The principle of Business Model Before Product states that a product should only be developed once the underlying business logic has been thought through. Many innovation projects fail not because of technology or the product itself but because no viable business model exists: Who pays? For what? Through which channel? How does it scale? Answering these questions retroactively is significantly harder than considering them from the start.
A frequent counterexample is the Segway launch: the product was technically impressive, but the business model was unclear. Who was the target audience? How was distribution supposed to work? What problem was being solved? In contrast, Nespresso first conceived the business model (Razor-and-Blade with proprietary capsules and direct sales) and then aligned the product accordingly. The machine was a means to an end; the business model was the actual innovation.
The principle traces back to Alexander Osterwalder and Steve Blank and stands at the center of Lean Startup thinking. It requires the willingness to test business model assumptions just as rigorously as product hypotheses.
