Business Model Generation – Part3 – Design
“Businesspeople don´t just need to understand designers better; they need to become designers.” Roger Martin
This chapter describes a number of techniques and tools from the world of design that can help us design better and more innovative business models. The following text explores six business model design techniques:
- Customer Insight
- Visual Thinking
Each technique is introduced in the book with a story, exercises and suggestions. I keep on focusing the main idea of some techniques and summarize them for you to get in touch with these techniques.
Technique 1 Customer Insights
Companies invest heavily in market research, yet often wind up neglecting the customer perspective when designing products, services and business models. Good business model design avoids this error. It views the business model through customers´ eyes. This does not mean that customer thinking is the only place from which to start an innovation initiative, but it does mean that we should include the customer perspective when evaluating a business model.
But the challenge of innovation is developing a deeper understanding of customers rather than just asking them what they want. As pioneering automaker Henry Ford once said: “If I had asked my customers what they wanted. They would have told me ´a faster horse´”.
Another challenge lies in knowing which customers to heed and which customers to ignore. Sometimes tomorrow´s growth segments wait at the periphery of today´s cash cows. Therefore business model innovators should avoid focusing exclusively on existing Customer Segments and set their sights on new or unreached segments. A number of business model innovations have succeeded precisely because they satisfied the unmet needs of new customers.
Shift from “YOU: Organization-centric business model design” to “THEM!: Customer-centric business model design”
Technique 2 Ideation
Generating new business model ideas. Mapping an existing business model is one thing; designing a new and innovative business model is another. What is needed is a creative process for generating a large number of business model ideas and successfully isolating the best ones. This process is called ideation.
One challenge we face when trying to create new business model options is ignoring the status quo and suspending concerns over operational issues so that we can generate truly new ideas.
To come up with new or better options, we must dream up a grab bag of ideas before narrowing them down to a short list of conceivable options. Thus, ideation has two main phases:
- Idea generation – where quantity matters
- Synthesis – in which ideas are discussed, combined, and narrowed down to a small number of viable options
We can generate ideas for innovative models from several different starting points. The book shows two ways: epicenters of business model innovation using the Business Model Canvas – we already know about – and “what if questions”.
The power of “What if” questions
We often have trouble conceiving innovative business models because we are held back in our thinking by the status quo. “What if” questions help us break free of constraints imposed by current models. They should provoke us and challenge our thinking.
Managers of a daily newspaper might ask themselves: What if we stopped our print edition and went to entirely digital distribution, through Amazon´s Kindle or through the Web? This would allow the newspaper to drastically reduce production and logistics costs, but would require making up lost print advertising revenues.
The ideation process
The ideation process can take several forms.
- Team composition – Key question: Is our team sufficiently diverse to generate fresh business model ideas?
- Immersion – KQ: Which elements must we study before generating business model ideas?
- Expanding – KQ: What innovations can we imagine for each business model building block?
- Criteria selection – KQ: What are the most important criteria for prioritizing our business model ideas?
- “Prototyping” – KQ: What does the complete business model for each shortlisted idea look like?
The other techniques are pretty simple to understand but have a lot of power. Visual thinking means using visual tools such as pictures, sketches, diagrams and PostIt notes to construct and discuss. Prototyping is as simple as it is called as well as Storytelling. But nevertheless the authors use great and detailed examples to get a deep understanding how to use these tools effectively.
The Business Model Generation