Design for Profit
If you are in the middle of building a new offering – whether it is an engineered product, a workflow, a structured service or a new software release, then the time to be thinking about what the business model will look like is NOW. Actually, it was about six months ago, but the good news is – it isn’t too late! One of the worst mistakes a business can make is doing the product or service design, and then thinking about business models. Yet, this happens far too often. Why is it so dangerous?
I spent many years in a Sector notorious for passing all of the value to its customers. The industry lead for one well-known customer once stated “this will make you thousands and save us billions”. Yet, many of the technical advances were made by suppliers, not the customers. How did this happen?
As each new technique was introduced, the companies that introduced them repeatedly forgot the first rule of new products:
“you can’t charge to turn on something that you can’t turn off”.
This, simple rule must be at the core of all new products and services you introduce, and therefore, they need to be worked into the design, whether that design is a piece of engineered kit, a service with a workflow, or a process to enable greater efficiency.
Whenever I speak with engineers and designers, I keep stating this. The time to think about your marketing and sales plan is before you finalize the design.
There are four logical steps to consider:
- Versioning during design. Plan for different versions of your offering, and work out how to ensure you can control their use. Make the different versions clear.
- Engineer a business model at the same time you engineer the thing itself. Remember sales people will end up under pressure to “give things away”, so make the rules clear.
- Recognize the Impact you will have. Make an honest assessment whether what you are making is catch-up, evolution or revolution. This will impact your marketing plan but also define whether you need to be “backwards compatible”
- Understand the Value Proposition. Find some way to model (and therefore explain) the incremental value of your new product or service, compared with what it replaces (yours or someone else’s). This will probably never be uniform across the market, so use the Value Types approach to describe ratios.
Many companies – even large ones – spend a fortune on developing new products but don’t follow these steps. They sit between engineering and marketing, and success comes when these groups work together.
Follow the points in this section and it will help you to break the design process down into logical steps. In turn, this will be a big part of helping decide how to hold onto a fair proportion of the value you will create for your customers.