Pm Methodology
|Strategic business innovation
Product Strategy meets Business Innovation
A contribution by Thomas Bauch, Managing Director PM1
In times of dynamic markets and rapid technological progress, companies are faced with the challenge of continuously securing and expanding their competitiveness. Product managers play a central role in this process by developing and implementing innovative approaches that drive both product strategy and business development.
In this article, we have highlighted various innovative approaches that companies can use to increase their competitiveness.
Contents at a glance
Methods & concepts for business model adjustments
Adapting or changing the business model is often necessary to adapt to changing market conditions and tap into new revenue streams. Traditional business models often reach their limits in today’s fast-paced world, and innovative approaches can make the difference between stagnating and growing business.
Methods and tools
- Business Model Canvas: A strategic management tool that makes it possible to develop new business models or optimise existing ones. It helps to visualise the key components of a business model.
- Lean Startup approach: This approach promotes the rapid testing and adaptation of business models in order to reduce uncertainties and respond more quickly to customer feedback.
Business model customisation concepts
- Fee-per-use model: Customers only pay for the actual use of a product or service. This reduces the barriers to entry for customers and can lead to higher utilisation and satisfaction.
Example: Car sharing services where users pay per kilometre or minute driven.
- Subscription model (Subscription): Regular income from subscriptions provides financial stability and enables companies to continuously deliver services or products.
Example: streaming services such as Netflix or Software-as-a-Service (SaaS) offerings such as Microsoft Office 365.
- Freemium model: Basic services or products are offered free of charge, while premium functions have to be paid for.
Example: Spotify, which offers a free basic version and a paid premium version.
- Operator model: The company remains the owner of the product and offers it as a service, including maintenance and support. This can promote long-term customer loyalty and open up additional sources of income.
Example: Mechanical engineering companies that do not sell their machines but offer them as a service.
- Platform model: Creation of a platform that brings providers and buyers together and generates revenue through transaction fees or advertising.
Example: Airbnb, which provides a platform for letting accommodation.
- Marketplace model: A digital or physical marketplace where various suppliers can offer their products and services.
Example: Amazon, which serves as an online marketplace for various retailers.
- Licensing model: Companies sell licences to use their technologies, products or brands.
Example: Software companies that sell licences for the use of their software to other companies.
- Affiliate model: Income from commissions for referring customers to other companies.
Example: Websites that recommend products and receive a commission when these products are purchased via their links.
- Razor-and-blades model: selling a basic product at a low price and generating revenue through the sale of complementary products or consumables.
Example: printers and printer cartridges, Nespresso machines and capsules
- Franchise model: Expansion of the business by granting licences to franchisees who operate the business model under the company’s brand.
Example: fast food chains such as McDonald’s.
- Data monetisation model: Use and sale of data generated through the use of products or services.
Example: Social media platforms such as Facebook, which use user data for targeted advertising.
- On-demand model: Provision of products or services on demand, often via digital platforms.
Example: Food delivery services such as Uber Eats or Lieferando.
- Pay-What-You-Want model: Customers can determine the price themselves, often with a minimum price or a recommended donation.
Example: Some museums and non-profit organisations use this model.
- Crowdsourcing model: Utilising the collective intelligence and creativity of a large group of people to develop products or solutions.
Example: Platforms such as Kickstarter for financing projects through crowdfunding.
- Circular economy model: focus on sustainability through the reuse, recycling and remanufacturing of products.
Example: Companies that buy back, refurbish and resell used products.
These business model approaches offer a wide range of opportunities to increase a company’s competitiveness and adapt to dynamic market conditions. By selecting and adapting the right model, companies can tap into new sources of income and remain successful in the long term.
Service as a Business: Total service offerings
Bundling products and services into a comprehensive range of services enables a new market positioning and creates additional value for the customer. This approach can help to increase customer loyalty and strengthen differentiation from competitors.
Methods and tools
- Service Design Thinking: A creative approach to developing new services that focuses on the needs and expectations of customers.
- Customer journey mapping: This method helps to understand the customer’s interactions with the company and identify possible optimisation potential.
Concepts
- Full-service offers: Combination of products and services to create an integrated offering that covers all of the customer’s needs.
- Managed Services: Long-term services that include the operation, management and maintenance of products to provide the customer with a complete solution.
- Preventive and predictive maintenance: Preventive maintenance and predictive maintenance are two different approaches to maintaining machines and systems, each of which can be regulated in special maintenance contracts.
- Shared Value Service Agreements (SVSAs) are agreements between service providers and customers that aim to create shared value instead of just offering traditional services in return for payment. This type of contract is based on the concept that both parties work together to create value and share the benefits. The aim is to create a win-win situation where both the service provider and the customer benefit from the partnership.
Value-based pricing: value-orientated pricing
Value-based pricing assumes that the price of a product or service is based on the perceived value for the customer. This method can lead to higher margins and better utilisation of the customer’s willingness to pay.
Methods and tools
- Value Proposition Canvas: A tool for identifying and visualising customer benefits that helps to better understand the value of a product or service.
- Customer surveys and interviews: Direct feedback from customers can provide valuable insights into their values and willingness to pay.
Konzepte
- Communication of benefits: Clear communication of the added value and differentiating features of the product in order to increase the perceived value.
- Segmentation: Identifying and addressing different customer segments with different price preferences.
Total cost of ownership approach: life cycle analysis
The total cost of ownership (TCO) approach shifts the focus from the pure machine price to the total costs over the life cycle of a product. This includes acquisition, operation, maintenance and disposal.
Methods and tools
- TCO calculators: Software tools that make it possible to calculate the total costs of a product over its life cycle.
- Lifecycle Cost Analysis (LCCA): A method for evaluating the long-term costs of a product that takes into account acquisition, operation, maintenance and disposal.
Concepts
- Long-term customer loyalty: By emphasising life cycle costs, a closer bond with the customer can be achieved as they recognise the long-term benefits of the product.
- Service and maintenance contracts: Offers for regular maintenance and support to reduce overall costs for the customer while generating additional revenue for the company.
Blue Ocean Strategy: Tapping into new markets
The Blue Ocean Strategy aims to eliminate comparability with competitors by creating new markets and offerings. This requires innovative approaches and a radical reorganisation of the product portfolio.
Methods and tools
- Value Innovation: The core of the Blue Ocean Strategy, in which both the benefits for the customer and the cost structure are optimised simultaneously.
- Strategy canvas: A tool for visualising the current market position and identifying opportunities to create new market spaces.
Concepts
- New customer segments: Identification and development of new customer segments that have not yet been addressed.
- Innovative product features: Development of unique product features that make the competition obsolete.
Digitalisation of the product portfolio
Digitalisation makes it possible to create new, cost-efficient and competitive service bundles. By using digital technologies, companies can expand and improve their products and services.
Methods and tools
- Internet of Things (IoT): Networking of devices and systems to offer additional functionalities and services.
- Big data and analytics: use of large volumes of data to optimise products and services and create new business models.
Concepts
- Smart products: Products that are enhanced by digital technologies and offer additional functions, such as remote monitoring and maintenance.
- Digital services: Additional services made possible by digitalisation, such as real-time data analysis and personalised recommendations.
Digitisation business process
The digitalisation of business processes offers considerable added value for the customer. Automation, data analysis and networked systems improve the efficiency, responsiveness and personalisation of services.
Methods and tools
- Business Process Management (BPM): Methods and tools for analysing, designing, implementing and monitoring business processes.
- Robotic Process Automation (RPA): Use of software robots to automate repetitive tasks.
Concepts
- Automated customer services: Use of chatbots and other automated systems to improve and speed up customer service.
- Personalised offers: Use of data analyses to create customised offers and services that are precisely tailored to the customer’s needs.
Fazit
At a time when markets are constantly changing, companies need to remain flexible and innovative in order to stay competitive. Product managers are challenged to scrutinise their company’s strategic framework and find new ways to offer customers greater value. The approaches described in this white paper offer valuable ideas on how this can be achieved. By adapting the business model, bundling products and services, value-based pricing, life cycle considerations, opening up new markets, digitalising the product portfolio and digitalising business processes, companies can strengthen their competitiveness in the long term.
Find out how your peers put the topic of business innovation into practice.
At our PM1 Summit 2024, we have made the topic “Product Strategy meets Business Innovation” the guiding theme. We look forward to hearing our customers’ testimonials, success and failure stories and the interactive dialogue within the PM1 community.
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