I am a huge fan of Seth Godin, and this is a riff based on one of his recent blog posts.

If you want a successful business model:

Start with the fact that everyone has problems.  They want and NEED a cure for those problems.

1. Identify a problem.

2. Develop a simple solution for the problem.

3. Price and market it correctly.

4. Rinse and repeat.

For example, Apple found a problem.  The cell phones that let you look at your email on the road or cruise the net were button full, and performance mediocre.  So they developed the iphone.  It’s a pretty mediocre ipod, but it is an awesome phone and mobile computing device, for me.  I have never been so happy with any one gadget I have ever owned.  And it has the geek lust factor on top of it.  It’s beautiful to look at, as well as simple to use- something people would want to show off to their friends.  And like all of Apple’s products, the user interface is made so that it is intuitive and easy to use- no manual required for basic use.

But the phone was expensive, although competitively priced with other business phones.  Now with the 3G phone, the phone is cheap enough and fast enough to reach a whole new segment of the marketplace.  They took the same concept, tinkered with the existing problems- limited sales because of price point, people wanting faster speeds- and then gave people what they waned, as announced at the WWDC. – Lather, rinse, repeat.

This same model works for any business- you have to provide something someone needs- if you are just a luxury, a want over a need, your shelf-life will be short.  If you fill a need and solve a problem better than the other guy, success is much more likely.

As always, the devil is in the details.