A dyadic relationship where the Firm engages with a Customer about a problem that the Customer faces, and provides an integrated solution to that problem. The value proposition is relational.
Compared with the product pathway, the solutions pathway requires much greater customer engagement by the Firm with its Customer. The Customer has to trust the Firm to deliver the product-service that is typically key to the Customer’s business (B2B) or enjoyment (B2C). In B2B markets, users of airplane engines, machine tools or computers are provided services on a solutions basis such as “power by the hour”, “machine time as a service” and “software as a solution”. In B2C markets, services such as a haircut or an interactive premium priced online video game are solutions. In government markets, we see solutions being offered in some Private Finance Initiative (PFI) contracts. The boundary line between Solutions and Products is sometimes a matter of degree – not absolute. This pathway requires:
~ Identifying potential customers
~ Creating high level of trust with those customers, that allows identification of unmet needs
~ Tailoring the product or service delivery to fulfil those needs in the context of the customer
~ Charging mechanisms are almost always value based rather than cost based
~ Customer engagement is rarely outsourced; in contrast there are many possible supply arrangements including outsourcing for the component products or services.
SCALABILITY – Difficult: greater volumes often lead to higher unit costs
PROFITABILITY – Typically excellent among selected customers
RISK – Developing relationship with customer and tailor-made solutions require upfront investments in time, money, and relationship building..
- Lumi (close)
Lumi is an example of company that has a portfolio of business models. In its product business model it sells apps, software, and hardware to companies for real-time audience insight. Lumi also operates a solutions business model, which this write-up will ... › Read more
- Mediatonic (Service Model) (close)
UK video game developer Mediatonic currently finds itself in a transitional phase where it is shifting away from a service (work-for-hire) model towards a product model. Facilitated by the advent of online distribution channels such as Facebook and Apple&r... › Read more
- Nomad Digital (close)
Nomad Digital is an example of a “solutions” business model. The company provides wireless communication solutions for the rail transportation industry by providing both devices and services to rail franchise operators as well as rail engineeri... › Read more
- Playgen (close)
Playgen operates a typical service, or work-for-hire, business model in which the company creates a custom video game for a client and licenses use of the product to the client. Clients tend to be nonprofit organizations. Income is generated upon completio... › Read more
- Scoota (close)
Scoota represents an exemplar of a dyadic solutions business model in the rich media advertising sector. The company offers a bespoke online video advertisement production and distribution service to advertising agencies and website publishers. The videos ... › Read more
- Sports Interactive (close)
Sports Interactive operates a service (or work-for-hire) business model in which a wholly developed video game is prepared bespoke for a publisher. Unlike some other service business models, Sports Interactive has just one primary customer, Sega. This mode... › Read more
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