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Business Models
Pinpoint and catalogue value.
Business models play an important role in the new product development process because they succinctly describe all the critical components—competitive advantages—that come together to make a viable, healthy business. They're frameworks, or architectures, for creating compelling offerings from meaningful differentiation inside your company. As such, business models are an ideal way to create, catalogue and track competitive advantages. Where do you look for competitive advantages? Primarily in your company's value chains (see chart below). You're looking for components you can use to 1) provide more value to customers or 2) make more money.
Your product is the point at which competitive advantages come together—where they get consolidated and synthesized. The centerpiece of your business model is the transaction (an exchange of value in both directions). Your product must transform competitive advantages into a form that syncs with your target audience's needs and wants in order to complete the transaction. And it's this point where things usually fall apart. To complete the sync, you need to really understand your customers, as a group (segment) and as individuals, with all their perceptions and habits and distractions. Most companies find it difficult to do the necessary work (there's a better way), and that, in large part, is why product failure rates are through the roof.
Business models require an investment of time and energy, but they will save you much more later on as you go about the process of optimizing and validating a go to market strategy. As an encapsulation of strategy, they can speed innovation. Plus, at some point, all business models need to change as their surroundings change. Better than any other document, your business model can help you see environmental or competitive changes coming.
For a white paper on business models, click here.