Business model is a creative intelligent way of solving your business problem of growth, sustainability, and selling the buy to the consumer; having the greatest product/services alone is not enough. It is not just super marketing strategy. It is also pricing strategy, it is also the product priority strategy; also of segment strategy; also of strategizing timing and priorities of the markets and consumers.
It is often difficult to develop 10-100 million dollar products. Often products as a start-up strategy will lead to likelihoods of loss more often and more quickly. It is much easier to develop a 5-20 million-dollar service company, compared to a 10-100 million product strategy. The bigger the vision to develop, the more prominent are the absolute loss due to product failures.
As to why most products fail, read, https://hbr.org/2011/04/why-most-product-launches-fail
None the less whether product or service, there are so many ways an organization can compete in the market place intelligently using a business model.
For a lucid comparative discussion of 24 examples with 24 different business models/pricing strategies, see
http://www.dummies.com/education/college/examples-of-business-models/ - A John Wiley resource
The Yin-Yang of Business Models: Discovery Process and Execution for excellence
The importance of business model and the need to be innovating regarding the business model in the market place does not stop even for a well-established company, though it is often identified as a critical success factor as well as a critical lift factor of a strategic KPI of start-ups. With such an approach it is easier to see multi-fold lifts due to innovative disruptive business models among the start-ups.
The yin-yang of business model discovery and business model execution and how to achieve the discovery process quickly is explained by Stefan Gross-Selbeck: Business model innovation. https://www.youtube.com/watch?v=rgufaJ4gjPo
A start up is trying to get all its support functions working smoothly and contributing to making money; it is at the same time figuring out how to do it efficiently so that it can sustain and grow, even if the margins fall; how to keep the differentiation and uniqueness as a competitive force so that newer competitions do not take away its ability to sustain and growth - Doing all with the focus of making money and at the same time, growing and sustaining in its cycles of daily operations.
A start-up is always trying to figure out its business model; it is on the discovery mode, until it becomes a well-established company where the threat of its existence is not any more a serious problem, but its sustained growth may be its problem.
On the other hand, a well-established company has been filtering out of those situations over time, and it becomes well established; mostly it is trying to optimize the resources, inputs, budget to keep sustainability and growth. A well-established organization has figured it out already, optimized the various components of how they all come together, and it is executing its initial model that sustained and grew into more a successful continuation model, and where possible, continue to keep growth in a modest way for its stake holders.
In a brief one-word comparison, they are two different worlds of focus on what would make it a success, sustain, and become established success. They are discovery vs. execution.
A big problem is not every company can work on both sides, and both are needed. Start-ups or well established companies, if companies were to continue to thrive, grow in the market place, they all have to have the mind-set of a startup, and yet execute on a daily basis. If a well-established company is not facing the disruptive strategic business model from its competition, head-on, it will become irrelevant and loose its market to its competition. So There is a systematic way to have a start-up mindset and execute on a daily basis, and the key functioning characteristics of such a mind-set are:
- Attacker mindset to win
- Agile mindset to win
- Failure is ok mindset to win
So, in essence you may say that it is that the “Discovery” and “Execution” are two parts of yin-yang of business model.
A comparison of product vs. services start-up.
I want to bring out why to choose one over the other before I go for kindling your thoughts on how to execute one over the other with a plan to move from services to product.
We know something is a service (and hence the lack of it as products) when we see the following attributes