Business Model Barriers: When Good Products Can't Reach Customers
By Mark Blackwell, Founder, Arkaro
Executive Summary
Even products with compelling value propositions fail when supported by flawed business models. Three critical failure modes dominate: inadequate distribution channels that can’t effectively communicate value, value chain obstacles where intermediate players resist adoption, and complex stakeholder ecosystems that create coordination challenges. Companies often treat business model development as an afterthought, leading to technically superior products that struggle to gain commercial traction.
This is the fifth article in our 8-part series on the hidden root causes of product launch failure. Read the previous article on developing compelling value propositions.
In our exploration of product launch failures, we’ve established the importance of collaborative culture, clear innovation strategy, and compelling value propositions. However, even products with strong value propositions can fail if they don’t have a viable business model to deliver that value to customers.
While your value proposition answers “why would someone buy this?”, your business model addresses the critical question: “how will we profitably deliver this to customers?”
The $32 Million Question
New Age Eats burned through $32 million developing working cultivated meat technology, only to shut down in March 2023 with zero revenue. Their hybrid plant-based and cultivated pork production hit every technical milestone. The product worked perfectly.
So what went wrong?
The fatal flaw wasn’t in their labs—it was in their commercialisation strategy. Regulatory structures demanded 10-20 year approval timelines with no intermediate revenue opportunities. Brilliant technology, broken business model.
This pattern repeats across agriculture, food, and chemicals: innovations fail not because they lack merit, but because no one considered how to actually reach customers profitably.
Three Critical Business Model Failure Modes
In my work across Agriculture, Food, and Chemicals industries, I’ve identified three distinct failure modes that consistently undermine business models. Each represents a different aspect of the commercialisation challenge, and understanding them helps explain why so many promising products struggle to gain traction.
1. Channel Inadequacy: When Distribution Can't Deliver Value
The first failure mode occurs when companies fail to secure distribution channels that can effectively reach target customers and communicate the product’s value proposition.
Agricultural Distribution: The Reality of Channel Constraints
Superior technology often faces unexpected distribution hurdles that have nothing to do with product performance. Even when farmers want innovative solutions, three key constraints prevent channel partners from promoting them effectively:
Training burden: New technologies demand that dealers develop fresh expertise and educate customers—all without guaranteed returns. Established products sell themselves through familiarity.
Brand advantages: Channel partners favour suppliers with market presence, proven support, and predictable demand. Startups struggle against incumbents offering certainty.
Financial reality: Established suppliers offer better margins, volume discounts, and promotional support. For dealers on thin margins, immediate financial benefits outweigh long-term technical advantages.
The result? Distribution systems reward familiarity over innovation, making superior products harder to commercialise through traditional channels.
Have you seen similar channel resistance patterns in your industry?
Moving beyond channel issues, even willing and capable distributors can’t overcome resistance from other value chain players.
2. Value Chain Resistance: When Stakeholders Block Adoption
The second failure mode occurs when intermediate players in the value chain resist adoption because the innovation threatens their business models, even when end users would benefit.
The Poultry Exchange: Digital Disruption Meets Industry Resistance
The Poultry Exchange exemplifies this resistance perfectly. Founded in 2015 as a digital marketplace for poultry transactions, the company ceased operations in 2017 despite customer feedback indicating demand. Founder Janette Barnard documented that “the industry wasn’t ready for digital transformation” and remained “intractable” to changing established transaction methods.
The platform had working technology and demonstrated customer interest, but failed because it threatened existing intermediaries and established trading relationships. Traditional poultry brokers and distributors saw the digital marketplace as bypassing their value-added services, creating systematic resistance to adoption.
PVC Pipe: A Classic Value Chain Resistance Case
McKinsey research documents perhaps the best historical example through PVC pipe adoption in the United States. Although PVC became one of the biggest plastics applications, it didn’t reach reasonable volume until nearly 15 years after launch.
First produced in 1952 for chemical plants, PVC didn’t achieve widespread housing market use until 1965. Full approval resolution took until 1968. Despite being less expensive and adequately durable, penetration was slow because it created two distinct “losers”: plumbers and distributors.
PVC threatened plumbers by simplifying installations that previously required skilled fitting. Distributors opposed it because it was much less profitable than incumbent metal options. These groups fought systematically through building codes and professional standards—not based on technical performance, but economic self-interest.
Vertical Farming: When Retailers Can’t Make the Economics Work
Bowery Farming illustrates how value chain economics can doom superior technology. Valued at $2.3 billion in 2021, the company shut down in November 2024 after raising over $700 million. Their controlled-environment agriculture worked exactly as intended—growing crops with 95% less water and 99% less land than traditional farming.
The failure stemmed from retailer resistance. Despite partnerships with major retailers like Whole Foods and Amazon Fresh, these key value chain players couldn’t generate sufficient margins to justify the capital-intensive model. Energy costs exceeded projections, and even with technological superiority, the retail value chain couldn’t absorb the cost structure required for commercial viability.
Successful business models address value chain obstacles by:
- Mapping the complete value chain to identify all impacted stakeholders
- Analysing economic impact on each participant
- Identifying potential losers who might resist adoption
- Developing strategies to mitigate resistance or compensate partners
However, even when individual stakeholders are aligned, business models can fail due to the complexity of coordinating multiple players simultaneously.
3. Coordination Complexity: When Multiple Stakeholders Must Align
The third failure mode occurs when adoption requires simultaneous changes across multiple stakeholders, creating coordination challenges that extend commercialisation timelines significantly.
Polycarbonate Automotive Glazing: The Coordination Challenge
McKinsey research documents how polycarbonate automotive glazing illustrates this complexity. Despite dramatic weight-reduction benefits, adoption has taken far longer than expected due to value-chain coordination requirements.
Multiple supplier tiers must change production processes simultaneously, but suppliers won’t invest without clear OEM purchase commitments. Conversely, OEMs won’t commit without evidence of stable supply chains. This creates what McKinsey describes as a “catch-22, where each player waits for others to make the first move.”
Food Industry: Multi-Stakeholder Decision Making
New Age Eats’ failure also illustrates the complexity of multi-stakeholder alignment. Beyond regulatory barriers, the cultivated meat startup needed simultaneous buy-in from investors (requiring clear commercialisation timelines), food manufacturers (needing production scalability and cost targets), retailers (demanding consumer acceptance data), and consumers (requiring taste, price, and safety confidence). Each stakeholder operated on different timelines and success metrics. Investors expected rapid progress, regulators required extensive safety data, manufacturers needed proven economics, and consumers demanded familiar taste experiences. When regulatory delays extended timelines indefinitely, this stakeholder ecosystem collapsed—not because the technology failed, but because the business model couldn’t maintain alignment across divergent stakeholder needs during extended uncertainty.
Building Resilient Business Models
Understanding these three failure modes helps explain why McKinsey research shows that companies addressing business model challenges can reduce time to appreciable revenue by up to 50 percent. The key insight is that commercialisation requires as much rigour as technical development.
Based on our experience, here are five practices for developing viable business models:
1. Map the Complete Go-to-Market Journey
Beyond understanding value creation, map exactly how products will reach customers, including required channels, capabilities, support needs, and awareness generation.
2. Validate Economics Across All Stakeholders
Ensure your business model creates value for all essential participants, understanding true costs, required margins, and pricing dynamics within existing procurement approaches.
3. Test Channel Acceptance Early
Engage potential channel partners during development, gathering feedback on portfolio fit and required support before product completion.
4. Develop Multiple Business Model Options
Create flexibility through different approaches—direct vs. indirect channels, product vs. service models, licensing vs. manufacturing—allowing adaptation to market realities.
5. Continuously Refine Based on Learning
Evolve your business model throughout the innovation journey as customer interactions provide insights for market approach improvements.
From Concept to Commercial Success
A viable business model bridges the gap between strong value propositions and commercial success, ensuring innovative solutions can reach target customers sustainably.
The cases of PVC pipe, Bowery Farming, and polycarbonate glazing demonstrate that even superior technologies face significant business model challenges. Success requires building institutional capabilities in channel development, stakeholder management, and business-model creation that provide competitive advantages in commercialisation timing.
In our client work, business model issues become most visible at launch, but their roots lie in earlier innovation phases. By addressing these issues proactively, you dramatically increase launch success probability.
Evaluating Your Business Model
Before our next article, ask yourself these critical questions:
- Have you validated your distribution strategy with actual channel partners?
- Have you mapped the complete value chain to identify potential obstacles?
- Have you developed clear economics that work for all essential stakeholders?
- Do you have contingency plans if your initial approach encounters resistance?
Your answers will reveal potential vulnerabilities before they become costly launch failures.
About Arkaro
Arkaro is a B2B consultancy specialising in Strategy, Innovation Process, Product Management, Commercial Excellence & Business Development, and Integrated Business Management. With industry expertise across Agriculture, Food, and Chemicals, Arkaro’s team combines practical business experience with formal consultancy training to deliver impactful solutions.
You may have the ability to lead these change efforts with your team but time constraints can often be a challenge. Arkaro takes a collaborative ‘do it with you’ approach, working closely with clients to leave behind sustainable, value-generating solutions—not just a slide deck.
We don’t just coach – we get on the pitch with you
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In our next article, we’ll examine how inadequate prototyping and testing can undermine product launches.
References
[1] Boren, M., Chan, V., & Musso, C. (2012). The path to improved returns in materials commercialization. McKinsey & Company Chemicals Practice, August 2012.
[2] Rodriguez, M. (2023, March 23). New Age Eats shuts down cultivated meat startup. Food Dive. https://www.fooddive.com/news/new-age-eats-shuts-down-cultivated-meat/646280/
[3] AgFunder News. (2018). Failed AgTech Startups: The Poultry Exchange. AgFunder News. https://agfundernews.com/failed-agtech-startups-poultry-exchange
[4] Zimmerman, S. (2024, November 7). Celebrity-backed indoor farming company Bowery closes, lays off workers. Agriculture Dive. https://www.agriculturedive.com/news/celebrity-backed-indoor-farming-company-bowery-closes-lays-off-187-workers/732282/
