The Startup Way: How Modern Companies Use Entrepreneurial Management to Transform Culture and Drive Long-Term Growth

by Eric Ries

When experimenting with business models,9 here are a few things to keep in mind: Whose balance sheet should the product be on? Does it really make sense to force a small business or a consumer to pay cash up front? Why make a distinction between product and service? If products are designed to require periodic maintenance, why not take responsibility for providing it? Should a company profit from a product that may not actually fulfill the customer’s needs? By charging only when the product performs—per-use or performance-based compensation—the company stays fully aligned with the customer’s needs. Cycle times are faster when the company controls every aspect of service delivery. Can we take responsibility for intermediate steps in order to bring new innovations to market faster? When a company puts itself on the customer’s side of the transaction (we profit only when they profit), we are able to discover more ways to add value. Are new competitive dynamics available to gain market share? For example, in GE’s commercial lighting division, they have building-maintenance contracts that charge per socket rather than per bulb. GE is responsible for keeping the socket filled and operational. Every socket covered by a long-term agreement of this type effectively shrinks the total available market that is eligible for old-fashioned competitors to pursue.