Business Model Innovation and Product Development Strategies

Business Plan vs. Business Model

A Business Plan is a detailed document (typically 50-100 pages) containing extensive financial projections and loan projections. In contrast, a Business Model is a much less detailed, single concept that describes the specific way a business expects to make money. It illustrates the capabilities and resources required to create, market, and deliver value while generating profitable, sustainable revenue streams.

Common Business Archetypes

Key business archetypes include:

• Entrepreneur
• Manufacturer
• Wholesaler
• Inventor
• Contractor
• Financial Trader

Four Key Aspects of a Business Model

The four pillars of a business model are:

1. Offer
2. Customer
3. Infrastructure
4. Finance (including revenue streams and cost structure)

Scalability in Modern Business

Scalability refers to expanding a business model without an equal increase in the cost base. For example, consultancy faces significant limits on scalability, whereas software is much easier to scale (e.g., Facebook, FarmVille, and Skype).

The Value of a Product Platform

A Product Platform ensures continuity in the development of capabilities consistent with an evolving platform that a product family shares (e.g., frames in the car industry or the Walkman). Benefits include:

• Reduced cost of production
• Reduced systematic complexity
• Reduced R&D lead times
• Shared components between models
• Better learning processes across projects
• Improved ability to update products

Expected vs. Augmented Products

The expected product includes what customers have become accustomed to as normal in the market (e.g., a reasonably comfortable interior and basic accessories). The augmented product consists of features, services, or benefits that go beyond normal expectations.

Linear Steps in Product Development

The process follows these stages: Idea generation, idea screening, concept testing, business analysis, product development, test marketing, commercialization, monitoring, and evaluation.

The Evolving Role of the Customer

Customers can take on various roles, such as:

• Customer as a resource
• Customer as a co-creator
• Customer as a user

Risks Associated with Outsourcing

Outsourcing carries several risks, including:

• Dependence on the supplier
• Hidden costs
• Loss of competencies
• Social risk
• Inefficient management
• Service providers lacking necessary capabilities

Innovation Through New Services

New services can potentially deliver even more significant changes than new products, often leading to entirely new business models. New services are frequently underpinned by new technology applications (e.g., eBay, Ryanair, Uber, Google, Facebook, YouTube, and Airbnb).

Characteristics of Services as a Process

Services are distinct because they are:

• Intangible
• Produced and consumed simultaneously
• Heterogeneous
• Perishable
• Co-produced by the consumer

Market Testing and Reaction

Testing involves estimating the market’s reaction to a new product prior to incurring expensive production and promotional costs. The specific needs for testing depend on the type of product and the target consumer.

Techniques for Consumer Product Testing

Common testing techniques include:

• Concept tests
• Test centers
• Hall tests and mobile shops
• Product-use tests
• Trade shows
• Monadic tests

The Limits of Customer Oversight

Customers often lack oversight; therefore, businesses should lead the public with new products rather than simply asking what they want. Frequently, exciting new technology developed by scientists is rejected due to market research findings (e.g., the "Kaladont 3 strips" case).

Neuromarketing and Company Structure

Neuromarketing accesses subconscious views on products and brands to better understand consumer behavior. Regarding organization, a functional company structure involves diversification by product with centralized functions (organized by functions or by products).