When customer needs outgrow the business model

What happens when the founding assumptions of a business model begin to change?

This was a question explored in a fictionalized case developed by Andrés Cuneo and Marco Bertini of Esade, together with Jill Avery of Harvard Business School for Harvard Business Review. “Parque del Sendero: Repositioning in the Death Care Industry in Chile,” examined the options available to a major Chilean cemetery business when faced with changing consumer attitudes toward death, changing industry conditions, and a growing demand for cremation. In the case, the authors developed their insights using Monteverde Memorial Group (MMG) and its CEO, Javier Montoya, to explore the strategic choices facing the company.

MMG operates a traditional business that relies on its long-term relationship with families. These families can maintain a connection to their deceased loved ones by continuing to visit them where they are buried. MMG sells burial plots and maintains green, peaceful memorial parks where people can spend time at the graves of loved ones. The case suggests that families don’t just buy a burial service; they also buy a safe space to spend time by the grave, process their emotions and remember the person they lost.

But it’s becoming more challenging for the business to continue with this burial-based model. Land is becoming more expensive, development permits are taking longer, and water shortages are increasing operating costs. New regulations will also require investment in more efficient irrigation systems.

As the burial business faces these difficulties, the cremation business is growing. MMG’s CEO is reluctant to shift his business model for several reasons. One concern is that cremation has lower margins and risks becoming a commoditized service. He also feels that the shift to cremation may be a temporary reaction in relation to the pandemic.

However, customers are increasingly asking for cremation over burial. The critical decision the leadership team must make is not simply whether to offer cremation. Montoya has to decide if the business model can be adapted to changing customer preferences without losing sight of the values on which the business was built.

Cremation changes more than the funeral

The case suggests that changing funeral preferences can’t be explained by price alone.

Through conversations between MMG’s CEO and an anthropologist, the researchers explore how the meaning attached to death and remembrance is changing.

A cemetery is a vital physical space for some families because it enables them to continue relationships with those who have died. But today’s reality is also that many families are increasingly dispersed, religious beliefs are declining, and, financially, people may be less willing or able to commit to decades of cemetery maintenance. Covid also disrupted traditional rituals, leaving some families without the opportunity to say goodbye in familiar ways. Funerals had to take place more quickly, often without loved ones even present.

The researchers don’t see cremation merely as a cheaper funeral option. It can be a choice about how people want to grieve, remember and maintain a connection with someone who has died. As the case puts it, the decision is about meaning as well as cost.

These considerations of cost and meaning matter beyond the funeral industry. When customers change the way they understand a product or service, companies may need to reevaluate what they are actually providing.

Don't confuse the product with the purpose

This is the key question facing Javier Montoya, MMG’s CEO. He takes a slightly emotional view and sees the company’s cemeteries as more than commercial assets. As well as earning revenue for the business, they provide families with a permanent place to remain connected. With a more practical view, his son Daniel argues that the cemetery is only one way of providing that value.

This strategic question can be used to highlight an important distinction between any company’s product and its purpose. A business can become so closely associated with a particular way of delivering value that it begins to confuse that method with the value itself.

For MMG, its underlying purpose is to provide dignity, care and remembrance. But burial itself is only part of the picture. However, this also means there are other avenues for business development, from spaces for visiting urns to digital memorial services. The case even considers more experimental ideas, such as AI-assisted remembrance, showing how far a company might rethink its offering if it starts to respond to what customers want rather than stick rigidly to what it has always offered.

A choice between two futures—or a chance to build a third?

The two experts responding to the case reach different conclusions. One recommends offering cremation while continuing to invest in burial, allowing the company to serve both groups while customer preferences develop. The other argues that MMG should concentrate on modernizing its existing cemetery business and finding new ways to increase its value to families through digital services and recurring offerings.

There is no simple answer. The case illustrates the difficulty of making strategic decisions when the direction and speed of consumer change are unclear.

Whether cremation will quickly replace burial in Chile is uncertain. According to Chile’s Fiscalía Nacional Económica, cremation represents about 10% of funeral services, compared with more than 50% in the United States, Spain and the UK.

The choice is not necessarily between abandoning the old model and embracing the new one. It may be possible to experiment while protecting the business that still serves an important customer need.

The wider lesson for businesses

Broader changes in Chilean society are reflected in the case study. The country’s 2024 census found that the average household had fallen from four people in 1992 to 2.8 in 2024, while single-person households increased from 8.3% to 21.8%.

These figures alone don’t determine whether people will increasingly opt for cremation, but they illustrate why assumptions about family structures, permanence and long-term relationships may need to be reconsidered.

Changing customer expectations can affect businesses in any industry. The key insight here is that businesses should ask whether they are protecting a product, or protecting the value that product was created to provide.

Don't ask what your product is

For MMG, the answer may ultimately depend on how it defines remembrance. The case closes with a question from Javier’s granddaughter about whether people want to be remembered forever, or simply not forgotten immediately. The researchers use this human question to point toward a broader strategic challenge: companies cannot assume that the way customers have valued something in the past will remain unchanged.

Businesses trying to keep pace with customer needs would be wise to focus not on the next new product launch, but rather on what customers will continue to value—and how they can deliver it in a changing world.