Great Products vs. Great Businesses:

– Morgan Housel

Morgan Housel is a partner at The Collaborative Fund and a former columnist at The Motley Fool and The Wall Street Journal. He is a two-time winner of the Best in Business Award from the Society of American Business Editors and Writers, winner of the New York Times Sidney Award. He states, ”the gap between a great product and a great business can be ten miles wide”. We need to understand that a great product does not always make a great business. Every great business is backed by a great product, not every great product turns into a great business. Mark Zuckerberg was asked by a friend whether he thought his social network would make money. He knew how to make a product not to run business. But after that Facebook hit the market and was successful . It is very rare case in today’s world.
Let us understand product and business,
A product is something that solves someone’s problem or provide utility to a consumer.
A business is a product that works so well that people will pay more than it costs to produce and retain to it.

A product can be a great product only if the products manages to pass all the above stages. This is all about a great product but what about great busniess model?
There are two types of loses company makes one is to build a infrastucture to attract more customer and one is that the prices are not paid by customer of what business has paid. One mistake everyone does that they just focus on product development they just do Research & Development process but they do not focus on business model to build a competitive business. It is not wrong to focus on product but one should always focus on business model simultaneously.
While building a business model one should have a mindset to make a sustainable model that should run and make profits for generations. Not only profits are important but customer retention and customer attraction to a product is also important.
Venture capital ideas has also changed, Companies are staying private and making profitable cash flows and a competitive business model before going public so that get a boom in market. When Facebook went public, it said, “Simply put: we don’t build services to make money; we make money to build better services.”
Source,
https://www.collaborativefund.com/blog/great-products-vs-great-businesses/