What it is: A Business Model that tells us how to generate revenue by means of a product.
Made up of 4 basic building thoughts:
How will this be working?
What is this all about?
Who are the end users?
What is the revenue generation model? i.e. $P=$R-$E
Generally any model will have a context, drivers and constraints. These are driven by:
And these are dependent on:
To derive any Product Business model:
Identify Customer Segments, by classifying which Market segment are we targeting
Define Value Proposition, for each market segment
Identify and define Distribution Channels
Find and analyse what is the Relationship with the customer segments
Define Revenue Streams/Social or Environmental Benefits
Infer what Key Resources we require to deliver the customer Value Proposition
Extrapolate what are the Key Activities we are going to perform
Derive whom should we make Partnership with
Understand and accordingly define Cost Structure to make above current industry level margins
Defining Key elements of Product Value Proposition, sharpen on:
Promise: Can be either Functional, Economic or Emotional or a mix of all/some of them.
Differentiation: Competing Alternatives
Support: Infrastructure, Testimonials and 3rd Party Certification
For any Target Group, if:
Promise+Differentiation+Support == Cost+Effort+Risk, Value Proposition is just Marginal
Promise+Differentiation+Support >= Cost+Effort+Risk, Value Proposition is Reasonably Good
Promise+Differentiation+Support >> Cost+Effort+Risk, Value Proposition is Exceptional!