Journey from idea to successful business model

 Journey from idea to successful business model

Customers' needs are gradually diversifying and changing rapidly. Accordingly, many companies sympathize with the concept of design thinking that discovers the needs of customers and creates new products and services that relate to them.In conclusion, since the product derived from the design thinking process is an idea that originates from the customer's fundamental needs, if you develop it into a business model based on this, you will be able to significantly increase the probability of success generating actual profits.

 The process of completing the business model is also the journey of design thinking.

Alexander Osterwalder's “Business Model Canvas” is widely used when companies define business models, explain to others, or create new businesses. It is a very useful tool because it allows you to consider all the major components of the business model and explain them so that you can see them at a glance.

The beginning of the business model canvas is to understand who your customers are (Customer Segments) and define the value proposition you can provide to them. This is the result of the design thinking process we talked about earlier. Naturally, design thinking and business model canvas can be connected.

If so, what are some examples of making the business itself a success through pivoting, focusing on the customer even in establishing an actual business model? An example is the birth of the business model of “Baby Monitor” of the Owlet team, which became the winner of the International Business Model Competition in 2013. Let's follow that journey.

It's the'Baby Monitor' which is pretty familiar to us now. However, the starting idea wasn't targeting babies. In a hospital where patients are wearing condition measuring devices on their fingers, the wires connected to the device make it very uncomfortable for both the patient and the nurse to work. I thought it would be a good idea to develop it in the form of a measurement sensor that can be attached to the body.

Now that we have a clue to the idea, the first thing to do is,'Do the customers want it? Do you feel the value?’

93% of the nurses, who are the primary users of the pulse oximeter used primarily in hospitals, welcomed the idea and answered positively, but managers in hospital-related departments who would actually pay for the purchase of the machine were confused. I didn't want to pay more for that feature. Through this, the Owlet team realized that'users and customers can be different.'Obviously, ideas were derived based on real people's actions, but the final destination is in the creation of business. In this case, the flexibility of design thinking is also required in the definition of the business model. Developing an idea that started with a “customer” back into a conversion of a “customer”.

 Confirmation of target customer and value proposition block

The Owlet team turned their attention to another Pain point. At that time, the number 1 cause of infant and infant death was surprisingly'Sudden Infant Death Syndrome (SIDS)', and in the case of an American family who sleeps apart from their parents since a very young age, there is very much concern about this. I noticed that it was big.

They decided to combine their ideas. The idea was embodied by attaching a sensor for measurement to the baby, and when the baby has signs of sudden infant death syndrome, the condition is transmitted to the parent's smartphone, giving parents ‘peace of mind.’In this case, the actual users of the product or service and the purchaser came together as parents concerned about the well-being of the baby, and a survey was conducted on 105 mothers of infants and toddlers, and 96% of them would use the product if it came out Also checked.Now, that’s it. In the business model canvas, ‘Customer Segments’ and ‘Value Proposition’ were finally decided. With the most important first button of success well-placed, it is now time to solidify the other areas of the business model canvas.

 Customer relationship formation method and distribution channel selection

The Owlet team quickly created an MVP (Minimum Viable Product) and promoted it through internet media and SNS, and confirmed the reaction of potential customers. So, where can customers really buy the product?Again, the voice of the customer is of utmost importance. At first, the idea was to introduce and sell the product through the obstetrics and gynecology hospital, but as a result of a survey of 40 pediatricians and 105 mothers, a'baby products specialty store' where you can compare and purchase other products together. We concluded that'Retail Store' is a more accessible distribution channel for consumers.

 Discovering a revenue-generating model

The Owlet team then calculated the production cost of the product in order to determine the price of the product, which is a revenue-generating model, and as a result, it was found that profits were secured only at a fairly high price of around $200. However, I have doubts whether the customer is willing to pay for it. Since the actual market value of the product has not been verified, we have temporarily decided on a'rental' method with a low cost. It was important to listen to more customers, especially as the monetization model is critical to success.As a result of confirming the'estimated price' and the'maximum intent to pay' through a survey of mothers with infants and toddlers, it was surprisingly confirmed that the Owlet team had enough willingness to pay for the $200 price point that they thought could secure profits. You will change the model from rental to direct sales.