your business model that requires the most attention in your current context. Trying to innovate on a business model as a whole is a fool’s game.

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What is a business model? (Plus, how to define yours)

Last updated: March 2024

Business models distill the potential of a business down to its essence. Companies across every industry and at all stages of maturity need business models. Some rely on lengthy processes to build complicated models, while others move quickly to articulate the basics and take action. Either way, having the discipline to work through this planning tool forces internal alignment.

You must build something that real people with real needs will find value in and pay for — otherwise you do not have a lasting business. Brian de Haaff Aha! co-founder and CEO

For established enterprises, a business model is often a living document that is reviewed and adapted over the years. For companies launching products and services or entering new markets, a business model helps ensure that decisions are tied back to the overall business strategy . And for early-stage startups, a simple one-page business model enables founders to explore the mechanics of a business and how you anticipate it will be successful.

Defining and documenting a business model is an essential exercise. Whether you are starting a new venture, expanding into a new market, or shifting your go-to-market strategy , you can use a business model to capture fundamental assumptions about the opportunity ahead and tactics for addressing challenges.

Forward-thinking companies integrate their business model into all aspects of the organization — from recruiting talent to motivating employees. That is why many choose tools that make it possible to quickly build and share a business model. In Aha! software, for example, there are multiple ways to build a model and connect it to everyday work. One of the quickest ways is by using our whiteboard template — featured below.

Get this business model whiteboard template — with a free trial .

Business model large

Start using this template now

You can also try a similar template that is built into the product strategy section of Aha! Roadmaps . Or you can download free Excel and PowerPoint business model templates in this guide .

This article covers the basics of business models, from core concepts to best practices. Jump ahead to any section:

Definition of a business model

Business model components

Business model vs. business plan.

Different types of business models

Pros and cons of different models

Analyzing competitor business models

Business model templates

How to build a business model

What is the definition of a business model?

A business model defines how a company will create, deliver, and capture value.

A business model answers questions that are crucial for strategic decision-making and business operations. Creating a business model for your startup or product means identifying the problem you are going to solve, the market that you will serve, the level of investment required, what products you will offer, and how you will generate revenue. Pricing and costs are the two levers that affect profitability within a given business model.

A business model is part of your overall business strategy. Some business models extend beyond economic context and include value exchange in social or cultural terms — such as the intangible impact the company will have on a community or industry. The process of constructing and changing a business model is often referred to as “business model innovation.”

15 elements of a brilliant business strategy

This is why innovation programs fail

There are three main areas of focus in a business model: value proposition, value delivery, and value capture. The proposition outlines who your customers are and what you will offer. The delivery details how you will organize the business to deliver on the proposition. And the capture is a hypothesis for how the proposition and delivery will align to return value back to the business.

new product business model

The components of a business model include everything the organization needs to document and internalize so that the team can implement all three value focuses. This includes the market in which you operate, organizational strengths and challenges , essential elements of your product or products, and how you will generate revenue.

Below are some components to include when you create a business model:

Vision and mission : Overview of what you want to achieve and how you will do it.

Objectives: High-level goals that will support your vision and mission, along with how you will measure success.

Customer targets and challenges: Description of target customers (written as archetypes or personas ) and their pain points.

Solution: How your offering will solve customer pain points.

Differentiators: Characteristics that differentiate your product or service.

Pricing: What your solution will cost and how it will be sold.

Positioning and messaging: How you will communicate the value of your offering to customers.

Go-to-market: Proposed approach for launching new offerings and services.

Investment: Resources required to introduce your offering.

Growth opportunity: Ways that you will grow the business over time.

Positioning vs. messaging

  • What is value-based product development?
  • What is a go-to-market roadmap?

What is a business roadmap?

Business models and business plans are both elements of your overall business strategy. But there are key differences between a business model and a business plan.

A business model is seen as foundational and will not usually be reworked in reaction to shorter-term shifts — whereas a business plan is more likely to be updated based on changes in the economy or market.

Related: Business plan templates

What is the benefit of building a business model?

Innovation is about more than the products or technologies that you build. The way that you operate your business is a critical factor in how you stand apart in a crowded marketplace. The benefit of building a business model is that you can use the exercise to expose and exploit what makes your company unique — why choosing your offering is better for customers than any alternatives and how you will grow the business over time.

Many people associate business models with lengthy documents that describe a company’s problem, opportunity, and solution in the context of a two-to-five-year forecast. But business models do not need to be a long treatise.

A one-pager is just as effective for distilling and communicating the most important elements of your business strategy. The concise format is useful for sharing with broader teams so that everyone understands the high-level approach. Done right, a business model can become a touchstone for the team by outlining core differentiators to promote and defend in the market.

Related: A more comprehensive business model builder

What are the different types of business models?

There are many different types of business models. Below are some of the most common business models with example companies for reference (take note of the companies that appear in several categories):

Did you keep track of the companies that appeared in several of the business model examples? Good. You now have a grasp of how complex enterprises with vast portfolios of products and services often employ many business models within the same organization.

Consider a company like Apple, which manufactures and sells hardware products as well as offering cloud-storage, streaming subscriptions, and a marketplace for other applications. Amazon, whose offerings range from retail (with the acquisition of Whole Foods) to marketplace (Amazon.com) to subscription services (Amazon Prime and Amazon Music) to affiliate, also features in different categories. Each division or vertical will have a distinct business model that reflects the nuances of how it operates while also supporting the corporate business model.

Related: The product manager vs. the portfolio product manager

Pros and cons of different business models

Some types of business models work better for certain industries than others. For example, software-as-a-service (SaaS) companies often rely on freemium business models. This makes it easy for potential users to experience the value of the product and incentivizes paid conversions via access to additional features.

Many social media platforms make money through advertising. By providing full access to the platform for free, these companies attract more users. In turn, this creates a more valuable audience for advertisers and increases revenue for the business.

How do you analyze a competitor’s business model?

Business analysts and investors will often evaluate a company’s business model as part of due diligence for funding or market research . You can apply the same tactics to analyze a competitor’s business model — with a few caveats.

Public companies are subject to reporting requirements. This means that the business must regularly disclose financial and performance data to the public — these disclosures occur quarterly and annually. The data includes everything from gross revenue, operating costs and losses, cash flow and reserves, and leadership discussions of business results. Designed to protect and inform investors, these reports can provide you with the information you need to understand the basics of the company’s business model and how well it is performing against the model.

Private companies are not required to reveal business data publicly. Investors or partners may be privy to certain aspects of the company’s performance, but it can be difficult to understand exactly what is happening from the outside. Some analysts or business websites will attempt to “size” a business or market by looking at a variety of factors — including the number of employees, volume of search terms related to the core offering, estimated customer base, pricing structure, partnerships, advertising spend, and media coverage.

Once you have identified relevant alternatives to your offering and gathered all of the information that you can find, a good way to analyze a competitor’s business model is to conduct a competitive analysis.

You do not want to spend too much time thinking about other companies when you could be focused on your own. A simple SWOT analysis is a helpful way to map out strengths, weaknesses, opportunities, and threats that were revealed during your research.

Competitor analysis templates

  • How to price your product
  • How to position your product

Below are three types of business model layouts available in Aha! software that you can use to succinctly assess what is possible and what challenges could arise for your business.

Whiteboard business model template

Articulate the foundation of your product or service in a whiteboard-style format. The focus is on capturing key elements like why the solution is worth buying (messaging), pain points of the buyers (customer challenges), and ways you will grow the business (growth opportunities).

Business model canvas

This business model canvas included in Aha! Roadmaps uses drag-and-drop components within a flexible layout. You can rename or hide components as needed. And you can create as many strategic models in your workspace as you would like.

How to craft a product strategy in Aha! Roadmaps

How to use the strategic model template in Aha! Roadmaps

Free Excel and PowerPoint business model templates

Aha! Roadmaps helps businesses map out their strategy directly within the software. This is an example of a business model created in Aha!

  • Lean canvas

Similar to the business model canvas, the lean canvas in Aha! Roadmaps takes a problem-focused approach to create an actionable business plan. It is most commonly used by startups and entrepreneurs to document business assumptions. The focus is on quickly creating a concise, single-page business model. It documents nine elements, including customer segments, channels used to reach customers, and the ways you plan to make money.

Aha! Roadmaps helps businesses map out their strategy directly within the software. This is an example of a lean canvas created in Aha!

How to build a business model in 10 steps

Crafting a business model is part of establishing a meaningful business strategy. But a business model is essentially a hypothesis — you need to test yours to prove that it will actually provide value. Many startup founders especially underestimate the costs and timeline for reaching profitability.

1. Identify your target market

Who will benefit from your offering? What characteristics do prospective customers share?

2. Define the problem you will solve

What is the problem that you are solving? What are the pain points of your potential customers?

3. Detail your unique selling proposition (USP)

What will you build and how will you support it?

4. Create a pricing strategy

How much will you charge for your offering? What factors will go into choosing your price point?

5. Develop a marketing approach

How will you market your product and reach target customers? What channels will you choose for go-to-market?

6. Establish operational practices

How will you streamline processes and procedures to reduce overhead and fixed costs?

7. Capture path to profitability

How will your business generate revenue? What level of investment will be required and what fixed costs exist?

8. Anticipate challenges

Who are your competitors? What opportunities and threats exist for your business?

9. Validate your business model

Was your hypothesis correct? Does your business model solve a problem the way you thought it would?

10. Update to reflect learnings

What can you do differently in the future to ensure greater success?

Your business model will ultimately guide your organization and influence your product roadmap. Give it the deep thought it deserves — questioning your core assumptions about how you will generate value and how your team will work towards achieving shared goals.

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Business Model Canvas: Explained with Examples

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Got a new business idea, but don’t know how to put it to work? Want to improve your existing business model? Overwhelmed by writing your business plan? There is a one-page technique that can provide you the solution you are looking for, and that’s the business model canvas.

In this guide, you’ll have the Business Model Canvas explained, along with steps on how to create one. All business model canvas examples in the post can be edited online.

What is a Business Model Canvas

A business model is simply a plan describing how a business intends to make money. It explains who your customer base is and how you deliver value to them and the related details of financing. And the business model canvas lets you define these different components on a single page.   

The Business Model Canvas is a strategic management tool that lets you visualize and assess your business idea or concept. It’s a one-page document containing nine boxes that represent different fundamental elements of a business.  

The business model canvas beats the traditional business plan that spans across several pages, by offering a much easier way to understand the different core elements of a business.

The right side of the canvas focuses on the customer or the market (external factors that are not under your control) while the left side of the canvas focuses on the business (internal factors that are mostly under your control). In the middle, you get the value propositions that represent the exchange of value between your business and your customers.

The business model canvas was originally developed by Alex Osterwalder and Yves Pigneur and introduced in their book ‘ Business Model Generation ’ as a visual framework for planning, developing and testing the business model(s) of an organization.

Business Model Canvas Explained

What Are the Benefits of Using a Business Model Canvas

Why do you need a business model canvas? The answer is simple. The business model canvas offers several benefits for businesses and entrepreneurs. It is a valuable tool and provides a visual and structured approach to designing, analyzing, optimizing, and communicating your business model.

  • The business model canvas provides a comprehensive overview of a business model’s essential aspects. The BMC provides a quick outline of the business model and is devoid of unnecessary details compared to the traditional business plan.
  • The comprehensive overview also ensures that the team considers all required components of their business model and can identify gaps or areas for improvement.
  • The BMC allows the team to have a holistic and shared understanding of the business model while enabling them to align and collaborate effectively.
  • The visual nature of the business model canvas makes it easier to refer to and understand by anyone. The business model canvas combines all vital business model elements in a single, easy-to-understand canvas.
  • The BMC can be considered a strategic analysis tool as it enables you to examine a business model’s strengths, weaknesses, opportunities, and challenges.
  • It’s easier to edit and can be easily shared with employees and stakeholders.
  • The BMC is a flexible and adaptable tool that can be updated and revised as the business evolves. Keep your business agile and responsive to market changes and customer needs.
  • The business model canvas can be used by large corporations and startups with just a few employees.
  • The business model canvas effectively facilitates discussions among team members, investors, partners, customers, and other stakeholders. It clarifies how different aspects of the business are related and ensures a shared understanding of the business model.
  • You can use a BMC template to facilitate discussions and guide brainstorming brainstorming sessions to generate insights and ideas to refine the business model and make strategic decisions.
  • The BMC is action-oriented, encouraging businesses to identify activities and initiatives to improve their business model to drive business growth.
  • A business model canvas provides a structured approach for businesses to explore possibilities and experiment with new ideas. This encourages creativity and innovation, which in turn encourages team members to think outside the box.

How to Make a Business Model Canvas

Here’s a step-by-step guide on how to create a business canvas model.

Step 1: Gather your team and the required material Bring a team or a group of people from your company together to collaborate. It is better to bring in a diverse group to cover all aspects.

While you can create a business model canvas with whiteboards, sticky notes, and markers, using an online platform like Creately will ensure that your work can be accessed from anywhere, anytime. Create a workspace in Creately and provide editing/reviewing permission to start.

Step 2: Set the context Clearly define the purpose and the scope of what you want to map out and visualize in the business model canvas. Narrow down the business or idea you want to analyze with the team and its context.

Step 3: Draw the canvas Divide the workspace into nine equal sections to represent the nine building blocks of the business model canvas.

Step 4: Identify the key building blocks Label each section as customer segment, value proposition, channels, customer relationships, revenue streams, key resources, key activities, and cost structure.

Step 5: Fill in the canvas Work with your team to fill in each section of the canvas with relevant information. You can use data, keywords, diagrams, and more to represent ideas and concepts.

Step 6: Analyze and iterate Once your team has filled in the business model canvas, analyze the relationships to identify strengths, weaknesses, opportunities, and challenges. Discuss improvements and make adjustments as necessary.

Step 7: Finalize Finalize and use the model as a visual reference to communicate and align your business model with stakeholders. You can also use the model to make informed and strategic decisions and guide your business.

What are the Key Building Blocks of the Business Model Canvas?

There are nine building blocks in the business model canvas and they are:

Customer Segments

Customer relationships, revenue streams, key activities, key resources, key partners, cost structure.

  • Value Proposition

When filling out a Business Model Canvas, you will brainstorm and conduct research on each of these elements. The data you collect can be placed in each relevant section of the canvas. So have a business model canvas ready when you start the exercise.  

Business Model Canvas Template

Let’s look into what the 9 components of the BMC are in more detail.

These are the groups of people or companies that you are trying to target and sell your product or service to.

Segmenting your customers based on similarities such as geographical area, gender, age, behaviors, interests, etc. gives you the opportunity to better serve their needs, specifically by customizing the solution you are providing them.

After a thorough analysis of your customer segments, you can determine who you should serve and ignore. Then create customer personas for each of the selected customer segments.

Customer Persona Template for Business Model Canvas Explained

There are different customer segments a business model can target and they are;

  • Mass market: A business model that focuses on mass markets doesn’t group its customers into segments. Instead, it focuses on the general population or a large group of people with similar needs. For example, a product like a phone.  
  • Niche market: Here the focus is centered on a specific group of people with unique needs and traits. Here the value propositions, distribution channels, and customer relationships should be customized to meet their specific requirements. An example would be buyers of sports shoes.
  • Segmented: Based on slightly different needs, there could be different groups within the main customer segment. Accordingly, you can create different value propositions, distribution channels, etc. to meet the different needs of these segments.
  • Diversified: A diversified market segment includes customers with very different needs.
  • Multi-sided markets: this includes interdependent customer segments. For example, a credit card company caters to both their credit card holders as well as merchants who accept those cards.

Use STP Model templates for segmenting your market and developing ideal marketing campaigns

Visualize, assess, and update your business model. Collaborate on brainstorming with your team on your next business model innovation.

In this section, you need to establish the type of relationship you will have with each of your customer segments or how you will interact with them throughout their journey with your company.

There are several types of customer relationships

  • Personal assistance: you interact with the customer in person or by email, through phone call or other means.
  • Dedicated personal assistance: you assign a dedicated customer representative to an individual customer.  
  • Self-service: here you maintain no relationship with the customer, but provides what the customer needs to help themselves.
  • Automated services: this includes automated processes or machinery that helps customers perform services themselves.
  • Communities: these include online communities where customers can help each other solve their own problems with regard to the product or service.
  • Co-creation: here the company allows the customer to get involved in the designing or development of the product. For example, YouTube has given its users the opportunity to create content for its audience.

You can understand the kind of relationship your customer has with your company through a customer journey map . It will help you identify the different stages your customers go through when interacting with your company. And it will help you make sense of how to acquire, retain and grow your customers.

Customer Journey Map

This block is to describe how your company will communicate with and reach out to your customers. Channels are the touchpoints that let your customers connect with your company.

Channels play a role in raising awareness of your product or service among customers and delivering your value propositions to them. Channels can also be used to allow customers the avenue to buy products or services and offer post-purchase support.

There are two types of channels

  • Owned channels: company website, social media sites, in-house sales, etc.
  • Partner channels: partner-owned websites, wholesale distribution, retail, etc.

Revenues streams are the sources from which a company generates money by selling their product or service to the customers. And in this block, you should describe how you will earn revenue from your value propositions.  

A revenue stream can belong to one of the following revenue models,

  • Transaction-based revenue: made from customers who make a one-time payment
  • Recurring revenue: made from ongoing payments for continuing services or post-sale services

There are several ways you can generate revenue from

  • Asset sales: by selling the rights of ownership for a product to a buyer
  • Usage fee: by charging the customer for the use of its product or service
  • Subscription fee: by charging the customer for using its product regularly and consistently
  • Lending/ leasing/ renting: the customer pays to get exclusive rights to use an asset for a fixed period of time
  • Licensing: customer pays to get permission to use the company’s intellectual property
  • Brokerage fees: revenue generated by acting as an intermediary between two or more parties
  • Advertising: by charging the customer to advertise a product, service or brand using company platforms

What are the activities/ tasks that need to be completed to fulfill your business purpose? In this section, you should list down all the key activities you need to do to make your business model work.

These key activities should focus on fulfilling its value proposition, reaching customer segments and maintaining customer relationships, and generating revenue.

There are 3 categories of key activities;

  • Production: designing, manufacturing and delivering a product in significant quantities and/ or of superior quality.
  • Problem-solving: finding new solutions to individual problems faced by customers.
  • Platform/ network: Creating and maintaining platforms. For example, Microsoft provides a reliable operating system to support third-party software products.

This is where you list down which key resources or the main inputs you need to carry out your key activities in order to create your value proposition.

There are several types of key resources and they are

  • Human (employees)
  • Financial (cash, lines of credit, etc.)
  • Intellectual (brand, patents, IP, copyright)
  • Physical (equipment, inventory, buildings)

Key partners are the external companies or suppliers that will help you carry out your key activities. These partnerships are forged in oder to reduce risks and acquire resources.

Types of partnerships are

  • Strategic alliance: partnership between non-competitors
  • Coopetition: strategic partnership between partners
  • Joint ventures: partners developing a new business
  • Buyer-supplier relationships: ensure reliable supplies

In this block, you identify all the costs associated with operating your business model.

You’ll need to focus on evaluating the cost of creating and delivering your value propositions, creating revenue streams, and maintaining customer relationships. And this will be easier to do so once you have defined your key resources, activities, and partners.  

Businesses can either be cost-driven (focuses on minimizing costs whenever possible) and value-driven (focuses on providing maximum value to the customer).

Value Propositions

This is the building block that is at the heart of the business model canvas. And it represents your unique solution (product or service) for a problem faced by a customer segment, or that creates value for the customer segment.

A value proposition should be unique or should be different from that of your competitors. If you are offering a new product, it should be innovative and disruptive. And if you are offering a product that already exists in the market, it should stand out with new features and attributes.

Value propositions can be either quantitative (price and speed of service) or qualitative (customer experience or design).

Value Proposition Canvas

What to Avoid When Creating a Business Model Canvas

One thing to remember when creating a business model canvas is that it is a concise and focused document. It is designed to capture key elements of a business model and, as such, should not include detailed information. Some of the items to avoid include,

  • Detailed financial projections such as revenue forecasts, cost breakdowns, and financial ratios. Revenue streams and cost structure should be represented at a high level, providing an overview rather than detailed projections.
  • Detailed operational processes such as standard operating procedures of a business. The BMC focuses on the strategic and conceptual aspects.
  • Comprehensive marketing or sales strategies. The business model canvas does not provide space for comprehensive marketing or sales strategies. These should be included in marketing or sales plans, which allow you to expand into more details.
  • Legal or regulatory details such as intellectual property, licensing agreements, or compliance requirements. As these require more detailed and specialized attention, they are better suited to be addressed in separate legal or regulatory documents.
  • Long-term strategic goals or vision statements. While the canvas helps to align the business model with the overall strategy, it should focus on the immediate and tangible aspects.
  • Irrelevant or unnecessary information that does not directly relate to the business model. Including extra or unnecessary information can clutter the BMC and make it less effective in communicating the core elements.

What Are Your Thoughts on the Business Model Canvas?

Once you have completed your business model canvas, you can share it with your organization and stakeholders and get their feedback as well. The business model canvas is a living document, therefore after completing it you need to revisit and ensure that it is relevant, updated and accurate.

What best practices do you follow when creating a business model canvas? Do share your tips with us in the comments section below.

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FAQs About the Business Model Canvas

  • Use clear and concise language
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Amanda Athuraliya is the communication specialist/content writer at Creately, online diagramming and collaboration tool. She is an avid reader, a budding writer and a passionate researcher who loves to write about all kinds of topics.

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How to Identify New Business Models

Systematically exploring alternative approaches to value creation can allow companies to find new opportunities for growth.

  • Innovation Strategy
  • Business Models

Image courtesy of Kennametal.

Image courtesy of Kennametal.

Organizations traditionally pursue growth via one or more of three broad paths:

  • They invest heavily in product development so they can produce new and better offerings.
  • They develop deep consumer insights in order to offer new and better ways to satisfy customers’ needs.
  • They concentrate on strategy formulation to grow by acquisition or by moving into new or adjacent markets.

Each of these paths usually involves devoting considerable time and resources to developing a corresponding organizational competency. For example, to build product capability, companies typically invest in in-house research and development departments and/or technology-sourcing expertise. Establishing customer insight capability often requires creating in-house market research units and implementing robust feedback links between the sales force and the developers of product or service lines. And creating a strategy capability generally involves setting up dedicated corporate strategy units and merger and acquisition groups or engaging consultants.

Recently, a fourth path has emerged, one that we might label “business model experimentation”: the pursuit of growth through the methodical examination of alternative business models. At its heart, business model experimentation is a means to explore alternative value creation approaches quickly, inexpensively and, to the extent possible, through “thought experiments.” The process sheds new light on potential competitors and lowers the risk of taking the wrong or a lesser-potential road — all for an initial investment that is typically quite small relative to what can be gained.

Research conducted in the last 10 years has established a link between business model innovation and value creation. 1 To our minds, this research points to the need for organizations to build a competency in business model innovation — that is, in the process of exploring possible business model alternatives that can be pursued to commercialize any given idea prior to going out into the market and expending resources. However, few organizations have successfully conceived and executed a business model different from their current one, fewer still have done it more than once and only a handful have put in place a methodical approach to business model innovation.

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Our goal is to demonstrate how an organization’s ability to methodically and routinely examine multiple business model alternatives — in other words, by treating the business model as a variable and not a constant — can serve as a critical enabler of growth, allowing executives to anticipate, adjust to and capitalize on new technologies or customer insights. The approach we describe is based on research over the last two decades into mechanisms of reliable, methodical business model generation as well as our own work helping companies 2 build the capability to create repeatable growth through business model experimentation.

What Is a Business Model?

At a conceptual level, a business model includes all aspects of a company’s approach to developing a profitable offering and delivering it to its target customers. A review of the relevant literature reveals that more than 40 different components — such as target customer, type of offering and pricing approach — have been included in various definitions of business models put forward over the past few decades, with much of the variation stemming from differences between the industries and circumstances in which a definition has been applied. 3

For our purposes, we will explore the concept of a business model by addressing several core questions that the majority of business model researchers deal within their models:

  • Who is the target customer?
  • What need is met for the customer?
  • What offering will we provide to address that need?
  • How does the customer gain access to that offering?
  • What role will our business play in providing the offering?
  • How will our business earn a profit?

In any working business model, the answers to these questions are fixed. But what if they weren’t? What if you considered each of them as a variable? What new opportunities could you capture that you can’t address with your current business model? The answers to these questions form the essence of business model experimentation.

Starting the Process

The first step in the business model exploration process is to create a template to examine possible alternative answers to the questions above. (See “A Business Model Development Template.”) The questions that help to shape a business model represent a series of decisions, each of which has a set of possible outcomes. Our template lays out various possible outcomes within the business model structure. Selecting one possibility from each category and then linking them together forms one potential new way to proceed. And, of course, selecting different combinations creates other possible outcomes.

To see how this works, consider how an airline might use the template to generate alternative business models. Currently, airlines serve a range of customers with the same basic model. For example, regardless of whether the customer is going on vacation with her family, traveling on business or responding to an emergency, airlines use the standard pay-per-seat model with which we are all familiar. Minor levels of customization exist — for example, larger seats and priority boarding for those who pay for them — but the core model is the same for all.

To explore business model innovation, an airline could start by picking a specific customer group and then beginning to explore potential options other than its current model. Answers to the question “How does the customer gain access to the offering?” (which is essentially the same as asking “How will we sell it?”) could include “Through travel agents” or “Through online websites” or “Through self-service kiosks” or “As part of partnerships.” As for where on the value chain the airline might operate, it could be the service provider, but it might also be a wholesaler selling off excess capacity to reduce unprofitable flights. Various profit models would likely start with the traditional pay-per-seat but might expand to include subscription models. The offering itself might be a premium seat, a low-cost seat or maybe even fractional ownership of a plane or chartered use of an aircraft. We experimented with “What we sell” for an airline to show how changing just one variable can result in a substantially different business. (See “Generating New Business Models by Changing One Variable.”)

Working out what elements should be in a business model — and then examining different combinations of them — can be a rapid and robust way to explore the possibilities of business model innovation. This process has the potential, for instance, to uncover combinations that are common in other industries but not in your own. In fact, deliberately applying analogies from other industries (for example, what if a company became the NetJets of agricultural equipment or the Dell of automobiles?) can be highly fruitful. It may also highlight links that create a “systemic” level of competitive advantage in the business concept — much as Apple did with the agreements it made with record labels to distribute songs through its iTunes online music site. Alternatively, the business model innovation process can uncover opportunities to more comprehensively fulfill a customer need than any current competitors do.

A quick run-through of simple combinations of high-level strategic questions can produce a wide range of potential business models. But each of the questions could be examined in more detail in a systematic way to yield deeper insight into some specific aspect of the business. For example, rather than brainstorming various alternatives for the “What we sell” category, a company could break the category down into its constituent parts and ask a series of additional questions such as:

  • Should we sell a product or a service?
  • Should it be standard or customizable?
  • Will its benefits be tangible or intangible?
  • Will we sell a generic or branded offering?
  • Should it be a durable or a consumable?

We have often found it useful to visualize such choices as switches, or levers, which can be flipped one way or the other. (See “Exploring Offering Options in More Depth.”) You could engage in a similar exercise to systematically explore potential variations in the way a customer might gain access to an offering or the way a customer might pay for it.

Narrowing the Choices

Despite what one might think, these choices are not infinite. In working through possible combinations of variables, it becomes clear that some are inherently interrelated. For example, if the offering is a durable good like a car, it is unlikely that the consumer will need to purchase new ones frequently. Such realizations dramatically reduce the number of options that must be explored.

What’s more, there are likely only a handful of ways that any of these questions can be practically addressed while remaining consistent with the mission of the organization and its “goals and bounds” 4 — that is, what the organization is willing, and not willing, to do. Some answers form a more natural path to making the business more efficient or better able to deliver the existing value proposition. Some will lead to models that are more feasible to implement than others, given the company’s existing competencies and its ability to develop new ones.

In fact, it is possible to use this approach to deliberately align the exploration of alternative business models with wider corporate goals by “locking in” one or more variables as you go about your experimentation. To see how this might work, let’s take a look at two cases in more depth. In the first, a tool manufacturer explores opportunities to enter new lines of business spurred by market trends; in the second, a maker of petroleum additives seeks to identify new ways to employ its core competencies.

Exploring New Customer Needs

Kennametal is a tool manufacturer based in Latrobe, Pennsylvania. Faced with an evolving manufacturing environment, a changing customer base and increasing global competition, Kennametal embarked on a business model experimentation initiative to diversify its revenue stream by identifying two to three new businesses in adjacent markets that would leverage core assets. A small team kicked off the initiative with a research effort focused on developing a more comprehensive understanding of potential customers’ frustrations, desires and challenges, in order to populate both the target customer and possible needs categories of the business model template. The research involved a combination of qualitative, quantitative and observational activities. 5

Since the goal was to create diversified revenue streams, Kennametal chose to prioritize needs based on the classic measures of their profit potential: importance to the customer, the customer’s level of dissatisfaction with the offerings currently on the market and the degree to which the need had not already been targeted by other internal efforts. The company then identified three high-potential combinations. For example, one was small “job shops” that had unmet training needs. The next step was to focus on developing the offering and determine how the company would deliver it.

For each possibility, the team methodically reviewed a list of levers for the remaining business model components — for example, “What we sell” and “How we profit” — and articulated multiple options for each lever. By examining more than 30 different levers in multiple combinations, they systematically generated an expansive list of possible business model options. Conceptualizing the different components of a business model as levers forced the team to consider new combinations they likely would have otherwise overlooked. For example, Kennametal has traditionally been a product-centered company that provides service as part of product sales. However, by looking at its service capabilities and examining the options for some “How we profit” levers, the company was able to consider a number of interesting fee-for-service business models. In doing so, Kennametal was essentially exploring ways to monetize the latent wealth of knowledge contained in the organization’s experience, people and knowledge-management systems.

With more than 30 levers, there were literally thousands of possible permutations and, therefore, the last step in the process was to identify the most attractive ones. The team focused on the possibilities that would generate the greatest customer satisfaction, would be the hardest for competitors to copy and were the most feasible to pilot. This process ensured not only that a wide range of options were considered but that the opportunities selected were well matched to customers’ needs, were competitively robust and leveraged existing resources appropriately.

The initiative required a minimal amount of time from a small, multifunctional team over an eight-week period — truly a low-risk way to home in on new growth options. In this way, Kennametal used the business model innovation process to move beyond incremental improvements in its businesses and generate three new opportunities to pursue in adjacent markets. In particular, two of these initiatives formed the foundation of new service-based offerings for Kennametal.

Using Core Competencies to Create New Businesses at Infineum

Infineum, an enterprise based in Oxfordshire, United Kingdom, with about 1,600 employees that conducts business in more than 70 countries, is another organization that has used the business model experimentation process. Infineum is one of the leading formulators, manufacturers and marketers of petroleum additives for the fuel and lubricant industry, and its customers are oil and fuel marketers. Infineum’s goal in the business model experimentation process was to leverage its product technology and know-how and create a list of profitable new opportunities that fit with its core competencies.

Since Infineum wished to hold to a strong interpersonal sales model in any initiative it pursued, we locked down the “How we sell” switch and did not consider alternative sales methods. In addition, the company’s goals and boundaries were built into the process by dividing entries under each category into three groups: “desirable,” “discussable” and “unthinkable.” (See “Incorporating Goals and Boundaries into Business Model Experimentation.”)

Given those requirements, within each category each option was considered according to its overall merits. Infineum identified a number of new opportunities, two of which we will now describe in more detail. Both went from inception to commercialization within 18 months, a time frame that is unusual in an industry as asset-intensive as petrochemicals.

Rethinking what we sell. The first example involves additives for the lubrication of high-precision instruments like cameras and robotics. Identifying a commercialization opportunity for this market presented two special challenges to Infineum’s existing business model. First, the amount of lubricant required per instrument is extremely small, so selling the product by the ton, as Infineum usually did, was not appropriate. Second, Infineum was working closely with one particular original equipment manufacturer, which wanted to treat the offerings as a trade secret, whereas Infineum would have normally sought patent protection for its intellectual property.

To address these challenges, a new business model was devised having two key new elements in the “What we sell” and “How we profit” categories. The first element was to charge a regular fee (typically, twice yearly) for work resulting in meeting R&D targets. This fee was charged on the basis of value to the OEM in meeting technical challenges, rather than bearing any relationship to the cost of the R&D, and as such can be considered as the direct monetization of the value of the R&D work. The second element involved licensing the necessary know-how to the OEM and charging royalties linked to the OEM’s use of that know-how, based on the OEM’s unit sales. Revenue from these elements, together with the sales price of additives sold to the OEM, created three distinct income streams, which led to a viable business model for Infineum that was also acceptable to the OEM.

Changing places. The second example shows what can happen when you look at different roles your company might play in the industry value chain. Infineum normally sold diesel and heavy-fuel-oil additives to refineries, with a value proposition based on a combination of high levels of technical performance, lowering costs and a responsive supply chain to deal with fuel-specific requirements. In the new business opportunity, additives are mixed into the fuel after it has left the refinery, typically when it is on board a ship in the port of delivery. Here, the main emphasis is on high levels of responsiveness and very short lead times to minimize the turnaround time of vessels in port.

In this business model, Infineum was operating further along the supply chain than usual, with a very different value proposition. In this case, in order to gain access to the distribution channel, Infineum partnered with a transportation service provider familiar with operating further along the supply chain in this specific market. By holding inventory of product close to the partner’s supply points, Infineum was able to meet the challenge of very short lead times.

Neither of these opportunities could have been captured and commercialized within Infineum’s normal business models. They involved the development of not only new value propositions but new ways to turn a profit and new ways to position the company within the industry value chain. So beyond improving business results by opening new avenues to revenue, these initiatives stretched the organization’s ability to think beyond its traditional competencies.

The Bottom Line

By engaging in business model experimentation with a small, focused team, companies can accomplish three important goals. First, they can understand the implications of different business models and make clearer, better informed decisions about where and how they want to compete. Second, they can identify the business models that will create the most value for customers and themselves and appropriately leverage their existing resources. And third, they can use business model innovation to extract the maximum potential from other growth-focused activities — their technical R&D, customer insight and strategic development efforts. Given the high potential of business model innovation and how few companies have mastered it, we see business model experimentation as a potent source of competitive advantage.

About the Authors

Joseph V. Sinfield is an associate professor of civil engineering at Purdue University in West Lafayette, Indiana, and a senior partner at the innovation and strategy consulting firm Innosight. Edward Calder, a principal at Innosight, is based in the firm’s Lexington, Massachusetts, headquarters. Bernard McCon-nell is vice president of WIDIA Products Group at Kennametal, based in Latrobe, Pennsylvania. Steve Colson is a company coach at Open Water Development Ltd. and a former general manager of growth initiatives at petroleum-additive maker Infineum in the United Kingdom.

1. See T.W. Malone, P. Weill, R.K. Lai, V.T. D’Ursio, G. Herman, T.G. Apel and S.L. Woerner, “Do Some Business Models Perform Better Than Others? “Working paper 4615-06, MIT Sloan School of Management, (Cambridge, Massachusetts, 2006) May 16; S.M. Shafer, H.J. Smith and J.C. Linder, “The Power of Business Models,” Business Horizons 48, no. 3, (2005): 199-207; E. Giesen, S.J. Berman, R. Bell and A. Blitz, “Three Ways to Successfully Innovate Your Business Model,” Strategy & Leadership 35, no. 6 (2007): 27-33; and M.W. Johnson, C.M. Christensen and H. Kagermann, “Reinventing Your Business Model,” Harvard Business Review, 86, no. 12 December 2008: 51-59. In a study of 1,000 of the largest U.S. firms, for example, Malone et al. called attention to the link and mapped out a comprehensive classification system that can be employed both to categorize and to develop business models. Shafer et al. described the benefits General Motors gained by employing business model innovation in the development of OnStar, and contrasted this success story with the narrow and less innovative approach employed to define the business model for eToys in the late 1990s. Giesen et al. examined 35 financially successful enterprises and outlined three distinct paths to business model innovation — industry, revenue and enterprise model innovation — that were at the core of their success. Further, Johnson et al. explored the stories of P&G, Tata, Hilti and Dow Corning to emphasize the financial and long-term competitive differentiation benefits that companies can achieve through business model innovation.

2. Johnson et al., “Reinventing Your Business Model.”

3. Shafer et al., “The Power of Business Models”; and M. Morris, M. Schindehutte and J. Allen, “The Entrepreneur’s Business Model: Toward a Unified Perspective,” Journal of Business Research 58, no. 6 (June 2005): 726-735.

4. J.V. Sinfield and S.D. Anthony, “Constraining Innovation: How Developing and Continually Refining Your Organization’s Goals and Bounds Can Help Guide Growth,” Strategy & Innovation 4, no. 6 (November-December 2006): 1, 6-9.

5. For more on conducting research into discovering such needs see, for example, C.M. Christensen and M.E. Raynor, “The Innovator’s Solution: Creating and Sustaining Successful Growth” (Cambridge, Massachusetts: Harvard Business Press, 2003); and S.D. Anthony and J.V. Sinfield, “Product for Hire: Master the Innovation Life Cycle With a Jobs-to-be-done Perspective of Markets,” Marketing Management 16, no. 2 (March-April, 2007): 18-24.

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What Is a Business Model?

  • Andrea Ovans

new product business model

A history, from Drucker to Christensen.

A look through HBR’s archives shows that business thinkers use the concept of a “business model” in many different ways, potentially skewing the definition. Many people believe Peter Drucker defined the term in a 1994 article as “assumptions about what a company gets paid for,” but that article never mentions the term business model. Instead, Drucker’s theory of the business was a set of assumptions about what a business will and won’t do, closer to Michael Porter’s definition of strategy. Businesses make assumptions about who their customers and competitors are, as well as about technology and their own strengths and weaknesses. Joan Magretta carries the idea of assumptions into her focus on business modeling, which encompasses the activities associated with both making and selling something. Alex Osterwalder also builds on Drucker’s concept of assumptions in his “business model canvas,” a way of organizing assumptions so that you can compare business models. Introducing a better business model into an existing market is the definition of a disruptive innovation, as written about by Clay Christensen. Rita McGrath offers that your business model is failing when innovations yield smaller and smaller improvements. You can innovate a new model by altering the mix of products and services, postponing decisions, changing the people who make the decisions, or changing incentives in the value chain. Finally, Mark Johnson provides a list of 19 types of business models and the organizations that use them.

In The New, New Thing , Michael Lewis refers to the phrase business model as “a term of art.” And like art itself, it’s one of those things many people feel they can recognize when they see it (especially a particularly clever or terrible one) but can’t quite define.

new product business model

  • AO Andrea Ovans is a former senior editor at Harvard Business Review.

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How To Create A Business Model In Seven Steps

Define the problem you’re going to solve, then define the customers for which the problem will be solved. Next, identify the customer and the problem. After that, define a set of possible solutions. After, define a set of possible monetization strategies for that solution, test, and choose your business model .

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A business model design in seven steps

Time needed:  1 day

How to create a business model in one day and seven simple steps

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The most valuable asset any organization has is its business model .

Indeed, that is the way all the moving parts of the organization fit together to create a value chain.

The aim of the value chain is value creation for several players in that industry, market, and so on.

The business model is not static, it changes and evolves along with the scale of the organization.

The type of  business model you designed for your company will not work if your company scales. You’ll need to rethink and redefine it.

This is even more evident in companies that are trying to innovate.

When those organizations create a new technology or an innovative approach to existing industries, it is critical to understand who are the players involved in that industry and how you’re creating value for them.

In this blog, we covered the business models  of many organizations.

For instance, Google’s massive success is strictly connected to its business model .

The company managed to create a balance between several players in the publishing and information industry where each of those players gets back some value (economic and not) from having a relationship with Google .

Where do you start when it comes to creating a business model ?

Related : Successful Types of Business Models You Need to Know

It’s all about business model design

The primary aim of a business model is to create a sustainable chain, able to unlock value for several players in a market, industry, or niche .

Therefore, this value chain will start from a value proposition , a promise you make to the key players and partners in that market, industry, or niche depending on where you start.

For instance, when PayPal started out it didn’t look to dominate the whole market. It started from a niche .

As Pether Thiel put it in his book, Zero to One:

The most successful companies make the core progression—to first dominate a specific niche and then scale to adjacent markets—a part of their founding narrative.

Indeed, PayPal began by identifying its most valuable partner, what at the time they called “power user.”

That was a choice driven by its business model design .

Therefore, instead of focusing on generically offering a service for everyone, PayPal focused on acquiring and attracting as many power users as possible.

Those power users were mostly on another platform that had already scaled up: eBay.

Thus, PayPal focused all its effort on acquiring those power users from eBay , fast!

Only after PayPal had drafted, tested, and validated a clear value proposition for a small , yet critical group of power users, it could move on to take larger and larger segments of that market.

What is a value proposition?

At its most basic level, a value proposition is a promise you make as an organization to deliver something (either monetary or advantage) to a critical player you have in our industry.

For instance, when Google started it showed right away it was capable of offering 10x of search results, at a faster speed and more relevant to users.

However, had Google kept its search engine primarily focused on providing paid results, it would not have taken off.

Instead, Google focused on offering relevant paid results but also a bunch of organic results.

In short, Google managed to index and rank the web pages from blogs, journals, news sites and any other website that made those pages available to Google for its index.

In exchange for that content, Google offered back visibility as qualified traffic toward those sites.

Indeed, search engines back then (at the end of the 1990s) were not focused on offering quality traffic.

Thus, most of the audience you got back to your site might have been quite relevant to your business.

Google instead, with its dominant search engine allowed publishers, and businesses (small and large) to gain customers.

That sealed an implicit deal “Me (Google) will send you qualified traffic that helps you grow your business if you (publisher, business, or whoever publishes on the web) offer me your content to be indexed.”

We might call that an implicit contract, which is the beginning of a value chain.

In fact, from this sort of contract part of the Google business model has been built. Imagine the scenario where Google was not attractive enough to provide qualified traffic to content producers.

They would have stopped offering their content for free by blocking access to the search engine.

Instead, they allowed Google to index their pages because the visibility they got was too attractive.

A business model is also about how you make money but how you make money isn’t your business model

One of the biggest misconceptions of the business model is to confuse it with the monetization strategy or the revenue model of the company.

While this is an essential piece of the puzzle, it is just one of the components of a successful business model .

In this blog, we’ve discussed at great length how companies make money  as a way to start the discussion of a business model .

However, a business model implies the understanding of

operations, customer acquisition and retention, supply chain management, and the cost above and revenue aspects

According to the business model you designed over the years for your organization there will be a piece that plays a more critical role compared to others.

For instance, a vital component of the Coca-Cola business model is its distribution strategy .

For other companies like McDonald’s, the key to its business model success is the heavily franchised restaurants that helped the company scale up all over the world.

Each company will develop a unique  model  among the many types of business models which is what makes it thick in the long run!

What principles should I follow to create and design a business model?

Developing a deep understanding of your business model implies asking a few critical questions. For instance, some of those questions might be:

  • What value do I offer my potential customers? Or what problem do I solve with my product/service?
  • How do I charge my customers?
  • What does my acquisition cost look like?
  • What channels can I tap into to find my ideal customer?
  • Did I create a predictable revenue stream ? If not what can I do to generate that?

Your business model will be based on a few critical assumptions about who your customers are, how your product or service should look like, what are the favorite channels to reach them, and a few others.

Those assumptions will be tested as soon as you start kicking off your operations.

Your main concern should be just that. You need to check those assumptions as quickly as possible. 

Steve Blank has identified 17 principles in his  Customer Development Manifesto :

  • There Are No Facts Inside Your Building, So Get Outside
  • Pair Customer Development with Agile Development
  • Failure is an Integral Part of the   Search for the Business Model
  • If You’re Afraid to Fail You’re Destined to Do So
  • Iterations and Pivots are Driven by Insight
  • Validate Your Hypotheses with Experiments
  • Success Begins with Buy-In from Investors and Co-Founders
  • No Business Plan Survives First Contact with Customers
  • Not All Startups Are Alike
  • Startup Metrics are Different from Existing Companies
  • Agree on Market Type – It Changes Everything
  • Fast, Fearless Decision-Making, Cycle Time, Speed and Tempo
  • If it’s not About Passion, You’re Dead the Day You Opened your Doors
  • Startup Titles and Functions Are Very Different from a Company’s
  • Preserve Cash While Searching. After It’s Found, Spend
  • Communicate and Share Learning
  • Startups Demand Comfort with Chaos and Uncertainty

I suggest you read this manifesto over and over again. This should be the first step!

What tools can you use to design and create your business model?

One of the most used tools to design and create a business model has revolved around the customer development manifesto above.

However, it is essential to keep in mind that this manifesto was the fruit of an era where venture capital had become scarce compared to the dot-com bubble at the end of the 1990s.

Those tools for business modeling have been developed in that context. Thus, those are not a one-size-fits-all toolbox but rather work better in a context where capital is scarce, and you need to test your business model assumptions as quickly as possible. In that context three primary tools are:

  • Business model canvas.
  • Lean startup canvas.
  • Customer development canvas.

Those tools can be used by entrepreneurs in the phases of the business model generation:

  • Map the business model hypotheses.
  • Test these hypotheses with customer feedback.
  • Iterative this process.

The result will be an incremental development of a product that will reach a minimally viable version .

The better the product, based on customer feedback, the larger the audience it will reach.

Lean makes sense when capital is scarce and when you need to keep burn rates low.

Lean was designed to   inform the founders’ vision  while they operated frugally at speed. It was not built as a focus group for consensus for those without deep convictions .

Is the lean startup still a valuable model?

As Steve Blank has pointed out in an HBR article entitled “ Is the Lean Startup Dead? “

I realized it was time for a new startup heuristic: the amount of customer discovery and product-market fit you need to find is inversely proportional to the amount and availability of risk capital.

In other words, the more risk capital that is available on the market the least the lean startup model might work.

The reason is, that if you have massive risk capital, you won’t need to test all your assumptions.

Quite the opposite, you’ll need to execute them fast.

Also, one of the primary logic of the lean startup is to burn cash at the slowest rate possible, while evolving (so-called pivoting) your business model .

If money is not an issue, then why go for the lean startup?

Steve Blank went further:

Rather than the “first mover advantage” of the last bubble ,  today’s theory is that  “massive capital infusion owns the entire market.”

Therefore, if you secured a massive injection of money, then your aim might be primarily toward growth , rather than profits.

In that context, the lean startup might not work!

Are capital moats sustainable?

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When a company or startup has a substantial capital allocate for growth , that is when this injection can become a short-term competitive advantage.

However, as companies finance growth through artificial injection of capital, those also become extremely risky, because many of the assumptions underlying the business model can’t be tested organically, thus leaving the company’s foundations weak.

An example of this excess of use of capital as a competitive moat has been WeWork , which has proved one of the most disastrous business endeavors of the last decade.

Thus, capital moats and technological moats need to be balanced with careful business model testing and organic validation in the marketplace!

Key Highlights

  • This step is the foundation of your business model . It involves identifying a specific problem that your product or service aims to solve.
  • Problems can be functional (solving a practical need) or emotional (addressing a psychological desire or pain point).
  • Defining the problem clearly helps you focus on delivering value to your target audience.
  • Once the problem is defined, it’s important to identify the individuals or groups who are facing this problem. These are your potential customers.
  • Group your potential customers into categories, keeping it to a maximum of three types. Each type may have distinct characteristics and needs.
  • From the categories of potential customers and the identified problems, narrow your focus to one key customer type and one specific problem.
  • This step helps prevent spreading your resources too thin and allows you to concentrate on understanding your primary audience and addressing their primary need.
  • Brainstorm a range of solutions that could address the key problem for your chosen customer type.
  • List up to ten solutions. Then, evaluate these solutions based on feasibility, cost, time, and resources required.
  • Narrow down the list to three solutions that are viable given your constraints.
  • For the solution you’ve chosen, consider how you’ll monetize it. Determine how your business will generate revenue from providing the solution to your target customers.
  • Brainstorm up to five potential monetization strategies. These could include subscription models, one-time purchases, freemium offerings, etc.
  • Focus on the two strategies that can be tested quickly and efficiently.
  • This step involves practical validation of your selected solution and monetization strategies.
  • Test your product or service with real customers to gather feedback. Evaluate how well your monetization strategies perform in real-world scenarios.
  • Based on the feedback and data collected, choose the most effective solution and monetization strategy combination.
  • With a validated solution, monetization strategy , and a clear understanding of your target audience, you have the foundation of your business model .
  • Your business model is the blueprint that outlines how your company will create, deliver, and capture value in the market.
  • Continuously monitor and refine your business model as you gather more insights from customers and adapt to changing market conditions.

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Social Impact

/ article, four steps to sustainable business model innovation.

By  David Young and  Marine Gerard

This article is part of an ongoing series that describes the concept of “Sustainable Business Model Innovation” (SBM-I) and how companies are putting it to use.

You may have noticed that every day there’s another announcement about companies making new climate commitments, asset managers outlining their plans for ESG integration, or regulators proposing new disclosures or extending producers’ responsibilities. Corporate coalitions like the World Economic Forum International Business Council and the US Business Roundtable endorse a more stakeholder-inclusive corporate capitalism while industry coalitions work to solve their members’ shared sustainability challenges. And employees and consumers call on employers and brands to take environmental and social challenges seriously. All of this makes clear that we have entered a new era for business, one in which sustaining competitive advantage requires companies to transform their business models for sustainability.

Company leaders need a broader, more systemic understanding of these dynamic sustainability challenges and the ways that their companies can play a part in addressing them. Fortunately, as some farsighted businesses are discovering, the most powerful opportunities for profitable innovation are embedded in these same challenges. Let’s consider three examples.

The first is Telenor, the leading Norwegian mobile operator. In 2008, having entered Pakistan three years earlier, it joined forces with the microfinance bank Tameer. With support from the Bill and Melinda Gates Foundation, the International Finance Corporation (IFC), and the Consultative Group to Assist the Poor (CGAP), they launched a new service called Easypaisa, providing mobile-based financial services to the unbanked and underbanked. By the end of 2019, Telenor Microfinance Bank (the result of Telenor’s acquisition of Tameer) boasted the largest branchless banking service in Pakistan, growing its Easypaisa mobile wallet user base to 6.4 million, its depositor base to 17 million, and the transactions volume through its agent network to about PKR 1 trillion (approximately $6 billion). This service has significantly advanced financial inclusion in Pakistan and established Telenor as a major telecom enterprise there.

Or consider Ajinomoto, a global food and biotech company based in Japan. It produces seasonings, sweeteners, and pharmaceuticals. As part of its 2030 vision and growth strategy to “help one billion people worldwide lead a healthier life,” Ajinomoto is exploring a new "personalized nutrition for health" business. Combining its core nutrition expertise and new technology, the company aims to provide customers with digitally enabled diagnostics, analytics, and product recommendations. These would guide people toward the kind of well-balanced amino acid intake that boosts cognitive and physiological functions and helps prevent aging-related diseases like dementia—a prominent societal issue in Japan.

Another example is Indigo Ag, a US-based agricultural technology startup that was valued at $1.4 billion in 2017. In 2019, the company launched a service called Indigo Carbon to help incentivize farmers to remove carbon from the atmosphere and sequester it in their soil. The service provides technologies and recommendations for regenerative agriculture practices. The ultimate goal is to pay farmers for each ton of carbon captured and then sell certifications to companies looking to offset their carbon footprints. By supporting a transparent carbon credit marketplace, Indigo Carbon creates benefits for all participants: the farmers, the companies buying the offsets, the planet, and its own business.

What do these three companies have in common? Regardless of industry, geography, or size, they (and dozens of others like them) are innovating business models—building on and expanding beyond their core assets and capabilities—to address significant environmental and societal challenges in their local contexts. In this way, they create new sources of value and competitive advantage for their business.

The Four-Step Innovation Cycle

In our research, we have studied more than 100 cases of companies that are practicing what we call “Sustainable Business Model Innovation” (SBM-I). We have found that the most advanced of these companies, the “front-runners,” combine environmental, societal, and financial priorities to re-imagine their core business models and even shift the boundaries of competition.

One might expect the front-runners to consist mainly of smaller enterprises, branded through their visible social or environmental missions. But most of them are actually global corporations that have gradually developed new business models that create both sustainability and long-term competitive advantage.

The core practice for SBM-I is an iterative innovation cycle, shown in Exhibit 1. With each round, the company gains scale, experience, and market presence for its initiative; these reinforce both the business advantage and the environmental and societal benefits generated.

new product business model

1. Expand the Business Canvas

So how can you bring this cycle to life in your company? The first step is to develop a rich understanding of the broader stakeholder ecosystem in which the company operates and of the environmental and societal issues and trends that might affect this ecosystem. As part of this diagnosis, you explore the potential impacts of ecosystem dynamics and issues on your business model. This will allow you to identify a range of business vulnerabilities and opportunities tied to environmental and societal issues. Some of these are good starting points for focused SBM-I.

More specifically, we recommend the following:

  • Expand the business canvas by mapping the wider ecosystem of stakeholders and societal issues in which the business operates. Ask yourself: Who are the key stakeholders in the system? What are the material environmental and societal issues and trends? How do stakeholders and environmental and societal issues directly or indirectly impact all the different parts of the business model?
  • Stress-test the business model (current or potential) within this broader map. How do stakeholder dynamics and environmental and societal issues constrain or hold back your business model? Where do limitations in the system create vulnerabilities for the business model? 
  • Extrapolate trends and build materiality scenarios. Look at today’s environmental and societal trends and think about how they might evolve over time. In addition, build scenarios to envision completely different, more extreme versions of the future (as opposed to linearly projecting trends) to stretch your thinking. And then, under these scenarios, ask yourself: How might environmental and societal issues change over time? How might stakeholders’ perceptions of and attitudes toward those issues shift? What would be the effects on the system map and the business model?
  • Explore scaling up the business. Imagine the business model at different scales of activity. Suppose your business grew three- or five-fold over the next few years. Where might breaking points or opportunities arise? What happens to the externalities the business creates? How do risks and opportunities change?
  • Identify innovation opportunity spaces or “strategic intervention points” (SIPs). These are points at which targeted action or innovation could alter stakeholder dynamics, positively impact the environmental or societal issues, reduce the vulnerabilities of the business model, or even create new business value opportunities.

Look for difficulties, gaps, and risks to arise from the analysis. For example, your company’s own lines of business might contribute to the environmental or societal issue and impact the growth of the business today. Also, don’t just rely on your own thinking. Cultivate outsiders who can provide complementary and thought-provoking perspectives.

In a recent interview , Christine Rodwell, former vice president of business development cities at Veolia, explained that “to walk the talk on sustainability, companies need to listen to their external stakeholders. They should create a committee of critical friends (across public, social, and academic sectors) who will challenge them and advise them to develop business solutions that create meaningful environmental and societal benefits.”

To understand what expanding a business canvas looks like in practice, consider the hypothetical example of a consumer packaged goods (CPG) manufacturing company engaged in a real-world dilemma: the toxic effect of plastic packaging on natural habitats, particularly in the world’s oceans. About 18 billion pounds of plastic waste enter the world’s oceans each year. This is equivalent to five grocery bags of trash on every foot of coastline. Plastic pollution causes extensive damage to life on land and at sea, including toxic contamination, strangulation, blockage of digestive passages, and endocrine-related reproductive problems for people as well as animals. Concerns about this problem reached a tipping point in the mid-2010s, as studies confirmed the damage.

As industrial leaders in this field know all too well, the complexities of gathering, cleaning, sorting, recycling, and reusing plastics have made it costly and difficult to address this issue. Companies that step forward with effective and financially viable solutions will not only gain enormous goodwill but are also likely to build high-growth businesses.

But where do you start? And where do you focus innovation efforts and investments to tackle such a complex, multifaceted environmental issue? Reflecting the SBM-I cycle approach, Exhibit 2 shows what a stakeholder-centric systems map for the plastics issue could look like from the point of view of a CPG company. This map uses basic systems dynamics principles to capture the most significant interrelationships among the CPG company, the environmental issue at stake, and key stakeholders (consumers, policymakers, civil society, waste collectors and recyclers, and plastics manufacturers). The arrows show patterns of cause and effect. For example, when urbanization increases, so does the cost of landfilling.

new product business model

The power of this diagram (versus more traditional, linear depictions) comes in part from its ability to reveal where delays, rebound effects, or tipping points might be active in the system. For instance, the node labeled “environmental and recycling awareness” will influence changes in several consumer habits—but only after a delay. Such awareness cannot be seen as a quick-fix solution, but over time it will help change the dynamics of the entire system.

The boxes in the exhibit represent the opportunity spaces or strategic intervention points (SIPs) that become evident during this step. In this example, a few of the SIPs for our CPG company are as follows: shifting to new packaging formats; setting up plastic collection initiatives; lobbying for government programs like deposit return systems; joining precompetitive coalitions that invest in recycling infrastructure and new recycling technology; and educating and nudging consumers to consume and dispose of packaging in more sustainable ways.

2. Innovate for a Resilient Business Model

The first step in the cycle will have led you to identify the opportunity spaces that hold potential for both financial returns and societal value. You must then transform your business model, or imagine an entirely new one, so that you can seize these opportunities. In this second step, you innovate and develop new aspects of that new business model. You are seeking to bypass current constraints, break tradeoffs, deploy technological advances, and perhaps integrate activities that were previously kept separate. You should ideate a new business model to integrate and reinforce both business advantage and environmental and societal benefits.

In related research , we introduced and defined seven archetypal business models that optimize for both societal and business value. Here we illustrate how they might apply to the plastics waste challenge.

  • Own the origins. Change production inputs to generate societal and environmental benefits. For instance, HP is working with waste collectors in a partnership with the First Mile Coalition in Haiti. HP has invested $2 million in a local facility to produce clean, high-quality recycled plastics that can then be used as input in an array of HP personal computer products and ink cartridges, reducing the environmental footprint of those products. Four years after its launch in 2016, the program had already diverted approximately 1.7 million pounds (771 metric tons) of plastic materials (equivalent to more than 60 million plastic bottles) from waterways and oceans and created income opportunities for 1,100 Haitians (with 1,000 more expected in coming years). Thanks to this and other efforts, HP boasted the world’s most sustainable PC portfolio in May 2020. This included, for example, the HP Elite Dragonfly, the first PC manufactured with ocean-bound plastic.
  • Own the whole cycle. Create environmental and societal impact by influencing the product usage cycle from cradle to grave. Since the 1990s, Grupo AlEn, a leader in home cleaning products based in Monterrey, has invested and scaled up its in-house plastic recycling operations to become one of the largest plastic recyclers in Mexico. AlEn now operates 30 routes and 6,200 collection points in the Monterrey area, recycling more than 50,000 tons of PET and HDPE per year. This business expansion has given AlEn an exclusive supply of recycled plastics, enabling it to create distinctive, greener packaging at a relatively stable cost.
  • Expand societal value. Expand the environmental and societal value of products and services, and capture value in pricing, market share, and loyalty. In 2018, PepsiCo acquired Sodastream, the world’s leading at-home sparkling water maker. Building on this technology, PepsiCo has begun to bring packaging-free, customizable beverages to workplaces, college campuses, and airports. This new business positions PepsiCo to win in the increasingly personalized beverage market and to save an estimated 67 billion single-use plastic bottles by 2025.
  • Expand the value chains. Innovate by layering onto the business ecosystems of customers or of partners in other industries. In Chile, Algramo’s innovative bulk distribution system replaces single-use plastic with RFID-equipped reusable containers. Since 2013, the startup has scaled up its business by partnering with more than 2,000 family-owned stores across Santiago. They dispense affordable food and staple products “al gramo” (Spanish for “by the gram”) and reward customers for reusing containers. Algramo’s model not only helps the environment but also benefits the urban poor, who previously had to pay high prices for small quantities of products, in wasteful, individually wrapped packets.
  • Re-localize and regionalize. Shorten and reconfigure global value chains to bring societal benefits closer to home. In Brazil, BASF has developed a solution to a local issue: waste certificate fraud. Some collectors and recyclers claim credits for recycled materials that they didn’t actually process or that aren’t actually recycled. Partnering with Kryha, a digital blockchain studio, and Recicleiros, an NGO that supports waste collectors and their cooperatives, BASF developed an online platform called ReciChain. This platform enables accurate and secured data tracking throughout the recycling value chain, to improve the quality of operations and guarantee the validity of manufacturers’ certificates and claims.
  • Energize the brand. Encode, promote, and monetize the full environmental and societal value of products and services, and use that leverage to engage customers in novel ways. The innovative manufacturing company 3M released the latest version of its Thinsulate insulation product in 2019. This is “100% recycled featherless insulation” made from recycled plastic bottles. Building on this accomplishment, 3M worked with the high-end apparel brand Askov Finlayson to create “the world’s first climate-positive parka,” producing 3,000 parkas in 2019 as an inspiring demonstration project.
  • Build across sectors. Create new business models in collaboration with government and nonprofit organizations, particularly in rapidly developing economies, to improve the business ecosystem and societal proposition. Together, SC Johnson and the social enterprise Plastic Bank have opened nine recycling centers in Indonesia to collect and recycle plastic before it reaches the ocean. This partnership also plays an important societal role, helping families in impoverished areas who collect plastic waste by buying it at a premium from them. In 2019, the partnership announced a ground-breaking, three-year deal to create 509 plastic collection points, including locations in Thailand, the Philippines, Vietnam, and Brazil. In aggregate, these points are expected to collect 30,000 metric tons of plastic over three years—the equivalent of stopping 1.5 billion plastic bottles from entering waterways and the ocean. On the business side, among other benefits, this collaboration will secure a steady supply of high-quality recycled plastics and help SC Johnson meet its 2025 packaging goals.

These seven archetypes can be starting points for developing your own business model innovation. Adapt them, and combine several together to develop a more comprehensive solution to environmental and societal issues relevant to your enterprise. Interestingly, among the 102 in-depth SBM-I cases that we explored in our research, 75% of the SBM-I leaders (the “front-runners”) combine three or more archetypes. This contrasts with less than 30% in the two other groups: the “ecosystem leaders” and the “initiative leaders,” whose efforts tend to be more narrowly focused.

In addition to exploring the possibilities inherent in these seven archetypes, take inspiration in the lessons learned from SBM-I front-runners. Front-runners see sustainability as a source of competitive advantage. In line with their long-term strategies, they continuously iterate and fine-tune their business models, always seeking to deepen their beneficial impact. They explicitly seek to understand and fix the root causes of environmental and societal challenges—as some of our plastics recyclers did, addressing not just the environmental concerns but also the social aspects of the issue. These companies also use digital technologies wherever possible, to break economic constraints and unlock new solutions. They practice an intensive form of stakeholder engagement: partnering with nonprofits and governments, operating across organizational boundaries, and pooling resources with other enterprises, even competitors. Last but not least, they experiment with new forms of value capture, such as blended financing sources, to de-risk and amplify their own investments. After all, notwithstanding their environmental and social track records, the front-runners are still in business to show a profit and return investment to shareholders.

3. Link to Drivers of Value and Competitive Advantage

In the third stage of the cycle, test, iterate, and refine your business model ideas or concepts (from the second step) to ensure that they will yield the environmental and societal benefits intended, and that the benefits will translate into value and advantage for the company. A business with weak profit margins cannot invest in innovation to amplify and scale environmental and societal benefits.

The objective of this step is to keep assessing and reengineering the business model, so that it continually improves the resilience of the business and the benefits to society. The following questions, based on our research into the characteristics of robust, resilient business models , can help you navigate this part of the process:

  • Can the business model scale effectively? Can it be replicated across all your business units or the markets you serve, without diminishing returns?
  • Will the business model differentiate your brand or product and make it more competitive in the marketplace?
  • Will it reduce the risk of commoditization, by being hard for others to imitate? Will its distinctiveness help you retain some control over pricing?
  • Can it leverage network effects? For example, can it attract the kinds of customers and suppliers that make other customers feel compelled to join?
  • Does the business model harness business ecosystems—including the larger industry, the value chain, and everyone who interacts with your products, services, and practices—for advantage and sustainability?
  • Does the business model naturally create meaningful environmental and societal benefits?
  • Will the environmental and societal benefits remain durable against changing trends over time, even as the business model scales up?
  • Does the business model increase returns to shareholders as well? Are the financial benefits linked to the environmental and societal benefits in some significant way?
  • Finally, does the model animate your company’s purpose? Does it boost engagement and loyalty between the company and its employees, customers, investors, and other stakeholders?

Exhibit 3 shows how a company might assess its business model against these nine questions. The resulting footprint reveals how robust and resilient the business model is and identifies where it could be improved to unlock further advantage and value for the company.

new product business model

The fuller the footprint, the better. Among the front-runners in our sample, 90% score “high” on at least five of the nine attributes, as opposed to only 30% in the other groups. The front-runners also show superior average scores on every single dimension.

4. Scale the Initiative

The full potential value of sustainable business model innovation is achieved only when the new business model is brought to scale: engaging people in the company, across the supply chain, in the company’s networks, and in its ecosystems to expand impact and advantage.

To accomplish this, companies can leverage three enablers. First, partnerships with other organizations, within or across industries or sectors, can help a company pool resources, fill capability gaps, and unlock new markets. Almost 90% of the front-runners have broadened their efforts this way. Second, digital technology (leveraged by 80% of the front-runners) can help create new distribution channels that reach previously unserved or underserved populations at a fraction of the cost of their predecessors. Third, companies that adopt SBM-I tend to develop cultures and leadership values that attract and engage people inside and outside their boundaries. Indeed, all of the front-runners explicitly mention the environmental and societal impact they seek to deliver in their vision, purpose, or mission statements.

Consider the example of BIMA, a mission-driven provider of mobile-delivered health and insurance services that started operations in Ghana in 2010. Its innovative digital technology platform and its partnership model (which comprises telecom providers, mobile money providers, and insurance underwriters) have enabled it to rapidly scale its innovative business model. BIMA now provides affordable, easy-to-manage life and health insurance to more than 35 million low-income customers across ten emerging economies. BIMA’s customers have access to its services through their mobile phones. Many of them are lower income families who earn less than $10 a day. About 75% of them are obtaining insurance for the first time in their lives. These societal benefits are at the core of BIMA’s strategy and mission; the company’s website says explicitly that its “purpose is to protect the future of every family.”

The four-step innovation cycle we propose in this article offers companies a way to systematically integrate and solve for social and business value in one business model. Most of the companies that begin this journey are already skilled at optimizing for business advantage. They may already recognize the importance of taking into account their environmental and societal impacts. With this approach, they are now ready to take on innovation for a business that optimizes for both business and social value.

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10 key steps to developing a business model.

Business Model for Product Development

Understanding your business model is crucial for evaluating the ability of the company to support a new product idea. Too often we see companies taking on a new product development project, only to discover late in the process that the company is missing key infrastructure, such as the appropriate distribution channels, expertise in key technologies or the ability to finance large product purchases for customers. This post will help you decipher your business model in 10 key steps.

Definition of a Business Model

Before we get started on those 10 steps, a brief definition of a business model: It describes how a company creates and distributes a compelling value proposition that customers are willing to pay for at a price that yields an acceptable profit for the company.

10 Steps to Developing a Business Model

Now for the 10 steps to developing a business model. Throughout the process, stay at a fairly high level and focus on the most important attributes. It’s easy to get lost if you get into every little detail.

  • Choose a particular target segment and describe it. A segment is a group of customers with similar needs, behaviors or other attributes that the company chooses to serve.
  • Next, what channels are used to market to, sell to, distribute to and support this segment? Are there any partners we need to establish or maintain relationships with?
  • What products and/or services are offered to this segment, and are there any differences by channel? If so, make that clear.
  • What are the revenue streams? How are prices set? How are customers charged for products and services? How is revenue collected?
  • Now, what is the value proposition delivered by each product. Think not only of value propositions for the customer (including the end-customer and any intermediaries), but also partners. Remember that the value proposition is from the perspective of the customer and can vary by customer segment; that is why we focus on one segment at a time.
  • What are the key activities the company must perform to ensure the value proposition is delivered? This can include activities supporting partners and channels that are key to the value proposition. This may also involve outsourcing.
  • What are key inputs and resources that must be acquired and maintained? This can include human, physical, financial and intellectual assets, as well as suppliers and vendors.
  • Next, what implications do the elements defined so far have for the infrastructure of the business? They may not have been captured already. Is there significant investment required in maintaining certain technologies, skills or branding, for example?
  • The cost structure includes the fixed costs of maintaining the value chain, as well as variable costs. Where are the biggest or most volatile costs?
  • Finally, have you adequately identified what the company does differently to deliver on the competitive strategy (how the company differentiates itself from the competition)? If it’s not evident in the activities or resources identified you’ll need to take another pass at it. It may take several iterations to get something you are comfortable with.

Arranging your Findings for Easy Reference

Repeat for each customer segment, noting similarities and differences with the previous segment(s). You may find it helpful to arrange your findings for easy reference in a diagram like the one below.

new product business model

The business model is one of the most powerful, and most overlooked, tools of the product developer. New products must fit the existing business model, unless the company is expressly willing to adapt its model to support the new product. Evaluating fit with the business model early and often throughout the development process helps prevent costly mistakes and improve new product success.

Learn more about how the Product Risk Framework® (BFF) integrates important business model components. The BFF is a business intelligence SW tool for product developers.

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Product Innovation: What Business Leaders Need to Know

Business professional leading discussion on product innovation

  • 24 Mar 2022

An innovative product can cut through a stagnant market and meet customer needs in new, exciting ways. At its heart, innovation allows businesses to stay relevant and drive growth.

As a business leader, it can be challenging to foster innovative thinking within your firm, understand what innovation opportunities exist, and how to execute them with your current capabilities.

Here’s a primer on the three types of innovation, five tips for leading innovation, and how you can deepen your innovation skills to help propel your business forward.

Access your free e-book today.

What Is Product Innovation?

Product innovation is the process of creating a new product—or improving an existing one—to meet customers’ needs in a novel way.

There are three key types of innovation :

  • Sustaining innovation , in which a business consistently provides the highest quality products to its best customers
  • Low-end disruption , in which an emerging company enters at the bottom of the market, providing a “good-enough” product with a low-profit model
  • New-market disruption , in which an emerging company creates a new segment in an existing market and moves upmarket, gradually rendering the incumbent products obsolete

The difference between the three types of innovation lies in their relationships to the existing market. Low-end and new-market disruption are both types of disruptive innovation , meaning they’re used by companies with fewer resources to challenge well-established businesses.

A sustaining innovation is one that targets the top of the market—that is, the people willing to pay the most—and directly competes with the incumbent products that own that segment. While a new entrant may have some success breaking into the top of an existing market, the incumbent business is likely to put up a fight.

Disruptive innovators, however, are likely to avoid a fight because the segments they’re after offer the lowest profit margins and, therefore, aren’t a justifiable use of incumbent companies’ time, money, or effort.

When seeking innovation opportunities for your product, consider both types. Sustaining innovations will allow your business to stay relevant in its current market and continue delighting its top customers, while disruptive innovations will allow you to break into other markets or create a new market segment.

Related: 23 Resources for Mobilizing Innovation in Your Organization

5 Innovation Tips for Business Leaders

1. identify your customers’ jobs to be done.

In the online course Disruptive Strategy , Harvard Business School Professor Clayton Christensen explains the jobs to be done theory . According to Christensen’s theory, customers don’t just buy a product to meet their needs; they hire it to do a job.

The job to be done isn’t always the product’s main function. For example, someone may choose to hire ice cream cones to do the job of making summer memories with their children. Other times, the jobs are more straightforward. For instance, someone could hire a specific running shoe to do the job of reducing knee pain during exercise.

Consider what job customers hire your product to do. Are there other jobs they need done that you could solve by improving the product? Conducting market research with existing customers can offer insights into the variety of jobs people are hiring your product to do and highlight opportunities to innovate.

The jobs to be done framework also presents a unique way to view competitors. Not only are you competing with other brands that make comparable products, but also anything else that can perform the customer’s job to be done. Returning to the ice cream cone example, the customer could choose to hire water balloons, popsicles, or a day at the beach to do the same job of making summer memories as a family.

Remember to periodically reassess your customers’ jobs to be done so you can iterate on your product to meet their needs as they arise.

2. Create an Environment That Fosters Innovation

Even a company with a clear sense of its customers’ jobs to be done and a stellar innovation strategy can’t be successful without an internal culture that fosters innovation.

Options to empower your employees to develop an innovative mindset may include:

  • Creating opportunities for cross-team collaboration
  • Leading with a growth mindset and embracing failures as opportunities to learn
  • Hosting brainstorming sessions and encouraging out-of-the-box thinking
  • Dedicating a team or committee to coming up with innovative ideas without the typical restraints or success metrics as the core business

As a business leader, remember the power you have to influence your organization’s culture and use it to empower your employees to think big and take calculated risks in the name of innovation.

3. Determine Your Organization’s Capabilities

Before diving into an innovation strategy, ensure your organization has the proper resources, processes, and profit formula to execute it.

Resources can include everything from the materials used to make products to technology, cash, and employees.

Processes are the ways in which tasks are executed; for example, product development or employee onboarding plans.

The profit formula is the criteria used to guide prioritization decisions and can include metrics such as gross margin targets or return on investment thresholds.

In Disruptive Strategy, Christensen describes these three factors as essential to determining your organization’s capabilities, so you can plan realistic innovation and growth goals.

“We really need to think deeply to understand what an organization can and cannot do,” Christensen says. “When we recognize what an organization can and cannot do, it doesn’t put us in a straightjacket and constrain us, but it does tell us, if we need new capabilities, we realize where we have to build those abilities. If the market is changing in front of us and our abilities change over time, it tells us what we need to create new and where we can use the old.”

Listing your organization’s resources, processes, and profit formula can enable you to gain a clearer picture of what areas need to change to make innovation possible.

4. Keep Disruptive Innovations Separate

One key point Christensen stresses in Disruptive Strategy is that businesses can’t disrupt themselves—that is, disruptive innovations need to be kept separate from sustaining ones.

“It’s important to realize you can’t disrupt yourself,” Christensen says. “If you have an idea for a new market disruption, for example, and you tried to implement that new technology in your core market, the probability that you’ll succeed is zero. The reason why is that the core company can’t make money with this new product and they’ll either ignore it or they’ll change it so they can implement it as a sustaining technology to help the core business go.”

While it may seem counterintuitive, if you have an idea for a disruptive innovation, you should form a separate business unit to execute it so the innovation doesn’t get lost in the company’s existing strategy.

5. Consistently Think One Step Ahead

Innovation isn’t a one-and-done project; it’s a commitment to thinking one step ahead for the business’s lifespan. As you hone your resources, processes, and profit formulas, innovation will become easier and a more ingrained part of your company’s culture.

Be aware of new entrants emerging into your market, as well as opportunities for your business to disrupt other markets. By understanding the bigger picture, you can prepare for disruption and seize new opportunities as they arise, knowing you have the internal necessities in place to execute.

Disruptive Strategy | Create winning strategies for your organization | Learn More

Learning to Lead Innovation

As a business leader, it’s your responsibility to set the tone and lay the foundation for a strong product innovation strategy. To build your skills in this area, consider an innovation training course, such as Disruptive Strategy.

“I have already applied so much of what I have learned [in Disruptive Strategy],” says Paige Peterson , a sales manager at Coravin, Inc., who took the course to gain clarity and insight as her company sought to disrupt the wine industry. “My strategy and message for my team and how we communicate with our customers has begun to shift. The biggest takeaway is looking at my product on the shelf and always trying to gauge ‘What is the job to be done here?’”

Not only can innovation training be an asset to you as a leader, but also to your team or business unit. Consider providing access to a course to your employees to equip them with the foundational knowledge for innovation.

Are you interested in driving innovation for your organization? Explore our six-week course Disruptive Strategy , one of our online entrepreneurship and innovation courses. If you aren't sure which course is the right fit, download our free course flowchart to determine which best aligns with your goals.

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new product business model

Product Business Model

The product business model is a dyadic transactional relationship where your good or service can be designed and delivered without prior interactions with the customer.

This Pathway Requires

Selling products or services is the oldest and most common form of business model.

Exemplars for B2C include Ford motor cars; McDonald’s hamburgers, and for B2B companies include electric motors for consumer durables. This pathway requires:

  • Identifying potential customers
  • Identifying how to capture awareness and create demand
  • Identifying mechanisms of monetization – that include unit price, freemium , razor-blade , discounts for quantity
  • There are many ways the firm can be structured that include: hierarchical-integrated or unbundled-networked among partners of suppliers and channels.

Scalability – Greater volumes typically reduce costs.

Profitability – When the firm achieves scale and there are high entry barriers.

Risk – Copycat products especially those with lower costs.

Learn from exemplars

Transform your thinking of the product business model.

The BusinessModelZoo™ provides insight to help you understand and navigate the opportunities and rewards as well as risks and threats to the product business model it faces from the other business model pathways.

Engaging dynamically and as a result fulfilling more completely my customer’s needs is an essential element of transforming from a product to a solutions business model . These moves are likely to involve some significant costs, and are typically worthwhile only when I can digitize critical elements of the offering that allow the dynamic engagement to be offered at large scale (see digital solutions exemplar). The benefits of a solutions business model are typically higher prices and the opportunity to tailor prices to particular customers.

Adding a physical market place (or better a digital market place) that allows customers to buy not just my offerings but also those of rivals is an addition to my business portfolio . By definition, a market place uses a matchmaking business model that allows me to engage with a wider group of customers and to learn more about rival offerings, but typically demands more resources and a much more-nimble approach to management. Amazon’s market place is not a very profitable business considered separately, but this matchmaking business model has allowed Amazon to create complementary businesses such as AWS that are very profitable.

Adding a new customer group that brings a new additional revenue stream on account of their interactions with my current customers is an essential element of becoming a multi-sided business model. Such actions will be challenging, costly and are typically only achieved in stages, but might be a very profitable final end point. The new customers are likely to be advertisers, and whoever they are it is essential that they engage with my existing customers in a value adding manner. I will need enhanced capabilities to service this new group of customers (the advertisers). Once again, to be really effective as a multi-sided business model , I will have to digitize many elements of my offering.

My physical product business model is at risk from rivals offering solutions business models at scale. In every industry, there are small scale operators who offer solutions business models that are not a threat, but there is a significant threat when a large-scale operator appears with an attractive solutions business model . Such has been the case in capital goods industries where large firms are offering digitally enhanced products or services that engage more effectively with customer needs and are offered on “pay for use and performance” basis. Such a threat can only be countered either by my reducing price significantly, or by my switching to a solutions business model, something that will involve significant costs (see text above).

If a market place appears in my industry, my sales could be increased by participating in this matchmaking business model , but I might lose my direct customer relationship and that may reduce my profits. Airbnb expanded the sales of its smaller rental firm participants many-fold, but threatened traditional hotel chains who were reluctant to participate because they no longer “owned the customer”. My best response maybe to develop a solutions business model (see text above).

It may be very difficult to counter an effective multi-sided business model competitor, especially if the multisided firm is able to use one of its customer groups to subsidize the costs (and prices) of its offering. If the appearance of the extra customer group debases the offering in the eyes of your customers (as in say advertising supported educational offerings) you may be able to resist by maintaining the integrity of your offer. Otherwise you might be forced to change your business model to either a solutions business model or a multi-sided business model (see text above).

Engaging dynamically and as a result fulfilling more completely my customer’s needs is an essential element of transforming from a digital product to a digital solutions business model . Even in the digital sphere, these moves are likely to involve some significant costs. The benefits of a solutions business model are typically higher prices and the opportunity to tailor prices to particular customers.

Adding a digital physical market place that allows customers to buy not just my offerings but also those of rivals is an addition to my business portfolio. By definition, a market place uses a matchmaking business model that allows me to engage with a wider group of customers and to learn more about rival offerings, but typically demands more resources and a much more-nimble approach to management. Electronic games producers often run market places, and this aspect of their business is typically not a very profitable business considered separately, but the matchmaking business model allows the games producers to gain insights into market trends and competitor offerings.

Adding a new customer group that brings a new additional revenue stream on account of their interactions with my current customers is an essential element of becoming a multi-sided business model . Such actions will be challenging, costly and is typically only achieved in stages, but might be a very profitable final end point. The new customers are likely to be advertisers, and whoever they are it is essential that they engage with my existing customers in a value adding manner. I will need enhanced capabilities to service this new group of customers (the advertisers).

My digital product business model is at risk from rivals offering a digital solutions business model because customers of solutions business models are typically more loyal. Such a threat can only be countered either by my reducing price significantly, or by my switching to a solutions business model, something that will involve significant costs (see text above).

If a digital market place appears in my industry, my sales could be increased by participating in this matchmaking business model , but I might lose my direct customer relationship that may reduce my profits. (see text above).

It may be very difficult to counter an effective multi-sided business model competitor, especially if the multisided firm is able to use one of its customer groups to subsidize the costs (and prices) of its offering. If the appearance of the extra customer group debases the offering in the eyes of customers (as in say advertising supported educational offerings) you may be able to resist by maintaining the integrity of your offer. Otherwise you might be forced to change your business model to either a olutions business model or a multi-sided business model (see text above).

Discover other  Business Model  pathways

Explore all four business model pathways for developing your business. Each describes an ideal model of how a business can engage with its customer, deliver value, and monetize the result.

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Business Model Canvas

What is the business model canvas.

A business model canvas provides a high-level, comprehensive view of the various strategic details required to successfully bring a product to market. The typical use case for this tool is to outline the fundamental building blocks of a business, but it can be used effectively for individual products as well. The exact ingredients may vary, but these are some of the typical components included:

  • Customer segments —Who is going to use this product?
  • Product value propositions —What is this going to do for the customer to make their life/job better?
  • Revenue streams —How will the company make money from this product?
  • Channels —How will the product be sold or distributed?
  • Customer relationships —What is the success and support strategy for new customers?
  • Key partners —What other companies or individuals are part of the development and go-to-market strategy?
  • Key activities —What must happen internally to release this product?
  • Key resources —What people, materials and budget are required to pull this off?
  • Cost structure —How much will it cost to develop, manufacture, distribute, and support the product?

Asking and answering these questions should be de rigueur for any new product, but this particular framework is useful for distilling the supporting business case down into something easily digestible. By forcing everything to be on a single page, each question must be answered succinctly, which often cuts through any grandstanding to illustrate whether each area is truly addressed and viable.

How do product managers use the business model canvas?

The business model canvas serves two primary purposes for product managers : focusing their thinking during its creation along with expediting and framing the conversation when communicating with others.

Because the business model canvas is a comprehensive summary of what the product will do, who will use it, why they’ll use it, how it will happen, and how the money works, it requires a lot of thinking and homework to put it together. This exercise is very helpful for product managers to fully understand the market opportunity and refine their story while uncovering potential problem areas and fully vetting their impact. Plus the process of boiling everything down to a single page ensures that what is included is as truthful and well supported as possible.

The business model canvas can serve as a continually referenceable touchstone for the product development process and beyond, essentially serving as a mission statement for the product. As conditions on the ground change and more is learned about the product’s market reception and usage, the canvas can be updated to accurately reflect the latest information; reviewing the canvas periodically is a worthy activity in and of itself.

As a communication tool, the business model canvas is an ideal document for our short attention span world and is as useful with the executive team as it is with a junior developer. Since it only contains the most salient and relevant information, the audience won’t be drowning in details or distracted by supporting evidence or non-sequiturs. The canvas can also create a universal vocabulary for the product and get everyone using the same language and concepts going forward.

[Free report] 2021 State of Product Management ➜

Tips for using the business model canvas

Here is how to make the most of the business model canvas and the process of creating and maintaining it:

  • Note assumptions and challenge them —Since a business model canvas is developed while a product is still “theoretical” there is often a lack of actual facts to rely on. Instead, educated guesses, informed opinions and assumptions are utilized to build it out. While there’s often no escaping these, anything in the canvas that is an assumption versus a proven fact should be called out, with every effort made to both challenge the assumption and anticipate the impact if the assumption turns out to be incorrect.
  • Bounce it off a virgin audience —Fellow employees and even board members will approach a business model canvas with a trunkload of inherent biases. To truly test the veracity and completeness of a canvas, allow some outside parties to validate it independently. It should be a self-explanatory document, so allowing them to review it and provide feedback without any dialogue or explanations is a great test of its worthiness and thoroughness.
  • It’s easy to update, so keep it current —Unlike longer, weightier documents, the single-page nature of the business model canvas means there’s no excuse for it to languish and fall behind the business’s current line of thinking or newly gathered information. Reviewing it on a regular basis and maintaining its accuracy enhances its usefulness and is a helpful process to note when assumptions or plans have changed.
  • An ever-present reminder —Thoughts, plans, goals, and assumptions were laid out succinctly in the canvas with great care and deliberation. Going forward the canvas can be continually referred to for guidance, inspiration, and level setting as folks become swept up in the momentum of product development, sales, and marketing.
  • Present it in pieces —Sure, the entire business model canvas fits on one piece of paper, but there is a lot of things on that 8 ½ x 11 inch page. When presenting it, discuss each piece individually, gradually revealing the entire contents. This will prevent information overload and allow the team to convey things narratively instead of an information dump.
  • Reference all the evidence —Any hard data should be clearly referenced (if not included) in the canvas to give the arguments and statements as much legitimacy as possible. Reviewers will be trying to poke holes (as they should), so firm things up whenever there’s a chance.
  • Be specific —No one needs a business model canvas to understand fundamental business case elements; it is intended to tell the story and rationale for this particular product. Cut out anything generic and make it as relevant to this exact opportunity as possible. In particular, link individual customer segments with their respective value propositions, since a product won’t be all things to all people.
  • Create multiple canvases —During the early phases, generating more than one business model canvas based on divergent assumptions, target markets, or value propositions can be a useful tool for exploring different directions the product could head. After the plans are firmed up, multiple canvases can still be employed, this time to see how different scenarios pan out when key factors change… it can be used as a wargaming tool to prepare for different potential outcomes.
  • Who, what, and why first. How and how much second —Although a business model canvas includes everything from a value proposition and personas to implementation costs and resources, everything should be driven from the market opportunity and rationale for bringing a product to market. If those aren’t solid, spending cycles on technology and costs is a waste of time.

Creating a business model canvas puts new product ideas under the microscope and pulls together disparate sources of intelligence, opinions, hunches and research into a single piece of paper. It forces critical thinking and analysis of assumptions and guesses and provides an excellent reference point for the entire organization.

Once the canvas is approved and productization begins, the canvas can also serve as a straw man for the product roadmap, lining up future features and functionality based on the priorities laid out in the document to achieve market success.

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Rob Llewellyn

The 50 Best Examples of Business Model Transformation

What is business model transformation .

Business model transformation refers to the process of altering the fundamental way a company operates and delivers value to customers, in order to improve its performance, competitiveness and adapt to changing market conditions.   It involves rethinking the company's strategy, operations, financials, and organisational structure, in order to create a new and more effective business model. The goal is to create new sources of revenue, lower costs, and increase the overall value the company provides to its customers and stakeholders.

Business Model Transformation

What is a Business Model?

A business model is a conceptual framework that outlines how a company creates, delivers, and captures value. It defines the products or services a company offers, the target customers it serves, the channels through which it reaches those customers, and the revenue streams it generates. The business model outlines the underlying logic of how a company operates, generates revenue, and grows over time. It is a key element of a company's overall strategy and plays a crucial role in its success or failure.   New businesses often seek to disrupt existing markets by introducing new and innovative business models. These new models can offer unique value propositions, reach customers in new ways, and generate revenue in ways that traditional businesses cannot.

Examples of new types of business models include:

Subscription-based models, where customers pay a recurring fee for access to a product or service 

Platform-based models

Platform-based models are where a company creates an ecosystem of buyers and sellers and takes a commission on transactions

Sharing economy models

Sharing economy models are where individuals share resources, such as cars or homes, through an online platform 

Freemium models

Freemium models are where a basic version of a product or service is offered for free, with premium features available for a fee

Crowdfunding models

Crowdfunding models are where a business raises funds from a large number of people, typically via the internet

crowdfunding business model

There are many more types of business model. Those listed above and others have the potential to shake up traditional industries and create new market opportunities, but they also bring new challenges, such as regulatory hurdles, changing customer behaviours, and intense competition.

Technology Enabled Business Models

Technology-enabled business models are business models that leverage digital technologies to create new value propositions for customers and generate new revenue streams. These business models often rely on the use of data, analytics, and automation to increase efficiency, improve customer experiences, and create new products and services.

Examples of technology-enabled business models include:

Platform business models: Platforms such as Uber, Airbnb, and Amazon leverage digital technologies to connect buyers and sellers, hosts and guests, or service providers and customers, creating new marketplaces and revenue streams.

Subscription business models: Companies such as Netflix, Spotify, and Adobe use subscription-based models to offer access to digital content or software as a service, providing recurring revenue streams.

E-commerce business models: Retailers such as Amazon, Alibaba, and Zara use e-commerce business models to sell products online, using data and analytics to personalize the shopping experience and improve supply chain efficiency.

Freemium business models: Companies such as Dropbox, LinkedIn, and Hootsuite use freemium business models to offer a basic service for free and charge for premium features, using data and analytics to convert free users to paying customers.

Data-driven business models: Companies such as Google, Facebook, and Twitter use data-driven business models to monetize user data, providing targeted advertising and insights to advertisers.

Technology-enabled business models often disrupt traditional business models and create new opportunities for growth and innovation. By leveraging digital technologies to create new value propositions, organizations can stay ahead of the curve and create sustainable competitive advantages. Learn more about technology enabled business models.  

7 Reasons For Business Model Transformation

A business may decide to undergo a business model transformation for a variety of reasons, including:

1. Market disruption

Market disruption refers to the phenomenon where an emerging technology or business model disrupts an established market or industry, leading to significant changes in the competitive landscape and the way business is conducted. The market or industry changes, and the older business model is no longer effective.

Disruptive technologies or business models often challenge established market leaders by providing a new and innovative way to deliver products or services that meets customer needs in a more efficient, convenient, or cost-effective way. Disruptors often leverage digital technologies, data and analytics, and platform-based business models to create new value propositions for customers and generate new revenue streams.

Market disruption can be a double-edged sword, as it can lead to the downfall of established companies and industries, but it can also create new opportunities for growth and innovation. By keeping up with emerging technologies and business models and embracing innovation, companies can position themselves to be disruptors rather than the disrupted.

2. Increased competition

Increased competition refers to the situation where a company faces more competitors in the marketplace, either from new entrants or from existing competitors who have expanded their offerings or improved their value propositions.

The emergence of new technologies, changes in consumer behaviour, and global market dynamics are some of the factors that can lead to increased competition. In a highly competitive environment, companies may need to invest more in marketing, product development, and customer service to differentiate themselves from their competitors and maintain their market share.

To stay competitive in a dynamic market, companies need to stay agile, be open to change, and continually adapt their strategies to meet the evolving needs of their customers. This may involve investing in new technologies, expanding into new markets, or developing new products and services that offer unique value propositions. By staying ahead of the competition and focusing on delivering value to their customers, companies can maintain a competitive edge and succeed in the marketplace.

3. Declining sales

Declining sales refer to the situation where a company experiences a decrease in the volume or value of its sales over time. This can be caused by a variety of factors, such as changes in consumer preferences, increased competition, economic downturns, and supply chain disruptions.

Declining sales can have significant negative impacts on a company, such as reduced revenue, lower profit margins, and decreased market share. This can lead to a vicious cycle, where lower sales lead to reduced investment in marketing and innovation, which further depresses sales.

By taking proactive measures to address declining sales, companies can turn the situation around and regain their competitive edge. This may require a shift in strategy, investment in new capabilities, and a willingness to embrace change and innovation.

4. Technological advancements

New technologies have emerged that enable companies to reach customers and operate more efficiently, and the current business model is not taking advantage of these advancements.

Technological advancements can occur across a range of fields, such as information technology, biotechnology, materials science, energy, and transportation. They can involve new discoveries or breakthroughs, as well as incremental improvements to existing technologies.

Technological advancements can have significant impacts on society and the economy, creating new opportunities for innovation and growth, as well as challenges and disruptions. To leverage the benefits of technological advancements, companies and individuals need to stay up to date with emerging technologies, be willing to experiment and innovate, and be adaptable to change.

5. Changing customer needs

The company's target customers' needs, and behaviours have changed, and the current business model is no longer meeting their needs.

Changing customer needs refer to the situation where the preferences, expectations, or demands of customers evolve over time due to factors such as changes in technology, lifestyle, demographics, or societal trends. As customers become more informed and empowered, they expect businesses to meet their needs in more personalized and customized ways, and to offer seamless experiences across all touchpoints.

Changing customer needs can have a significant impact on businesses, especially those that fail to adapt to these changes. To stay relevant and competitive, businesses need to be agile and able to respond to changing customer needs by developing new products, services, and experiences that meet evolving expectations.

By prioritising customer needs and staying attuned to changing trends, businesses can maintain their competitive edge and build stronger relationships with their customers.

6. Shifting regulatory environment

The company is facing new regulations or changes in existing regulations that impact its business model.

A shifting regulatory environment refers to the situation where there are changes in the laws, rules, or policies that govern a particular industry or sector. These changes can be driven by a range of factors, such as changes in political leadership, shifts in public opinion, or new technologies and business models that disrupt established regulatory frameworks.

A shifting regulatory environment can have significant impacts on businesses, especially those that operate in highly regulated industries such as finance, healthcare, and energy. Changes in regulations can create new opportunities or pose new challenges for businesses, depending on their ability to adapt and comply with new requirements.

By staying attuned to changes in the regulatory environment and adopting a proactive and collaborative approach to compliance, businesses can position themselves to succeed in the marketplace and take advantage of new opportunities.

7. Mergers and acquisitions

The company has undergone a merger or acquisition and needs to integrate the business models of the two companies.

Mergers and acquisitions (M&A) refer to the process of combining two or more companies through a variety of financial transactions, such as mergers, acquisitions, consolidations, or tender offers. The goal of an M&A transaction can be to achieve various strategic objectives, such as expanding the company's geographic reach, gaining access to new markets, achieving economies of scale, or acquiring new technology or talent.

M&A transactions can have significant impacts on both the companies involved and the broader market. On the one hand, M&A transactions can lead to increased efficiencies, cost savings, and other synergies that can benefit the companies and their stakeholders. On the other hand, M&A transactions can also lead to job losses, cultural clashes, and other negative impacts, especially if the companies involved are unable to successfully integrate their operations and cultures.

M&A transactions can take many forms, including horizontal mergers, where companies in the same industry merge; vertical mergers, where companies in different stages of the supply chain merge; and conglomerate mergers, where companies in unrelated industries merge.

The ultimate goal of a business model transformation is to create a new and more effective way for the company to operate, generate revenue, and grow over time. It requires a strategic and well-planned approach, as well as a willingness to take risks and embrace change.

Business Transformation Versus Business Model Transformation

Business Transformation and Business Model Transformation are similar but distinct concepts. This results in a lot of people using the terms interchangeably and not understanding how they differ.   Business Transformation refers to a comprehensive change program aimed at improving an organisation's overall performance and competitiveness. It can encompass changes to the company's strategy, operations, technology, culture, and structure. Business transformation often requires a significant effort, resources, and time, and affects many areas of the company.   Business Model Transformation, on the other hand, is a specific type of transformation focused on changing the way a company creates, delivers, and captures value. It is a more targeted effort to improve the company's business model, with the goal of generating new sources of revenue, reducing costs, and increasing the overall value the company provides to its customers and stakeholders.   In short, business transformation is a broader, more comprehensive effort to improve the entire organisation, while business model transformation is a specific type of transformation aimed at improving the company's business model. 

Types of Business Transformation

There are several types of business transformation, which we'll consider below. Note that this is about business transformation types. Not Business model types. We'll talk about business model types later.

Digital Transformation

Digital transformation is the type of transformation that is focused on leveraging digital technologies to transform the company's operations, reach customers in new ways, and generate new sources of revenue. It may involve changes to the company's technology systems, customer engagement strategies, and revenue models.

Operational Transformation

Operational transformation: This type of transformation is focused on improving the efficiency and effectiveness of the company's operations. It may involve changes to the company's supply chain, production processes, and technology systems.

Organisational Transformation

Organisational transformation: This type of transformation is focused on changing the company's culture, structure, and processes to improve its overall performance and competitiveness. It may involve changes to the company's management systems, decision-making processes, and employee engagement strategies. 

Market-Focused Transformation

Market-focused transformation: This type of transformation is focused on entering new markets, expanding the company's reach, and increasing its market share. It may involve changes to the company's target customer segments, marketing strategies, and distribution channels.

Cultural Transformation

Cultural transformation: This type of transformation is focused on changing the company's culture and values to align with its overall strategy and goals. It may involve changes to the company's leadership, communication styles, and employee engagement strategies.

Business Model Transformation

Business model transformation: This type of transformation is focused on changing the way a company creates, delivers, and captures value. It is a targeted effort to improve the company's business model, with the goal of generating new sources of revenue, reducing costs, and increasing the overall value the company provides to its customers and stakeholders.   Each type of transformation has its own set of challenges and opportunities, and companies must choose the type of transformation that is most appropriate for their specific needs and goals. It's also important to note that multiple types of transformation may occur simultaneously, as companies seek to adapt to changing market conditions and improve their overall performance. 

Business Model Innovation

Business model transformation cannot occur without innovation, however, it requires the proper form of innovation as the term “innovation” often elicits thoughts of product innovation. Some organisations tend to get caught up in the thrill of developing new products, frequently neglecting business model innovation.   Business model innovation refers to the process of creating and implementing new or significantly improved ways of doing business in order to gain a competitive advantage. This can include changes to a company's revenue streams, value proposition, customer segments, distribution channels, or other aspects of the business model.   The goal of business model innovation is often to create new sources of revenue, increase efficiency, or improve customer value. This can be done by exploring new markets, developing new products or services, or finding new ways to deliver existing products or services.   Business model innovation can be a key driver of growth and success for companies, especially in rapidly changing or disruptive industries.   Business model innovation is gaining recognition as a crucial aspect of strategic management that contributes to creating significant competitive advantages for an organisation.

Business Model Innovation Benefits

Business model innovation is important because it allows companies to adapt to changing market conditions and customer needs and create new sources of revenue and growth. In today's fast-paced business environment, companies that are able to continuously innovate and evolve their business models are more likely to stay competitive and successful.

5 Benefits of Business Model Innovation

There are several reasons why business model innovation is crucial for companies: 

1. Helps companies stay ahead of the competition

By continuously innovating their business models, companies can differentiate themselves from their competitors and create a competitive advantage.

2. Allows companies to explore new markets

Business model innovation can help companies identify new market opportunities and create new revenue streams. 

3. Helps companies adapt to changing customer needs

By understanding and responding to changing customer needs, companies can improve customer value and loyalty.

4. Enables companies to be more agile and efficient

Business model innovation can help companies streamline their operations and reduce costs, which can improve overall efficiency and profitability.

5. Helps companies to be more resilient

A diversified business model with multiple revenue streams can help companies to be more resilient in the face of market disruptions or economic downturns.   In summary, business model innovation is important because it allows companies to stay competitive and adapt to changing market conditions, which is essential for long-term success.

Business Model Innovation Process

Business model innovation is the development of new business models, the modification of existing business models, and the change from one business model to another.   It's increasingly seen as a source for superior organisational performance and competitive advantage that is complementing or even partly replacing organisational strategy.   The capability to move into new business models rapidly and successfully is an important source of competitive advantage and a key leverage to improve the performance of companies. 

Business Model Innovation in 10 Steps

Business model innovation consists of 10 iterative phases. An organisation undergoing this process may revisit stages and repeat or skip steps as needed, and may repeat the process to respond to new opportunities and challenges in its environment. The steps are:

1. Ideation

The purpose of the business model innovation and its key stakeholders are defined, and the value proposition and first conceptual ideas are ideated. 

2. Concept design

A first rough conceptualisation of the key business model elements is developed and documented.

3. Virtual prototyping

A range of prototypes is generated and revised to refine and communicate the business model concept. The phase also comprises benchmarking with solutions and concepts from other parties.

4. Experimenting:

The concept's crucial assumptions and variables are assessed through randomised controlled trials and simulations and by conducting field experiments.

5. Detailed design

A comprehensive analysis and examination of all the components of the business model and the connections between these components is performed.

6. Piloting

The entire idea is validated by launching a preliminary limited iteration of the business model in a portion of the target audience. 

The implementation of the business model is spread throughout the relevant organisational units and the designated target market. 

8. Monitoring

The regular collection and analysis of data and metrics relevant to the business model, such as revenue, customer satisfaction, market share, and operating costs, provide insights into the performance of the business model.

9. Diversification

The process of expanding the existing business model can take various forms, including vertical, horizontal, or geographic diversification.

10. Refinement

Fine-tuning and improving the business model to achieve better performance and results involves an examination to identify areas for improvement, such as increasing efficiency, reducing costs, improving customer satisfaction, or increasing revenue.   The process of innovating a business model may have to be repeated if significant changes are needed.

Product, Process, and Business Model Innovation

Product innovation.

Product innovation involves either the development of a new product, or improvements to an existing product. By revolutionising the way humans interact with mobile devices, Apple was a pioneer of product innovation. But even the mighty Apple has faced its fair share of challenges in this space. Because while bright ideas are one thing, effective management to make them a successful business reality is another matter.   Not so long-ago Apple was frustrated by seeing its teams reinvent the wheel every time a new product was launched. As is the case in many organisations, teams were often working in silos. One product team's quick decision would impact the work of a parallel team, resulting in one team destroying the progress of another. There was an abundance of great ideas at Apple, but a significant lack of great management. Apple has since improved performance in this space with ANPP (Apple New Product Process), but that still leaves thousands of other companies struggling to translate their ideas into income.

Process Innovation

Process innovation involves the implementation of new or improved production and delivery methods to reduce a company's costs or improve a company’s production levels. It can include changes across all value chain activities. The Ford Motor Company demonstrated process innovation more than a hundred years ago when it introduced the first moving assembly line, reducing assembly time per vehicle from 12 hours to around 90 minutes. A more modern example is using live data to plan production runs. Process innovations are typically far less visible to customers than product innovations. As with product innovation, executing process innovation projects and programmes is a struggle for many that lack the right management capabilities.

Business model innovation includes changes in how a product is brought to market and is broader and more complex than product or process innovation. Rather than focusing on the introduction of a new or improved product or service, business model innovation relates to the way products and services are brought to market.

50 Examples of Business Model Transformation

Here are a few examples of business model transformations:

Netflix Business Model Transformation

Netflix transformed its business model from a DVD rental-by-mail service to a streaming video service, leveraging the growth of the internet and the decline of physical media. This transformation allowed the company to reach a much larger customer base and generate new sources of revenue.

Amazon Business Model Transformation

Amazon transformed its business model from an online bookstore to an e-commerce platform, offering a wide range of products and services to customers. This transformation allowed the company to become a major player in the retail industry and generate new sources of revenue through its platform services.

Apple Business Model Transformation

Apple transformed its business model from a computer manufacturer to a consumer electronics company, offering products such as the iPhone and iPad. This transformation allowed the company to reach a much larger customer base and generate new sources of revenue from mobile devices and services.

Uber Business Model Transformation

Uber transformed its business model from a ride-hailing service to a transportation platform, offering a range of services including ride-hailing, food delivery, and electric bike rentals. This transformation allowed the company to reach a wider customer base and generate new sources of revenue through multiple services.

Walmart Business Model Transformation

Walmart transformed its business model from a brick-and-mortar retail store to an omni-channel retailer, offering customers the ability to shop both in-store and online. This transformation allowed the company to reach a wider customer base and generate new sources of revenue through e-commerce.

JPMorgan Chase Business Model Transformation

JPMorgan Chase transformed its business model from a traditional commercial bank to a financial services company, offering a range of products and services including investment banking, asset management, and private banking.

Salesforce Business Model Transformation

Salesforce transformed its business model from a customer relationship management (CRM) software company to a cloud-based platform for customer engagement, offering a range of products and services including marketing automation, customer service, and e-commerce.

Airbnb Business Model Transformation

Airbnb transformed its business model from a peer-to-peer room rental service to a travel platform, offering a range of services including home rentals, experiences, and travel activities.

Spotify Business Model Transformation

Spotify transformed its business model from a music download service to a streaming platform, offering customers access to millions of songs and podcasts.

Tesla Business Model Transformation

Tesla transformed its business model from an electric car manufacturer to a clean energy company, offering a range of products and services including solar panels, batteries, and electric vehicle charging stations.

Dropbox Business Model Transformation

Dropbox transformed its business model from a file-sharing service to a collaboration platform, offering a range of products and services for businesses, including file storage, collaboration tools, and virtual meetings.

Square Business Model Transformation

Square transformed its business model from a mobile payment processor to a financial services company, offering a range of products and services including point-of-sale systems, invoicing, and cash advances.

Zoom Business Model Transformation

Zoom transformed its business model from a video conferencing tool to a platform for remote work, offering a range of products and services including virtual meetings, webinars, and team collaboration.

Grubhub Business Model Transformation

Grubhub transformed its business model from an online food ordering platform to a full-service food delivery company, offering a range of products and services including food delivery, pick-up, and catering.

Procter & Gamble Business Model Transformation

Procter & Gamble transformed its business model from a traditional consumer goods company to a brand management company, relying on marketing and innovation to drive growth and profitability.

Microsoft Business Model Transformation

Microsoft transformed its business model from a software company to a cloud-based platform and services company, offering a range of products and services including cloud computing, artificial intelligence , and virtual reality.

Read about the New Digital Species .

Facebook Business Model Transformation

Facebook transformed its business model from a social networking site to a digital advertising platform, leveraging user data to target advertising to specific audiences.

Alibaba Business Model Transformation

Alibaba transformed its business model from a business-to-business e-commerce platform to a digital commerce company, offering a range of products and services including retail e-commerce, cloud computing, and financial services.

Instacart Business Model Transformation

Instacart transformed its business model from a grocery delivery service to a platform connecting shoppers with local grocery stores, offering a range of products and services including same-day delivery and pick-up.

Peloton Business Model Transformation

Peloton transformed its business model from a high-end stationary bike manufacturer to a digital fitness platform, offering a range of products and services including home exercise equipment, virtual fitness classes, and nutrition coaching.

Google Business Model Transformation

Google transformed its business model from a search engine to a technology company offering a range of products and services including advertising, cloud computing, and hardware.

Deliveroo Business Model Transformation

Deliveroo transformed its business model from a restaurant delivery service to a food delivery platform, offering a range of products and services including restaurant delivery, grocery delivery, and alcohol delivery.

Adobe Business Model Transformation

Adobe transformed its business model from a software company offering individual creative applications to a cloud-based creative platform, offering a range of products and services including photo and video editing, document management, and digital marketing.

Etsy Business Model Transformation

Etsy transformed its business model from an online marketplace for handmade goods to a global platform for creative businesses, offering a range of products and services including handmade goods, vintage items, and craft supplies.

Zillow Business Model Transformation

Zillow transformed its business model from a real estate listing site to a full-service real estate platform, offering a range of products and services including home listings, mortgage loans, and home improvement services.

Stripe Business Model Transformation

Stripe transformed its business model from a payment processor to a financial infrastructure platform, offering a range of products and services including payment processing, subscriptions, and lending.

Postmates Business Model Transformation

Postmates transformed its business model from a food delivery service to a delivery platform, offering a range of products and services including food delivery, grocery delivery, and alcohol delivery.

Wix Business Model Transformation

Wix transformed its business model from a website builder to a full-service website and online marketing platform, offering a range of products and services including website building, e-commerce, and digital marketing.

Shopify Business Model Transformation

Shopify transformed its business model from an e-commerce platform to a full-service commerce platform, offering a range of products and services including e-commerce, point-of-sale systems, and financial services.

Tencent Business Model Transformation

Tencent in China transformed its business model from an instant messaging platform to a technology conglomerate, offering a range of products and services including social media, online payments, gaming, and cloud computing.

Flipkart Business Model Transformation

Flipkart in China transformed its business model from an online bookstore to an e-commerce giant, offering a range of products and services including retail, fashion, and home goods. (India) Alibaba: Alibaba transformed its business model from an online marketplace to a technology conglomerate, offering a range of products and services including e-commerce, cloud computing, and digital media.

Naspers Business Model Transformation

Naspers in South Africa transformed its business model from a media company to a technology investment firm, offering a range of products and services including e-commerce, online classifieds, and internet services.

JD.com Business Model Transformation

JD.com in China transformed its business model from an online retailer to a technology-driven retailer, offering a range of products and services including retail, logistics, and financial services.

Mercado Libre Business Model Transformation

Mercado Libre in Argentina transformed its business model from an online marketplace to a digital commerce platform, offering a range of products and services including retail, payments, and shipping. 

Rocket Internet Business Model Transformation

Rocket Internet in Germany transformed its business model from an incubator to a technology investment firm, offering a range of products and services including e-commerce, online classifieds, and internet services.

SoftBank Business Model Transformation

SoftBank in Japan transformed its business model from a telecommunications company to a technology investment firm, offering a range of products and services including telecommunications, e-commerce, and internet services.

Baidu Business Model Transformation

Baidu in China transformed its business model from a search engine to a technology company, offering a range of products and services including search, online advertising, and artificial intelligence .

Rakuten Business Model Transformation

Rakuten in Japan transformed its business model from an online marketplace to a technology company, offering a range of products and services including e-commerce, mobile payments, and digital media.

Line Business Model Transformation

Line transformed its business model from a messaging app to a technology company, offering a range of products and services including mobile messaging, online payments, and mobile gaming. (Japan)

Wizz Air Business Model Transformation

Wizz Air transformed its business model from a low-cost airline to a hybrid airline, offering a range of products and services including low-cost and full-service flights. (Hungary)

Zalando Business Model Transformation

Zalando transformed its business model from an online retailer to a fashion platform, offering a range of products and services including retail, logistics, and fashion content. (Germany)

Swiggy Business Model Transformation

Swiggy transformed its business model from a food delivery service to an on-demand platform, offering a range of products and services including food delivery, grocery delivery, and hyperlocal services. (India)

Grab Business Model Transformation

Grab transformed its business model from a ride-hailing service to a super-app, offering a range of products and services including ride-hailing, food delivery, and mobile payments. (Singapore)

Royal Dutch Shell Business Model Transformation

Royal Dutch Shell transformed its business model from an oil and gas company to an energy company, offering a range of products and services including oil and gas, renewables, and electric vehicle charging. (Netherlands)

Carrefour Business Model Transformation

Carrefour transformed its business model from a brick-and-mortar retailer to an omnichannel retailer, offering a range of products and services including brick-and-mortar retail, e-commerce, and home delivery. (France)

Metro Business Model Transformation

Metro transformed its business model from a wholesaler to an omnichannel retailer, offering a range of products and services including wholesale, e-commerce, and brick-and-mortar retail. (Germany)

Tesco Business Model Transformation

Tesco transformed its business model from a brick-and-mortar retailer to an omnichannel retailer, offering a range of products and services including brick-and-mortar retail, e-commerce, and home delivery. (UK)

Tata Group Business Model Transformation

Tata Group transformed its business model from a conglomerate to a technology-focused conglomerate, offering a range of products and services including steel, automobiles, information technology, and engineering services. (India)     These are just 50 examples of companies that have undergone successful business model transformations. The key to a successful transformation is to identify new opportunities, rethinking existing value propositions, and embracing new technologies to create a more innovative and profitable business model.

What is Business Model Transformation – 34 Industries Reinvented

Radical Business Model Transformation

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What is ChatGPT? Here's everything you need to know about ChatGPT, the chatbot everyone's still talking about

  • ChatGPT is getting a futuristic human update. 
  • ChatGPT has drawn users at a feverish pace and spurred Big Tech to release other AI chatbots.
  • Here's how ChatGPT works — and what's coming next.

Insider Today

OpenAI's blockbuster chatbot ChatGPT is getting a new update. 

On Monday, OpenAI unveiled GPT-4o for ChatGPT, a new version of the bot that can hold conversations with users in a very human tone. The new version of the chatbot will also have vision abilities.

The futuristic reveal quickly prompted jokes about parallels to the movie "Her," with some calling the chatbot's new voice " cringe ."

The move is a big step for the future of AI-powered virtual assistants, which tech companies have been racing to develop.

Since its release in 2022, hundreds of millions of people have experimented with the tool, which is already changing how the internet looks and feels to users.

Users have flocked to ChatGPT to improve their personal lives and boost productivity . Some workers have used the AI chatbot to develop code , write real estate listings , and create lesson plans, while others have made teaching the best ways to use ChatGPT a career all to itself.

ChatGPT offers dozens of plug-ins to those who subscribe to ChatGPT Plus subscription. An Expedia one can help you book a trip, while an OpenTable one will get nab you a dinner reservation. And last month, OpenAI launched Code Interpreter, a version of ChatGPT that can code and analyze data .

While the personal tone of conversations with an AI bot like ChatGPT can evoke the experience of chatting with a human, the technology, which runs on " large language model tools, " doesn't speak with sentience and doesn't "think" the way people do. 

That means that even though ChatGPT can explain quantum physics or write a poem on command, a full AI takeover isn't exactly imminent , according to experts.

"There's a saying that an infinite number of monkeys will eventually give you Shakespeare," said Matthew Sag, a law professor at Emory University who studies copyright implications for training and using large language models like ChatGPT.

"There's a large number of monkeys here, giving you things that are impressive — but there is intrinsically a difference between the way that humans produce language, and the way that large language models do it," he said. 

Chatbots like ChatGPT are powered by large amounts of data and computing techniques to make predictions to string words together in a meaningful way. They not only tap into a vast amount of vocabulary and information, but also understand words in context. This helps them mimic speech patterns while dispatching an encyclopedic knowledge. 

Other tech companies like Google and Meta have developed their own large language model tools, which use programs that take in human prompts and devise sophisticated responses.

Despite the AI's impressive capabilities, some have called out OpenAI's chatbot for spewing misinformation , stealing personal data for training purposes , and even encouraging students to cheat and plagiarize on their assignments. 

Some recent efforts to use chatbots for real-world services have proved troubling. In 2023, the mental health company Koko came under fire after its founder wrote about how the company used GPT-3 in an experiment to reply to users. 

Koko cofounder Rob Morris hastened to clarify on Twitter that users weren't speaking directly to a chatbot, but that AI was used to "help craft" responses. 

Read Insider's coverage on ChatGPT and some of the strange new ways that both people and companies are using chat bots: 

The tech world's reception to ChatGPT:

Microsoft is chill with employees using ChatGPT — just don't share 'sensitive data' with it.

Microsoft's investment into ChatGPT's creator may be the smartest $1 billion ever spent

ChatGPT and generative AI look like tech's next boom. They could be the next bubble.

The ChatGPT and generative-AI 'gold rush' has founders flocking to San Francisco's 'Cerebral Valley'

Insider's experiments: 

I asked ChatGPT to do my work and write an Insider article for me. It quickly generated an alarmingly convincing article filled with misinformation.

I asked ChatGPT and a human matchmaker to redo my Hinge and Bumble profiles. They helped show me what works.

I asked ChatGPT to reply to my Hinge matches. No one responded.

I used ChatGPT to write a resignation letter. A lawyer said it made one crucial error that could have invalidated the whole thing .

Read ChatGPT's 'insulting' and 'garbage' 'Succession' finale script

An Iowa school district asked ChatGPT if a list of books contains sex scenes, and banned them if it said yes. We put the system to the test and found a bunch of problems.

Developments in detecting ChatGPT: 

Teachers rejoice! ChatGPT creators have released a tool to help detect AI-generated writing

A Princeton student built an app which can detect if ChatGPT wrote an essay to combat AI-based plagiarism

Professors want to 'ChatGPT-proof' assignments, and are returning to paper exams and requesting editing history to curb AI cheating

ChatGPT in society: 

BuzzFeed writers react with a mix of disappointment and excitement at news that AI-generated content is coming to the website

ChatGPT is testing a paid version — here's what that means for free users

A top UK private school is changing its approach to homework amid the rise of ChatGPT, as educators around the world adapt to AI

Princeton computer science professor says don't panic over 'bullshit generator' ChatGPT

DoNotPay's CEO says threat of 'jail for 6 months' means plan to debut AI 'robot lawyer' in courtroom is on ice

It might be possible to fight a traffic ticket with an AI 'robot lawyer' secretly feeding you lines to your AirPods, but it could go off the rails

Online mental health company uses ChatGPT to help respond to users in experiment — raising ethical concerns around healthcare and AI technology

What public figures think about ChatGPT and other AI tools:

What Elon Musk, Bill Gates, and 12 other business leaders think about AI tools like ChatGPT

Elon Musk was reportedly 'furious' at ChatGPT's popularity after he left the company behind it, OpenAI, years ago

CEO of ChatGPT maker responds to schools' plagiarism concerns: 'We adapted to calculators and changed what we tested in math class'

A theoretical physicist says AI is just a 'glorified tape recorder' and people's fears about it are overblown

'The most stunning demo I've ever seen in my life': ChatGPT impressed Bill Gates

Ashton Kutcher says your company will probably be 'out of business' if you're 'sleeping' on AI

ChatGPT's impact on jobs: 

AI systems like ChatGPT could impact 300 million full-time jobs worldwide, with administrative and legal roles some of the most at risk, Goldman Sachs report says

Jobs are now requiring experience with ChatGPT — and they'll pay as much as $800,000 a year for the skill

Related stories

ChatGPT may be coming for our jobs. Here are the 10 roles that AI is most likely to replace.

AI is going to eliminate way more jobs than anyone realizes

It's not AI that is going to take your job, but someone who knows how to use AI might, economist says

4 careers where workers will have to change jobs by 2030 due to AI and shifts in how we shop, a McKinsey study says

Companies like Amazon, Netflix, and Meta are paying salaries as high as $900,000 to attract generative AI talent

How AI tools like ChatGPT are changing the workforce:

10 ways artificial intelligence is changing the workplace, from writing performance reviews to making the 4-day workweek possible

Managers who use AI will replace managers who don't, says an IBM exec

How ChatGPT is shaping industries: 

ChatGPT is coming for classrooms, hospitals, marketing departments, and everything else as the next great startup boom emerges

Marketing teams are using AI to generate content, boost SEO, and develop branding to help save time and money, study finds

AI is coming for Hollywood. 'It's amazing to see the sophistication of the images,' one of Christopher Nolan's VFX guy says.

AI is going to offer every student a personalized tutor, founder of Khan Academy says

A law firm was fined $5,000 after one of its lawyers used ChatGPT to write a court brief riddled with fake case references

How workers are using ChatGPT to boost productivity:  

CheatGPT: The hidden wave of employees using AI on the sly

I used ChatGPT to talk to my boss for a week and she didn't notice. Here are the other ways I use it daily to get work done.

I'm a high school math and science teacher who uses ChatGPT, and it's made my job much easier

Amazon employees are already using ChatGPT for software coding. They also found the AI chatbot can answer tricky AWS customer questions and write cloud training materials.

How 6 workers are using ChatGPT to make their jobs easier

I'm a freelance editor who's embraced working with AI content. Here's how I do it and what I charge.

How people are using ChatGPT to make money:

How ChatGPT and other AI tools are helping workers make more money

Here are 5 ways ChatGPT helps me make money and complete time-consuming tasks for my business

ChatGPT course instruction is the newest side hustle on the market. Meet the teachers making thousands from the lucrative gig.

People are using ChatGPT and other AI bots to work side hustles and earn thousands of dollars — check out these 8 freelancing gigs

A guy tried using ChatGPT to turn $100 into a business making 'as much money as possible.' Here are the first 4 steps the AI chatbot gave him

We used ChatGPT to build a 7-figure newsletter. Here's how it makes our jobs easier.

I use ChatGPT and it's like having a 24/7 personal assistant for $20 a month. Here are 5 ways it's helping me make more money.

A worker who uses AI for a $670 monthly side hustle says ChatGPT has 'cut her research time in half'

How companies are navigating ChatGPT: 

From Salesforce to Air India, here are the companies that are using ChatGPT

Amazon, Apple, and 12 other major companies that have restricted employees from using ChatGPT

A consultant used ChatGPT to free up time so she could focus on pitching clients. She landed $128,000 worth of new contracts in just 3 months.

Luminary, an AI-generated pop-up restaurant, just opened in Australia. Here's what's on the menu, from bioluminescent calamari to chocolate mousse.

A CEO is spending more than $2,000 a month on ChatGPT Plus accounts for all of his employees, and he says it's saving 'hours' of time

How people are using ChatGPT in their personal lives:

ChatGPT planned a family vacation to Costa Rica. A travel adviser found 3 glaring reasons why AI won't replace experts anytime soon.

A man who hated cardio asked ChatGPT to get him into running. Now, he's hooked — and he's lost 26 pounds.

A computer engineering student is using ChatGPT to overcome learning challenges linked to her dyslexia

How a coder used ChatGPT to find an apartment in Berlin in 2 weeks after struggling for months

Food blogger Nisha Vora tried ChatGPT to create a curry recipe. She says it's clear the instructions lacked a human touch — here's how.

Men are using AI to land more dates with better profiles and personalized messages, study finds

Lawsuits against OpenAI:

OpenAI could face a plagiarism lawsuit from The New York Times as tense negotiations threaten to boil over, report says

This is why comedian Sarah Silverman is suing OpenAI, the company behind ChatGPT

2 authors say OpenAI 'ingested' their books to train ChatGPT. Now they're suing, and a 'wave' of similar court cases may follow.

A lawsuit claims OpenAI stole 'massive amounts of personal data,' including medical records and information about children, to train ChatGPT

A radio host is suing OpenAI for defamation, alleging that ChatGPT created a false legal document that accused him of 'defrauding and embezzling funds'

Tips on how to write better ChatGPT prompts:

7 ways to use ChatGPT at work to boost your productivity, make your job easier, and save a ton of time

I'm an AI prompt engineer. Here are 3 ways I use ChatGPT to get the best results.

12 ways to get better at using ChatGPT: Comprehensive prompt guide

Here's 9 ways to turn ChatGPT Plus into your personal data analyst with the new Code Interpreter plug-in

OpenAI's ChatGPT can write impressive code. Here are the prompts you should use for the best results, experts say.

Axel Springer, Business Insider's parent company, has a global deal to allow OpenAI to train its models on its media brands' reporting.

Watch: What is ChatGPT, and should we be afraid of AI chatbots?

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IMAGES

  1. Business Model Canvas: Definition, Benefits, and Examples

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  2. What is a Business Model & Top Examples

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  3. Putting It Together: Product Marketing

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  4. What is a Business Model? See our business model framework (2022)

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  5. Business Model Examples

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  6. Quick Guide to the Business Model Canvas

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  1. I Moved from SMMA to IPGA (Info Product Growth Agency) Business Model

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  3. How price determine quality

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  5. Concept to Market

  6. So, what exactly should be reinvented?

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  1. 8 Types of Business Models & the Value They Deliver

    8 Types of Business Models to Explore. 1. Product. A product is a tangible item of value. To run a successful product-focused business, try to produce the item for as low a cost as possible while maintaining a reasonable level of quality.

  2. What is a Business Model with Types and Examples

    Business Model: A business model is a company's plan for how it will generate revenues and make a profit . It explains what products or services the business plans to manufacture and market, and ...

  3. Guide to business model innovation: Strategies and examples

    To turn things around, LEGO embraced business model innovation by refocusing on its core product — the beloved plastic brick — and expanding into new markets. By capitalizing on brand partnerships, digital gaming, and even theme parks, LEGO successfully transformed its business model and remains a beloved brand worldwide.

  4. What Is a Business Model? Best Practices and Examples

    For established enterprises, a business model is often a living document that is reviewed and adapted over the years. For companies launching products and services or entering new markets, a business model helps ensure that decisions are tied back to the overall business strategy.And for early-stage startups, a simple one-page business model enables founders to explore the mechanics of a ...

  5. Business Model Canvas: Explained with Examples

    Here's a step-by-step guide on how to create a business canvas model. Step 1: Gather your team and the required material Bring a team or a group of people from your company together to collaborate. It is better to bring in a diverse group to cover all aspects.

  6. Business Models: Types, Examples and How to Design One

    Example: Some news and internet publishing companies use a freemium model, where some or all content is free but premium content or special features are paywalled. 11. Advertising or affiliate ...

  7. How to Design a Winning Business Model

    Ramon Casadesus-Masanell is a professor at Harvard Business School and the author, with Joan E. Ricart, of "How to Design a Winning Business Model" (HBR January-February 2011). JR. Joan E ...

  8. Business Model Innovation: Strategies and Examples for Successful

    Creating new products or services. Developing new distribution channels. Changing pricing models. Adopting new technology. Entering new markets. Business model innovation requires a deep understanding of the business, its customers, and the market. It requires a willingness to take risks and experiment with new ideas.

  9. How to Identify New Business Models

    Giesen et al. examined 35 financially successful enterprises and outlined three distinct paths to business model innovation — industry, revenue and enterprise model innovation — that were at the core of their success. Further, Johnson et al. explored the stories of P&G, Tata, Hilti and Dow Corning to emphasize the financial and long-term ...

  10. Business Model Canvas: Definition, Benefits, and Examples

    As Jim explains, here are a few of the benefits of using a business model canvas to think through product strategies: 1. You can use a business model canvas to roadmap quickly. You can use this canvas approach in just a few hours (and as Jim says, you can even do it with sticky-notes). This way, rather than trying to write out every detail ...

  11. What Is a Business Model?

    In The New, New Thing, Michael Lewis refers to the phrase business model as "a term of art.". And like art itself, it's one of those things many people feel they can recognize when they see ...

  12. How To Create A Business Model In Seven Steps

    A tech business model is made of four main components: value model (value propositions, mission , vision ), technological model (R&D management), distribution model (sales and marketing organizational structure ), and financial model (revenue modeling, cost structure, profitability and cash generation/management).

  13. Four Steps to Sustainable Business Model Innovation

    The full potential value of sustainable business model innovation is achieved only when the new business model is brought to scale: engaging people in the company, across the supply chain, in the company's networks, and in its ecosystems to expand impact and advantage. To accomplish this, companies can leverage three enablers.

  14. The 7 Most Successful Business Models Of The Digital Era

    Advertising-Supported. The ad-supported business model is among the most successful of the digital era. It is behind the rise of companies like Google and Facebook, which match users to products ...

  15. 10 Key Steps to Developing A Business Model

    The business model is one of the most powerful, and most overlooked, tools of the product developer. New products must fit the existing business model, unless the company is expressly willing to adapt its model to support the new product. Evaluating fit with the business model early and often throughout the development process helps prevent ...

  16. How to Create an Expert Business Model: A Detailed Guide

    4. Product-as-a-Service Business Model Template. The product-as-a-service business model essentially rents out products again and again to customers. This can be a great business model as you only have to purchase a set of products once—then you get paid each time customers want to use them. City bike or scooter rentals are examples of this.

  17. Product Innovation: What Business Leaders Need to Know

    What Is Product Innovation? Product innovation is the process of creating a new product—or improving an existing one—to meet customers' needs in a novel way.. There are three key types of innovation:. Sustaining innovation, in which a business consistently provides the highest quality products to its best customers; Low-end disruption, in which an emerging company enters at the bottom of ...

  18. Product Business Model

    My physical product business model is at risk from rivals offering solutions business models at scale. In every industry, there are small scale operators who offer solutions business models that are not a threat, but there is a significant threat when a large-scale operator appears with an attractive solutions business model.Such has been the case in capital goods industries where large firms ...

  19. What is the Business Model Canvas?

    A business model canvas provides a high-level, comprehensive view of the various strategic details required to successfully bring a product to market. The typical use case for this tool is to outline the fundamental building blocks of a business, but it can be used effectively for individual products as well. The exact ingredients may vary, but ...

  20. 17 Business Model Examples

    These are referred to as tiered offerings. A vivid example is Netflix, with three monthly plans: Basic for $8.99, Standard for $12.99, and Premium for $15.99. The subscription-based business model is suitable for service-based or content websites.

  21. What is Product Innovation? Definition, Types, Examples and Strategy

    Tesla's Model S is an example of product innovation in the electric vehicle (EV) market. It offered long-range capabilities, high-performance features, and advanced autonomous driving capabilities, setting a new benchmark for EVs and reshaping the perception of electric cars. Example 3. Dyson Cyclone V10 Vacuum.

  22. New product development

    The seven steps of the BAH model are: new product strategy, idea generation, screening and evaluation, business analysis, development, testing, and commercialization. Exploratory product development model (ExPD). Exploratory product development, which often goes by the acronym ExPD, is an emerging approach to new product development.

  23. The 50 Best Examples of Business Model Transformation

    Product, Process, and Business Model Innovation Product Innovation. Product innovation involves either the development of a new product, or improvements to an existing product. By revolutionising the way humans interact with mobile devices, Apple was a pioneer of product innovation.

  24. OpenAI unveils newest AI model, GPT-4o

    The new model, called GPT-4o, is an update from the company's previous GPT-4 model, which launched just over a year ago. The model will be available to unpaid customers, meaning anyone will have ...

  25. China's Nio launches Onvo brand to challenge Tesla's best-selling model

    , opens new tab Model Y, the world's best-selling EV. Nio unveiled the Onvo L60 SUV with a sticker price starting from 219,900 yuan ($30,476), 12% below the price of Tesla's Model Y which starts ...

  26. OpenAI launches new AI model and desktop version of ChatGPT

    OpenAI on Monday launched a new AI model and desktop version of ChatGPT, along with an updated user interface, the company's latest effort to expand use of its popular chatbot. The update brings ...

  27. International Journal of Business Information Systems

    With the widespread introduction of new digital technologies leading to new processes, products, markets, and ways of organising, ... Developing a Business Incubator Model for an Entrepreneurial University: The Case of Bindura University of Science Education. ACRID'17: Proceedings of the EAI International Conference on Research, Innovation and ...

  28. OpenAI Unveils New ChatGPT That Listens, Looks and Talks

    On Monday, the San Francisco artificial intelligence start-up unveiled a new version of its ChatGPT chatbot that can receive and respond to voice commands, images and videos. The company said the ...

  29. What Is ChatGPT? Everything You Need to Know About the AI Tool

    How ChatGPT is shaping industries: ChatGPT is coming for classrooms, hospitals, marketing departments, and everything else as the next great startup boom emerges. Marketing teams are using AI to ...