Three kinds of fit for a business model

Reference: blog post in Strategyzer in Nov 2014

Nabila Amarsy argues that one should strive to achieve three kinds of fit before executing a business model. These are:

1. Problem-Solution Fit – when you have evidence that customers care about certain jobs, pains, and gains. At this stage you’ve proved the existence of a problem and have designed a value proposition that addresses your customers’ jobs, pains and gains. Unfortunately you still do not have clear evidence that your customer really care enough about your value proposition enough to buy it.

2. Product-Market Fit – when you have evidence that your value proposition is actually creating value for customers by alleviating their pains and creating the gains they desire. Your product or service is beginning to gain traction in the market and you’ve gone through the long and iterative process of running tests that have validated and invalidated the various assumptions underlying your value proposition.

3. Business Model Fit – when you have evidence that your value proposition is embedded in a profitable and scalable business model. You have done the laborious back and forth between designing a value proposition that creates value for your customers and a business model that creates value for your organization. You have found the right business model that delivers optimal profitability.