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Business models in strategic management
Business models in strategic management

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2.2 The solution business model

This business model is focused on the creation of a tailored solution for the customer. In comparison to the product business model, the engagement with the customer is much greater. Simple examples are haircutting or make-up services, which are focused on clients’ unique needs. Other examples are custom-made and designed furniture and kitchens. Similarly, in B2B (business-to-business) markets, software customisers provide tailored solutions to their clients. An example is WIPRO, a large Indian corporation offering digital, technology and business solutions to other businesses. For instance, it offers artificial intelligence (AI) platforms for business clients, industry platforms for manufacturers of consumer goods and transport platforms for cargo process management of air cargos.

The animation below represents this model.

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Animation 2 Solution business model
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Animation 2 features a box on the left-hand side labelled ‘Firm – Redesign solution’. There is also a box on the right-hand side labelled ‘Customer – Customer’s need’. There is a single headed arrow running between the base of the box labelled ‘Customer – Customer’s need’ and the box labelled ‘Firm – Redesign solution ‘ (from right-to-left). The arrow is labelled ‘Customer’s need’.

There is also a single headed arrow running between the middle of the box labelled ‘Firm – Redesign solution’ and ‘Customer – Customer’s need’ (from left-to-right). The arrow is labelled ‘Integrated solution’ and there is an icon that symbolises a garment positioned above the arrow at the tip where it interfaces with the ‘Customer – Customer’s need’ box.

There is also a single headed arrow running between the top of the box labelled ‘Customer – Customer’s need’ and the box labelled ‘Firm – Redesign solution’ (from right-to-left). There is also an icon symbolising three coins above the arrow which is labelled ‘Payment’.

Animation 2 Solution business model
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The boundary line between product and solution business models is not clear-cut: there are some cases where the customisation is remarkable although the product is still not fully tailored to the needs of the customers. For instance, mass customisation combines the benefits of the product model with the possibility of offering large numbers of possible combinations. An example of mass customisation is the possibility of buying a laptop of the same brand and model with different Ram and hard drive sizes, or a car with different options.

Business models of this type are required to:

  • identify potential customers
  • create a trust relationship with the customer in order to understand customer needs
  • tailor the product/service in order to satisfy the needs of the customer
  • control the relationship with the customer to enhance its engagement, while other activities, component products and services can be outsourced
  • define a price based on the value perceived by the customer. This may differ significantly from the cost, as it happens for strategic consulting where client companies pay quite high prices for a consultant’s day in comparison with the relatively lower daily cost of the person employed.