Business Models That Matter – Differentiating with Purpose

Back in November 2024, Netguru hosted a Disruption Forum for design leaders. One of the most thought-provoking moments for me was a conversation with Terry Behan, a design strategist with deep experience in global and emerging markets. His insights about standing out in today’s crowded marketplace got me thinking about what it really takes to succeed.

Let me share the highlights from that conversation and explore how businesses are moving beyond the product itself to rethink how they deliver value. From aligning your product and market to experimenting with bold new business models, we’ll outline ideas and examples to help your product stand out – and thrive.

We'll look at companies like Hilti – great catch Terry! – which transformed its approach by shifting from selling tools to offering them as a service. We'll also touch on the ever-evolving role of product designers in driving these changes.

But let's start by thinking about what it really takes to launch and grow a product – from solving the right problem to scaling effectively.

Five stages of fit

A great idea is just the beginning. Bringing a product to life is way more involved. Terry mentioned the “five stages of fit” framework which breaks this process into clear, actionable steps. I find Terry’s framework super useful. Let’s take a look.

1. Problem-solution fit

Every great product starts with solving a clear problem. The first step is understanding what’s missing in the market and creating a solution to fill that gap.

Take Slack, for example. It began as a way to fix a common frustration – how messy and inefficient communicating can be in increasingly dispersed workplaces. By zeroing in on this pain point, Slack built a tool that made teamwork easier and immediately valuable to its users.

2. Product-market fit

Once you’ve figured out the solution, the next test is whether it resonates with users. Does the product solve the problem so well that they’ll choose it over everything else?

Product-market fit is about creating something people genuinely want and need – something they can’t imagine their daily routines without. At this stage, your product must deliver the value you promised.

3. Entry criteria for growth

Next, the focus shifts to growth. Scaling while maintaining quality and focus is one of the hardest things for a business to achieve. How do you get it right?

As Terry pointed out in our talk, it’s tempting to jump straight into expansion. But skipping steps can leave you with egg on your face.

Growth should follow a methodical, step-by-step approach. Think of it as moving through checkpoints: refine your product, validate your business model, and ensure you’ve ticked all the boxes before pushing ahead. Don’t take the leap until you’re ready – that way, your success will be more sustainable.

4. Business model fit

Now you’re ready to grow, which is where the business model comes in.

As Terry explained, this stage is about finding the right structure to support your growth. It’s not just about choosing any business model but experimenting to figure out which one delivers the most value to your users while ensuring long-term success.

5. Scalability fit

Once your business model is in place, we're onto the next challenge: scaling your business. As Terry pointed out, scaling isn’t a one-size-fits-all process – it’s about learning and adapting at every step.

Start small: begin with one customer, then five, then 50. Use these early stages to refine your processes and gather feedback. Prototyping plays a big role here, allowing you to test ideas with minimal risk before committing to a larger rollout.

The key is ensuring your business can handle growth without compromising quality or user experience.

Business models to choose from

Now that we’ve explored why a business model matters and how to align it with your product and market let’s look at how it works in practice. During our talk, Terry mentioned a couple of examples of how different approaches can help businesses reach more users and grow.

Freemium to premium

This model involves giving users a free trial of your product and then encouraging them to upgrade to a paid version.

Spotify is the perfect example. You can use its free tier, but the occasional ad – interrupting your Saturday night party playlist, for example – creates just enough friction to make the premium version tempting.

As Terry explained, this model isn’t just about pushing for conversions. It’s about casting a wide net and letting users explore the product. By focusing on growing the free user base, companies can rely on predictable conversion rates – often between 5-7% – to steadily grow their paying subscribers over time.

Subscription model

The subscription model is a classic approach that we’re all familiar with. It works well when people want a product but can’t – or don’t want to – pay for it upfront.

Take gym memberships. Instead of investing in a full workout setup at home, you pay a monthly fee to access a gym’s facilities and equipment.

This model has expanded into all kinds of industries.

One standout example is HelloFresh, which offers a simple solution: fresh, pre-portioned ingredients and recipes delivered to your door. Subscribers get everything they need to cook home-cooked meals without the hassle of planning or shopping. The convenience and reliability of the service have turned it into a billion-dollar business.

Product-as-a-service model

As the name suggests, this model shifts the focus from selling products to offering them as a service, delivering outcomes rather than just items.

Take Hilti. Instead of selling construction tools outright, they provide a monthly subscription that includes access to tools, along with maintenance, repairs, and replacements. This means construction companies always have the equipment they need, in tip-top condition, without the hassle of ownership.

Rolls-Royce uses a similar approach in aviation. Rather than selling jet engines, they offer 'power by the hour', charging airlines based on engine usage while taking care of maintenance and ensuring maximum airtime.

This model is a win-win for everyone. Customers get what they need without the stress, and providers build lasting relationships.

Micropackaging

In some markets, consumers can’t afford large quantities of products. Micropackaging helps with this, and the idea is simple: offer the same product in smaller, more affordable sizes.

Think about washing detergent. In many emerging economies, a large 5kg bag is out of reach for most households. By offering 50g sachets instead, companies make their products accessible to a much wider audience. This strategy has seen massive success, helping brands scale in markets representing 80% of the world's population.

It’s a great reminder that innovation isn’t always about changing the product. Sometimes, it’s as much about rethinking how it’s offered.

Product-on-demand

This model flips the traditional product development process on its head. Instead of investing heavily in production upfront, companies test the waters by gauging interest first.

Platforms like Kickstarter have popularized this model. Entrepreneurs create a prototype, showcase it on the platform, and collect pre-orders. If enough people invest, production moves forward. If not, the idea can be refined – or scrapped – without major financial risk.

As Terry explained, this approach allows businesses to experiment and gather real feedback before committing to full-scale production. It’s a smart way to validate demand and ensure resources are spent wisely.

Cooperative ownership model

This model is about sharing big-ticket items to make them more affordable and practical. Instead of one person or business footing the bill, several people or organizations share ownership, costs, and access.

As an example, think about farming equipment.

Tractors and harvesters are expensive, and most farmers only need them at certain times of the year. Companies like John Deere help farmers pool resources to share equipment, reducing costs while still getting the tools they need.

How to differentiate your business

OK, so let’s recap. We’ve explored the five stages of fit – a framework for validating and scaling your product. We’ve also highlighted a few different business models that might help set you apart from competitors.

Now let’s bring it all together. How do these ideas work in practice?

1. Check you're solving a real-world problem: Start by identifying a clear market need. For example, subscription meal kits address the hassle of meal planning and shopping for busy households.
2. Test whether your solution resonates with your audience: Would farmers find shared equipment practical? You need to prove your solution fits into people’s lives and genuinely solves their problems.
3. Don't jump ahead: If you’ve ticked the first two boxes, it might be tempting to move full steam ahead. First, pause and evaluate whether your product and audience are truly ready for growth.
4. Ensure your business is set up to scale: The right business model will almost certainly drive growth. Hilti's tool service ensures long-term customer loyalty by including maintenance along with access to equipment.
5. Start small, learn, and adapt: Growth isn’t about going big right away – it’s about starting small and building incrementally. A cooperative ownership model might begin with one shared tractor for a small group of farmers.

Three golden rules

As you grow, keep these principles in mind:

• Test, test, test: Experimentation helps you refine your approach and make adjustments before rolling out at scale.
• Prototypes reduce risk: Prototyping isn’t just for products – it works for business models too. Testing ideas early is one of the business design fundamentals and will help save time and money in the long run.
• Don’t rush growth: Gradual scaling allows you to test processes, refine operations, and grow sustainably. Start small, expand carefully, and use each stage to improve.

The Future

Whether it’s sharing farming equipment or designing adaptive interfaces, the future of business models will be driven by one thing: flexibility. Businesses that succeed won’t just focus on what they offer—they’ll focus on how they deliver it.

As Terry pointed out, user choice will shape the next generation of technology.

Some will embrace AI-powered systems that anticipate their needs and eliminate traditional interfaces like buttons and menus. Others will stick to more familiar options like clickable icons and dropdown menus. The key will be creating systems that adapt to the preferences of different users rather than forcing one approach on everyone.

While AI tools will play a major role in shaping these experiences, the robots aren’t ready to tackle everything. As Terry reminded me, AI isn’t capable of choosing the right business model – at least not yet. That’s still a uniquely human challenge, requiring creativity, experimentation, and judgment.

Ultimately, the winning formula is clear: combine human ingenuity with cutting-edge technology to create business models and experiences that work for your users – and for you.