MBADM 850 | Session 12 | Business Models and Innovation Monetization

Introduction:

A business model is a framework that supports a product or company's viability by showing how it creates, delivers, and captures value and revenue while meeting customer needs. Monetization involves generating income from assets or actions, effectively turning product or service usage into profit. Common strategies include offering products for free while earning from advertising, using the freemium model where basic services are free but premium features require a subscription (e.g., LinkedIn and Spotify), charging a recurring low fee (e.g., Netflix), applying tiered pricing based on volume, or adopting the Razor and Blades model, where a low-cost item requires expensive, disposable supplies. Companies like Amazon innovate mainly in sales and delivery channels, while Spotify disrupted the music industry with new revenue models, showing that success often results from optimizing or radically changing one part of the business. Achieving product-market-pricing fit is crucial, ensuring customers need, see value in, and are willing to pay for the product, often by discussing pricing early in the R&D process. Disruptive innovations, such as how airline loyalty programs evolved into large banking-partnered financial systems after deregulation, demonstrate how new business models can completely transform industries.