business model design process

Guide to Business Model Design Process

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In this article, we look at the 1) business model design process , the 3) starting point for business model design innovation , 3) the phases , and the 4) design attitude .

BUSINESS MODEL DESIGN PROCESS

All business model design projects are unique and present a challenge to the participants because there is no one formula or prediction for how they will evolve.

Business Model Design Process_

Objectives of business model innovation

Innovations and new iterations of business models are usually made with one of the following purposes ;

Motivations of business model innovation

When an already established business is exploring the possibility of innovating in its business model, it is usually with the following motives;

STARTING POINT FOR BUSINESS MODEL DESIGN INNOVATION

The impetus for creating or innovating in existing business model is driven by a number of factors. Each of these factors represents contextual elements that have their relevant set of challenges that come with them.

The challenges faced by new organizations when introducing a new business model in the market are;

1. Mobilize

In this phase, the entrepreneur takes steps to be ready for implementing a new business model successfully. The purpose of the team working on the change is to ensure that everything is in place for the business model to be implemented. This requires ensuring that all the elements of the 9 building blocks of Business Model Canvas are available.

The following four activities form the crux of this stage;

Framing the objectives is heavily dependent on the project parameters but some steps are common across projects. These include defining the scope of the project, creating a narrative for why the project is necessary and what the deliverables of the project will be. When deciding the project scope, it is essential to plan for at least the first three steps of the process i.e. Mobilize, understand and design. The final two phases are a product of the former three and can therefore not be planned in advance.

Pulling together the right team for the project is another key activity which will define the success or failure of your project. It may be difficult to find a pre-trained team for the project, especially for truly entrepreneurial venture. However, the safest option is to pull together an eclectic mix of people with diverse backgrounds and experiences, so your project is overseen by people with an extensive combined pool of knowledge. Since entrepreneurial ventures thrive on ideas and innovations, such a team will help boost creativity and produce unique solutions to customer pains. This is the phase when the team needs to establish the use of the Business Model Canvas as the common medium to record the evolution of the business model.

The mobilization phase can be dangerous because it causes people box themselves in with the idea on the table without challenging or exploring it. Their initial buy-in with the idea means that they commit to it completely. One way to avoid this is by engaging the team in an activity called kill/ thrill. This is a two portion activity which asks the entire team to list reasons why the project may end in failure (kill) and then list reasons why the project will be a raging success (thrill). This causes the team members to address the business model from all aspects and fully explore its efficacy.

2. Understand

This is the immersion stage of the project and is signified by resources deployed to thoroughly analyze the proposed business model design efforts to ensure it is sound. This involves the core team immersing themselves into the customers, technology and environment of the business.

Some of the activities involved are interviewing both experts and customers to collect ideas, inputs and needs. Another great source of information is to study past cases where other companies have tried to provide similar solutions and identify the reasons they failed to do so. Essentially this phase aims to understand the environment in which the business model will be expected to flourish and grow.

The key success factors for this phase are a deep understanding of the potential target market as well as observing target markets from fresh perspectives rather than being boxed in by traditional market boundaries.

The business model ‘design space’ has to be understood thoroughly for this stage to be a success so an environmental scan is a must. This includes market research, studying and involving customers, interviewing domain experts and observing the business models of potential customers. However, a surplus of research may leave your team paralyzed and unable to push through to the next stage. One way to avoid this eventuality is to start the prototyping phase in parallel with the understanding phase. This will help test out different hypotheses gleaned from the research.

Though it may seem obvious, customers are an extremely important source of information at this stage, yet they are often ignored, especially by entrepreneurs who still aren’t sure who their main target segment are. The customer empathy map can be a huge help if this is the case.

In the previous stage, we understand customers and prototype models as a result of this understanding. When we share these models with potential players and adapt them in accordance with their responses, we have officially entered the design phase .

Various iterations of many different models need to be tested out during this phase before the team settles on one which will form the backbone of the future business. Hence, this stage is often referred to as the inquiry phase.

The following three activities lie at the crux of this phase;

The critical success factors in this stage are to include as many people from the organization as possible in the creation process; the participants must possess the train of exploration, so they look beyond the way things are currently being done; and there must be plenty of time so all the business model ideas can be thoroughly explored.

There is always an imminent danger of the participants getting too attached to their business idea. All the iteration possible in the nine building blocks of the business model canvas should be thoroughly weighed for their probability of success.

4. Implement

This is the execution phase of the entire process. Now that you are armed with the perfect business model, it is time to start the groundwork on the company itself and take it from a concept to reality. As the name suggests, this phase is focused on implementing the business model of choice. This is the one activity which forms the crux of this fourth phase in the process.

The critical to success factors in this phase are the use of the best project management techniques and tactics; flexibility in adapting the business model quickly when and if the need arises; create synergy between the traditional business model and the new one.

Now that you have the final iteration of the business model, you will begin as with any other project; defining timelines and mapping milestones for the implementation process. Throughout this process, there will be continuous risk and reward calculation taking place to ensure that the reality and the expected results still coincide.

In this stage, the evolution of the company is the focus through improving and changing the business model as a result of the intelligence received about market reaction to its various aspects. This will happen through a team of managers who are hired with the responsibility of molding and managing this evolution.

The key activities which form the crux of this stage are;

The critical to success factors in this phase are obviously the ability of the management to view the business from a strategic and long-term perspective; be proactive and manage the day to day running of and adherence to the business model itself.

Most start-ups will probably be too small to have an entire team managing it. Instead, luckily for them, every employee will have a stake in the management of the business model and will constantly be alert to how changes in the environment may require realignment in the business model .

DESIGN ATTITUDE

For most organizations it is a major challenge to create and sustain a Design Attitude which is defined as the knowledge and willingness to invest time in thinking up a multitude of ideas with the knowledge that most of them will be discarded. Most managers may consider this a waste of time because they are inculcated with a decision attitude which gives precedence to the speed of the decision rather than coming up with a number of excellent alternatives and then selecting the best amongst them.

Since most managers possess the time is money attitude, they often fall into the trap of undervaluing the efficacy of the time spent in the business model design process because to them, the more time being used up in this process, the longer it takes to make money from the business. For new companies, this may be even more of an issue since many industry experts, venture capitalists and other investors, as well as the entrepreneurs own wallet may demand cutting short the time it takes to complete the process. However, it is fundamental, at this stage to remember, that you may make money sooner by doing away with the business model design process but that influx of money will not last long if you end up picking the wrong business model in your hurry to jumpstart the business.

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How to Design a Winning Business Model

Smart companies’ business models generate cycles that, over time, make them operate more effectively.

Reprint: R1101G

Most executives believe that competing through business models is critical for success, but few have come to grips with how best to do so. One common mistake, the authors’ studies show, is enterprises’ unwavering focus on creating innovative models and evaluating their efficacy in standalone fashion—just as engineers test new technologies or products. However, the success or failure of a company’s business model depends largely on how it interacts with those of the other players in the industry. (Almost any business model will perform brilliantly if a company is lucky enough to be the only one in a market.) Because companies build them without thinking about the competition, companies routinely deploy doomed business models.

Moreover, many companies ignore the dynamic elements of business models and fail to realize that they can design business models to generate winner-take-all effects similar to the network externalities that high-tech companies such as Microsoft, eBay, and Facebook often create. A good business model creates virtuous cycles that, over time, result in competitive advantage.

Smart companies know how to strengthen their virtuous cycles, undermine those of rivals, and even use them to turn competitors’ strengths into weaknesses.

The Idea in Brief

There has never been as much interest in business models as there is today; seven out of 10 companies are trying to create innovative business models, and 98% are modifying existing ones, according to a recent survey.

However, most companies still create and evaluate business models in isolation, without considering the implications of how they will interact with rivals’ business models. This narrow view dooms many to failure.

Moreover, companies often don’t realize that business models can be designed so that they generate virtuous cycles—similar to the powerful effects high-tech firms such as Facebook, eBay, and Microsoft enjoy. These cycles, when aligned with company goals, reinforce competitive advantage.

By making the right choices, companies can strengthen their business models’ virtuous cycles, weaken those of rivals, and even use the cycles to turn competitors into complementary players.

This is neither strategy nor tactics; it’s using business models to gain competitive advantage. Indeed, companies fare poorly partly because they don’t recognize the differences between strategy, tactics, and business models.

business model design process

Strategy has been the primary building block of competitiveness over the past three decades, but in the future, the quest for sustainable advantage may well begin with the business model. While the convergence of information and communication technologies in the 1990s resulted in a short-lived fascination with business models, forces such as deregulation, technological change, globalization, and sustainability have rekindled interest in the concept today. Since 2006, the IBM Institute for Business Value’s biannual Global CEO Study has reported that senior executives across industries regard developing innovative business models as a major priority. A 2009 follow-up study reveals that seven out of 10 companies are engaging in business-model innovation, and an incredible 98% are modifying their business models to some extent. Business model innovation is undoubtedly here to stay.

That isn’t surprising. The pressure to crack open markets in developing countries, particularly those at the middle and bottom of the pyramid, is driving a surge in business-model innovation. The economic slowdown in the developed world is forcing companies to modify their business models or create new ones. In addition, the rise of new technology-based and low-cost rivals is threatening incumbents, reshaping industries, and redistributing profits. Indeed, the ways by which companies create and capture value through their business models is undergoing a radical transformation worldwide.

Yet most enterprises haven’t fully come to grips with how to compete through business models. Our studies over the past seven years show that much of the problem lies in companies’ unwavering focus on creating innovative models and evaluating their efficacy in isolation—just as engineers test new technologies or products. However, the success or failure of a company’s business model depends largely on how it interacts with models of other players in the industry. (Almost any business model will perform brilliantly if a company is lucky enough to be the only one in a market.) Because companies build them without thinking about the competition, they routinely deploy doomed business models.

Business Model

A business model comprises choices and consequences.

Our research also shows that when enterprises compete using business models that differ from one another, the outcomes are difficult to predict. One business model may appear superior to others when analyzed in isolation but create less value than the others when interactions are considered. Or rivals may end up becoming partners in value creation. Appraising models in a stand-alone fashion leads to faulty assessments of their strengths and weaknesses and bad decision making. This is a big reason why so many new business models fail.

Moreover, the propensity to ignore the dynamic elements of business models results in many companies failing to use them to their full potential. Few executives realize that they can design business models to generate winner-take-all effects that resemble the network externalities that high-tech companies such as Microsoft, eBay, and Facebook have created. Whereas network effects are an exogenous feature of technologies, winner-take-all effects can be triggered by companies if they make the right choices in developing their business models. Good business models create virtuous cycles that, over time, result in competitive advantage. Smart companies know how to strengthen their virtuous cycles, weaken those of rivals, and even use their virtuous cycles to turn competitors’ strengths into weaknesses.

“Isn’t that strategy?” we’re often asked. It isn’t—and unless managers learn to understand the distinct realms of business models, strategy, and tactics, while taking into account how they interact, they will never find the most effective ways to compete.

What Is a Business Model, Really?

Everyone agrees that executives must know how business models work if their organizations are to thrive, yet there continues to be little agreement on an operating definition. Management writer Joan Magretta defined a business model as “the story that explains how an enterprise works,” harking back to Peter Drucker, who described it as the answer to the questions: Who is your customer, what does the customer value, and how do you deliver value at an appropriate cost?

Other experts define a business model by specifying the main characteristics of a good one. For example, Harvard Business School’s Clay Christensen suggests that a business model should consist of four elements: a customer value proposition, a profit formula, key resources, and key processes. Such descriptions undoubtedly help executives evaluate business models, but they impose preconceptions about what they should look like and may constrain the development of radically different ones.

Our studies suggest that one component of a business model must be the choices that executives make about how the organization should operate—choices such as compensation practices, procurement contracts, location of facilities, extent of vertical integration, sales and marketing initiatives, and so on. Managerial choices, of course, have consequences. For instance, pricing (a choice) affects sales volume, which, in turn, shapes the company’s scale economies and bargaining power (both consequences). These consequences influence the company’s logic of value creation and value capture, so they too must have a place in the definition. In its simplest conceptualization, therefore, a business model consists of a set of managerial choices and the consequences of those choices.

Companies make three types of choices when creating business models. Policy choices determine the actions an organization takes across all its operations (such as using nonunion workers, locating plants in rural areas, or encouraging employees to fly coach class). Asset choices pertain to the tangible resources a company deploys (manufacturing facilities or satellite communication systems, for instance). And governance choices refer to how a company arranges decision-making rights over the other two (should we own or lease machinery?). Seemingly innocuous differences in the governance of policies and assets influence their effectiveness a great deal.

Consequences can be either flexible or rigid. A flexible consequence is one that responds quickly when the underlying choice changes. For example, choosing to increase prices will immediately result in lower volumes. By contrast, a company’s culture of frugality—built over time through policies that oblige employees to fly economy class, share hotel rooms, and work out of Spartan offices—is unlikely to disappear immediately even when those choices change, making it a rigid consequence. These distinctions are important because they affect competitiveness. Unlike flexible consequences, rigid ones are difficult to imitate because companies need time to build them.

Take, for instance, Ryanair, which switched in the early 1990s from a traditional business model to a low-cost one. The Irish airline eliminated all frills, cut costs, and slashed prices to unheard-of levels. The choices the company made included offering low fares, flying out of only secondary airports, catering to only one class of passenger, charging for all additional services, serving no meals, making only short-haul flights, and utilizing a standardized fleet of Boeing 737s. It also chose to use a nonunionized workforce, offer high-powered incentives to employees, operate out of a lean headquarters, and so on. The consequences of those choices were high volumes, low variable and fixed costs, a reputation for reasonable fares, and an aggressive management team, to name a few. (See “Ryanair’s Business Model Then and Now.”) The result is a business model that enables Ryanair to offer a decent level of service at a low cost without radically lowering customers’ willingness to pay for its tickets.

Ryanair’s Business Model Then and Now

This depiction of Ryanair’s business model in the 1980s highlights the airline’s major choices at the time: offering excellent service and operating with a standardized fleet. The airline was forced to redesign its business model in the face of stiff competition.

Ryanair’s current business model rests on the key choices of offering customers low fares and providing nothing free. The rigid consequences include a reputation for fair fares and low fixed costs. Ryanair’s choices are aligned with its goals, generate cycles that reinforce the business model, and are robust given that it has been operating as a low-cost airline for 20 years.

Click here for a larger image of the graphic.

How Business Models Generate Virtuous Cycles

Not all business models work equally well, of course. Good ones share certain characteristics: They align with the company’s goals, are self-reinforcing, and are robust. (See the sidebar “Three Characteristics of a Good Business Model.”) Above all, successful business models generate virtuous cycles, or feedback loops, that are self-reinforcing. This is the most powerful and neglected aspect of business models.

Three Characteristics of a Good Business Model

How can you tell if a business model will be effective? A good one will meet three criteria.

1. Is it aligned with company goals?

The choices made while designing a business model should deliver consequences that enable an organization to achieve its goals. This may seem obvious until you consider a counterexample. In the 1970s, Xerox set up Xerox PARC, which spawned technological innovations such as laser printing, Ethernet, the graphical user interface, and very large scale integration for semiconductors. However, Xerox PARC was notoriously unable to spawn new businesses or capture value from its innovations for the parent due to a distressing lack of alignment with Xerox’s goals.

2. Is it self-reinforcing?

The choices that executives make while creating a business model should complement one another; there must be internal consistency. If, ceteris paribus, a low-cost airline were to decide to provide a level of comfort comparable to that offered by a full-fare carrier such as British Airways, the change would require reducing the number of seats on each plane and offering food and coffee. These choices would undermine the airline’s low-cost structure and wreck its profits. When there’s a lack of reinforcement, it’s possible to refine the business model by abandoning some choices and making new ones.

3. Is it robust?

A good business model should be able to sustain its effectiveness over time by fending off four threats, identified by Pankaj Ghemawat. They are imitation (can competitors replicate your business model?); holdup (can customers, suppliers, or other players capture the value you create by flexing their bargaining power?); slack (organizational complacency); and substitution (can new products decrease the value customers perceive in your products or services?). Although the period of effectiveness may be shorter nowadays than it once was, robustness is still a critical parameter.

Our studies show that the competitive advantage of high-tech companies such as Apple, Microsoft, and Intel stems largely from their accumulated assets—an installed base of iPods, Xboxes, or PCs, for instance. The leaders gathered those assets not by buying them but by making smart choices about pricing, royalties, product range, and so on. In other words, they’re consequences of business model choices. Any enterprise can make choices that allow it to build assets or resources—be they project management skills, production experience, reputation, asset utilization, trust, or bargaining power—that make a difference in its sector.

The consequences enable further choices, and so on. This process generates virtuous cycles that continuously strengthen the business model, creating a dynamic that’s similar to that of network effects. As the cycles spin, stocks of the company’s key assets (or resources) grow, enhancing the enterprise’s competitive advantage. Smart companies design business models to trigger virtuous cycles that, over time, expand both value creation and capture.

For example, Ryanair’s business model creates several virtuous cycles that maximize its profits through increasingly low costs and prices. (See the exhibit “Ryanair’s Key Virtuous Cycles.”) All of the cycles result in reduced costs, which allow for lower prices that grow sales and ultimately lead to increased profits. Its competitive advantage keeps growing as long as the virtuous cycles generated by its business model spin. Just as a fast-moving body is hard to stop because of kinetic energy, it’s tough to halt well-functioning virtuous cycles.

Ryanair’s Key Virtuous Cycles

Cycle 1: Low fares >> High volumes >> Greater bargaining power with suppliers >> Lower fixed costs >> Even lower fares

Cycle 2: Low fares >> High volumes >> High aircraft utilization >> Low fixed cost per passenger >> Even lower fares

Cycle 3: Low fares >> Expectations of low-quality service >> No meals offered >> Low variable costs >> Even lower fares

However, they don’t go on forever. They usually reach a limit and trigger counterbalancing cycles, or they slow down because of their interactions with other business models. In fact, when interrupted, the synergies work in the opposite direction and erode competitive advantage. For example, one of Ryanair’s cycles could become vicious if its employees unionized and demanded higher wages, and the airline could no longer offer the lowest fares. It would then lose volume, and aircraft utilization would fall. Since Ryanair’s investment in its fleet assumes a very high rate of utilization, this change would have a magnified effect on profitability.

It’s easy to see that virtuous cycles can be created by a low-cost, no-frills player, but a differentiator may also create virtuous cycles. Take the case of Irizar, a Spanish manufacturer of bodies for luxury motor coaches, which posted large losses after a series of ill-conceived moves in the 1980s. Irizar’s leadership changed twice in 1990 and morale hit an all-time low, prompting the new head of the company’s steering team, Koldo Saratxaga, to make major changes. He transformed the organization’s business model by making choices that yielded three rigid consequences: employees’ tremendous sense of ownership, feelings of accomplishment, and trust. The choices included eliminating hierarchy, decentralizing decision making, focusing on teams to get work done, and having workers own the assets. (See the exhibit “Irizar’s Novel Business Model.”)

Irizar’s Novel Business Model

When Irizar—a Spanish cooperative that manufactures luxury motor coach bodies—created a radically different business model, it made several innovative choices.

Shared Ownership

Accomplishment

These choices have led to innovation, high quality, and excellent service, generating high sales volume as well as customer loyalty.

Irizar’s main objective, as a cooperative, is to increase the number of well-paying jobs in the Basque Country, so the company developed a business model that generates a great deal of customer value. Its key virtuous cycle connects customers’ willingness to pay with relatively low cost, generating high profits that feed innovation, service, and high quality. In fact, quality is the cornerstone of Irizar’s culture. Focusing on customer loyalty and an empowered workforce, the company enjoyed a 23.9% compound annual growth rate over the 14 years that Saratxaga was CEO. Producing 4,000 coaches in 2010 and generating revenues of about €400 million, Irizar is an example of a radically different business model that generates virtuous cycles.

Competing with Business Models

It’s easy to infuse virtuousness in cycles when there are no competitors, but few business models operate in vacuums—at least, not for long. To compete with rivals that have similar business models, companies must quickly build rigid consequences so that they can create and capture more value than rivals do. It’s a different story when enterprises compete against dissimilar business models; the results are often unpredictable, and it’s tough to know which business model will perform well.

Take, for instance, the battle between two of Finland’s dominant retailers: S Group, a consumers’ cooperative, and Kesko, which uses entrepreneur-retailers to own and operate its stores. We’ve tracked the firms for over a decade, and Kesko’s business model appears to be superior: The incentives it offers franchisees should result in rapid growth and high profits. However, it turns out that the S Group’s business model hurts Kesko more than Kesko’s affects the S Group. Since customers own the S Group, the retailer often reduces prices and increases customer bonuses, which allows it to gain market share from Kesko. That forces Kesko to lower its prices and its profits fall, demotivating its entrepreneur-retailers. As a result, Kesko underperforms the S Group. Over time, the S Group’s opaque corporate governance system allows slack to creep into the system, and it is forced to hike prices. This allows Kesko to also increase prices and improve profitability, drive its entrepreneur-retailers, and win back more customers through its superior shopping experience. That sparks another cycle of rivalry.

Companies can compete through business models in three ways: They can strengthen their own virtuous cycles, block or destroy the cycles of rivals, or build complementarities with rivals’ cycles, which results in substitutes mutating into complements.

Strengthen your virtuous cycle.

Companies can modify their business models to generate new virtuous cycles that enable them to compete more effectively with rivals. These cycles often have consequences that strengthen cycles elsewhere in the business model. Until recently, Boeing and Airbus competed using essentially the same virtuous cycles. Airbus matched Boeing’s offerings in every segment, the exception being the very large commercial transport segment where Boeing had launched the 747 in 1969. Given the lumpiness of demand for aircraft, their big-ticket nature, and cyclicality, price competition has been intense.

How Airbus Bolstered Its Business Model

Companies can often strengthen their business models to take on competitors more effectively. Airbus’s business model initially fell short because Boeing could reinvest profits from its 747, which enjoyed a monopoly in the very large commercial transport segment. In 2007, Airbus launched the 380 to compete in that segment—strengthening its virtuous cycle relative to Boeing’s.

Historically, Boeing held the upper hand because its 747 enjoyed a monopoly, and it could reinvest those profits to strengthen its position in other segments. Analysts estimate that the 747 contributed 70 cents to every dollar of Boeing’s profits by the early 1990s. Since R&D investment is the most important driver of customers’ willingness to pay, Airbus was at a disadvantage. It stayed afloat by obtaining low-interest loans from European governments. Without the subsidies, Airbus’s cycle would have become vicious.

With the subsidies likely to dry up, Airbus modified its business model by developing a very large commercial transport, the 380. To dissuade Airbus, Boeing announced a stretch version of the 747. However, that aircraft would cut into the 747’s profits, so it seems unlikely that Boeing will ever launch it. Not only does the 380 help maintain the virtuousness of Airbus’s cycle in small and midsize planes, but also it helps decelerate the virtuousness of Boeing’s cycle. The increase in rivalry suggests that the 747 will become less of a money-spinner for Boeing. That’s why it is trying to strengthen its position in midsize aircraft, where competition is likely to become even tougher when sales of the 380 take off, by developing the 787.

Weaken competitors’ cycles.

Some companies get ahead by using the rigid consequences of their choices to weaken new entrants’ virtuous cycles. Whether a new technology disrupts an industry or not depends not only on the intrinsic benefits of that technology but also on interactions with other players. Consider, for instance, the battle between Microsoft and Linux, which feeds its virtuous cycle by being free of charge and allowing users to contribute code improvements. Unlike Airbus, Microsoft has focused on weakening its competitor’s virtuous cycle. It uses its relationship with OEMs to have Windows preinstalled on PCs and laptops so that it can prevent Linux from growing its customer base. It discourages people from taking advantage of Linux’s free operating system and applications by spreading fear, uncertainty, and doubt about the products.

In the future, Microsoft could raise Windows’ value by learning more from users and offering special prices to increase sales in the education sector, or decrease Linux’s value by undercutting purchases by strategic buyers and preventing Windows applications from running on Linux. Linux’s value creation potential may theoretically be greater than that of Windows, but its installed base will never eclipse that of Microsoft as long as the software giant succeeds in disrupting its key virtuous cycles.

Turn competitors into complements.

Rivals with different business models can also become partners in value creation. In 1999, Betfair, an online betting exchange, took on British bookmakers such as Ladbrokes and William Hill by enabling people to anonymously place bets against one another. Unlike traditional bookmakers who only offer odds, Betfair is a two-sided internet-based platform that allows customers to both place bets and offer odds to others. One-sided and two-sided businesses have different virtuous cycles: While bookmakers create value by managing risk and capture it through the odds they offer, betting exchanges themselves bear no risk. They create value by matching the two sides of the market and capture it by taking a cut of the net winnings.

Over the past decade, Ladbrokes’ and William Hill’s gross winnings have declined, so Betfair has hurt them, but not as much as expected. Because Betfair has improved odds in general, gamblers lose less money. They then place more wagers, and when bookies pay out, bettors gamble again, feeding a virtuous cycle. This has expanded the British gambling market by a larger proportion than just the improvement of odds might suggest. The better odds Betfair offers also help traditional bookmakers gauge market sentiment more accurately and hedge their exposures at a lower cost. When a new business model creates complementarities between competitors, it is less likely that incumbents will respond aggressively. The initial reaction from bookmakers to Betfair was hostile, but they have become more accommodating of its presence ever since.

Business Models vs. Strategy vs. Tactics

No three concepts are of as much use to managers or as misunderstood as strategy, business models, and tactics. Many use the terms synonymously, which can lead to poor decision making.

To be sure, the three are interrelated. Whereas business models refer to the logic of the company—how it operates and creates and captures value for stakeholders in a competitive marketplace—strategy is the plan to create a unique and valuable position involving a distinctive set of activities. That definition implies that the enterprise has made a choice about how it wishes to compete in the marketplace. The system of choices and consequences is a reflection of the strategy, but it isn’t the strategy; it’s the business model. Strategy refers to the contingent plan about which business model to use. The key word is contingent; strategies contain provisions against a range of contingencies (such as competitors’ moves or environmental shocks), whether or not they take place. While every organization has a business model, not every organization has a strategy—a plan of action for contingencies that may arise.

Consider Ryanair. The airline was on the brink of bankruptcy in the 1990s, and the strategy it chose to reinvent itself was to become the Southwest Airlines of Europe. The new logic of the organization—its way of creating and capturing value for stakeholders—was Ryanair’s new business model.

Changing strategic choices can be expensive, but enterprises still have a range of options to compete that are comparatively easy and inexpensive to deploy. These are tactics—the residual choices open to a company by virtue of the business model that it employs. Business models determine the tactics available to compete in the marketplace. For instance, Metro, the world’s largest newspaper, has created an ad-sponsored business model that dictates that the product must be free. That precludes Metro from using price as a tactic.

Think of a business model as if it were an automobile. Different car designs function differently—conventional engines operate quite differently from hybrids, and standard transmissions from automatics—and create different value for drivers. The way the automobile is built places constraints on what the driver can do; it determines which tactics the driver can use. A low-powered compact would create more value for the driver who wants to maneuver through the narrow streets of Barcelona’s Gothic Quarter than would a large SUV, in which the task would be impossible. Imagine that the driver could modify the features of the car: shape, power, fuel consumption, seats. Such modifications would not be tactical; they would constitute strategies because they would entail changing the machine (the “business model”) itself. In sum, strategy is designing and building the car, the business model is the car, and tactics are how you drive the car.

Strategy focuses on building competitive advantage by defending a unique position or exploiting a valuable and idiosyncratic set of resources. Those positions and resources are created by virtuous cycles, so executives should develop business models that activate those cycles. That’s tough, especially because of their interactions with those of other players such as competitors, complementors, customers, and suppliers that are all fighting to create and capture value too. That’s the essence of competitiveness—and developing strategy, tactics, or innovative business models has never been easy.

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Business Model Design

Business Model Design

February 8, 2018 by Chris Aitken

Is your disruptive business model a pipe dream?

By Chris Aitken

WHAT DO WE MEAN BY DISRUPTION?

The term Disruptive Innovation was first coined by Clayton Christensen in 1995 (Steve Jobs referenced this guy) to describe a theory to predict the ways in which current market incumbents are likely to be disrupted by new comers to a market. In essence the theory states that new market entrants are likely to disrupt an existing market where they are able to initially successfully target low end customers and then improve their product to ultimately target mainstream customers.

Clayton Christensen observed that disruption is an evolutionary process that takes time, and that many successfully disruptive new comers to a market adopt very different business models to existing incumbents. Additionally, existing companies can counter by continuing with their existing business model until it is no longer profitable, and meantime establish a separate ‘start-up’ company that adopts a Lean startup disruptive approach and business model.

If by ‘disruptive’ we mean ‘successful start-up’ – then Peter Thiel in his book ‘Zero to One’ offers some advice that is a little unconventional although bit hard to ignore. Thiel is a controversial figure – he is a member of Silicon Valley’s Paypal Mafia and highly successful venture capitalist Founders Fund, and also supported Trump in the 2016 American election.

Controversy aside, Thiel suggests that a successful start-up will have:

a monopoly position in an initially small market

an ability to deliver an order of magnitude improvement in customer experience

unique knowledge about the market or technology (or both), equal emphasis on both their sales and product development capabilities

an ability to leverage networks either through the nature of their services or internal capability.

WHICH BUSINESS MODEL?

The question soon arises though as to how to choose the most appropriate business model to support your disruptive ambition? Conventional wisdom says that it’s a matter of selecting an appropriate business model architype or pattern to match your situation. Business model architypes (e.g., Freemium) are common patterns for business models to suit differing requirements. So simply identify your requirements, select your architype and job done – right?

Well maybe not. First up - which set of architypes are you going to choose from? Alexander Osterwalder in the book Business Model Generation suggests there are 5 Business model architypes. Others variously suggest there are 8 , 55 ,or even 110 .

The point is – are they important? They all require customisation to implement within your particular context. Furthermore, each component of a business model needs to be evaluated in terms of its contribution to your (disruptive – e.g., Theil’s criteria) objectives, as well as its contribution to the model’s overall performance and coherency.

Blog-diagrams-Feb-2018_Purpose copy 2.png

Furthermore, Gartner suggests anecdotally that use of the Business Model Canvas is not that common amongst clients they interview. Bottom line? Business model design is difficult. Your business model is where your Value Proposition, Marketing Strategy, Service Delivery and Capability Platform and Cost Model all come together.

BUSINESS MODEL DESIGN

This article is the third in a series based on our Business Design Method. Because business models are complex they require that an intentional design process be followed. Business Model Architypes are great to get a sense of the possibilities – but there is simply no shortcut to working through your particular ambition and each of the elements that need to come together for a successful business model.

As you can see – Business Model Design falls at the very centre of the Business Design Method. This is because the Purpose Design, Value Model Design and Service Model Design activities all feed into the process of designing a business model.

BUSINESS MODEL DESIGN AND THE BUSINESS MODEL CANVAS

At FromHereOn we consider Business Model Design to be the process that defines four sub-models that together make up a complete business model. The process evaluates each of these against a given set of Strategic Goals, a Value Discipline, and the Brand Identity of a company.

The four sub-models that we define are the Market Model, Service Offering Model, Capability Model and the Sustainability Model. Each of these can be mapped to distinct elements of the Business Model Canvas .

The Market Model is concerned with understanding the market in which the business will operate and the way in which it presents its self to customers. The Service Offering Model describes the products and services, and the channels by which these are made available. This is where consideration is given to the ability of the business model to support what Eric Ries calls ‘Validated Learning’ in his book ‘The Lean Startup’ – which speaks to the need for a learning feedback loop in the way services are delivered. The Capability Model describes the capabilities needed to deliver the services into the given market, considers whether these need to be internal or outsourced and the level of coherency between them. This model also describes the capabilities that will provide the ‘Build, Measure, Learn’ activities at the core of any startup. The fourth and final model is the Sustainability Model which considers aspects of the other three to determine overall business model viability in terms of profitability as well as social and environmental viability.

Oliver Gassmann in his book The Business Model Navigator suggests that in order to be truly disruptive a business model requires changes to two or more of these sub-models within an existing business.

The process of Business Model Design breaks each of these 4 models down into their constituent parts and evaluates these against a defined set of desirability , viability , and feasibility objectives.

Viability: (Sustainability Model, MARKETING MODEL)

This view of the Business Model is what Eric Ries refers to as the startup “growth hypothesis”. Focusing on profit alone while ignoring environmental or social impacts is an old trick we know too well. Business model viability now however, needs to deliver financial, social, and ecological sustainability.

The increasing need for businesses to be both socially and ecologically sustainable is in large part driven by the combination of emerging first world economies of China, India and Brazil, global warming, and the disastrous consequences for everyone if these economies follow the same development trajectory as western economies. Circular Economies provide an interesting alternative that has the potential to describe ways to generate comfortable profit while delivering positive environmental and social outcomes as a consequence of conducting business.

Desirability: (Marketing Model, Services Model, Capability Model, Sustainability Model)

Not only is it important that your products and services are desirable to customer – but increasingly your business model itself needs to be attractive to consumers – witness recent reactions against Uber, and growing criticisms of Silicon Valley and monopolistic start-up culture and the Sharing Economy in general. A positive market perception of your company is worth something – the modern consumer wants value for money – but also a clear conscience – it makes it easier for me to do business with you.

Feasibility: (Capability Model, Service Model, Marketing Model)

Do you have the ability to deliver (i.e., both produce and sell) the products and services in the way that your desirability objectives demand? Feasibility considers your sourcing strategies, the front and back stage divide within your company, and your ‘secret source’ – your ability to deliver your unique proposition and customer experience, and your marketing strategy. It is not enough to be able to deliver highly desirable products and services – equal weight needs to be given to the ability to sell them. This speaks to the issue of Coherence Premium – the degree to which capabilities – internal or external are mutually reinforcing – and the additional value this represents to both business and customer.

Business Model Design needs to be a conscious and deliberate initiative. It is not enough to simply throw a series of good ideas together with liberal amounts of ‘gut’ instinct and industry experience to then expect great results. Business Model Design is hard, and requires what Thiel calls ‘Deliberate Optimism’. Obviously, a small investment in time to undertake deliberate Business Model Design has the potential for huge returns.

At FromHereOn we follow a divergent / convergent human centred design approach to Business Model Design. The process systematically considers all the issues we’ve discussed in this whitepaper and provides a way to rigorously design and test your business model for its ability to disrupt.

We can help you give your disruptive business model a ‘reality check’ and to grow something that is truly significant.

business model design process

Business model design process for social enterprises

Steps and activities to get your bm right.

Whether you are running a social enterprise or planning to launch a new one, coming up with a solid business model (BM) is never an easy task. Even more difficult is turning a first, rough business model idea into something practical and tangible. So, to help you navigate through these uncertainties, we will discuss the different steps of the business model design process for social enterprises.

Business model design process: an overview

Probably you’ve heard before about the “ design squiggle “. This illustration is indeed often used to capture the complexity of design processes of all kinds.

business model design process

As you might guess, BM design is a messy, iterative process too. As a matter of fact, practitioners usually face the same degree of uncertainty, ambiguity and unpredictability when designing new or innovative business models. In 2010, Osterwalder and Pigneur identified the key stages of a typical BM design process . Ever since then, other authors and scholars provided alternative interpretations that are all equally valuable.

At Social Business Design , we combined their different views and came up with a 6-phase design process , specifically meant for social enterprises. Even thought the phases are described in a linear way, please remember that the whole process is actually iterative by nature. Let’s now dig into it a bit more!

1. “Mobilize” Phase

The first phase is all about setting up the stage for a successful design process. It’s indeed crucial to create the right pre-conditions to do it right. And by “ pre-condition ” we mean key elements such as common understanding of the design process, agreed tools/languages to use, clearly defined roles and responsibilities within the team, etc. If all these elements are not properly set up, the process might immediately turn into a long, uphill journey.

2. “Research” Phase

During this step, team’s members usually immerse themselves in the field and collect information to gain deeper understanding of the market. For instance, this is the moment to further investigate the social problem tackled, or to analyze dominant business models in the industry. Also, it is the right time to study benchmarks, competitors, as well as the most relevant trends that may impact the business. Of course these are just few examples, as the list could go on and on from time to time.

business model design process for social enterprises

3. “Ideation” Phase

Often called the “ creativity ” phase, this is when the true magic begins to happen. In fact, once collectively defined a social impact mission to pursue, the team brainstorms over key insights, information and feedback collected in order to turn first, rough ideas into business model prototypes . Here, the goal should be to identify different possible business models to operate. Thus, coming up with several BM prototypes might help not running short of alternatives. Notice that the most commonly used tool for this purpose is the Social Business Model Canvas , which you’ve probably already heard about.

4. “Testing” Phase

“ Designing an innovative BM is one thing, testing if it’s going to work out is a radically different one “. During this phase, the team indeed uncovers underlying assumptions of the prototypes previously designed and runs experiments to test them. The assumptions might relate to any aspect of the BM, including value proposition , revenue model, but also growth engines . Once conducted stress-tests and experiments to validate/reject the assumptions, the team then evaluates the results. Eventually, the business model prototypes could get redefined accordingly, in order to end up selecting the most promising one.

5. “Implementation” Phase

At this stage, the team brings the desired business model to the field. In other words, there is a shift from abstract strategy to concrete actions . Tools like the BM Roadmap might be used to plan ahead the actions needed to implement a new business model.

business model design process

6. “Management” Phase

Once implemented the BM, the team ultimately sets up the management structures to continuously monitor/evaluate it . As a matter of fact, it’s important to analyze how the business (and new BM) is performing and how the market is reacting to it. From there, further improvements or adjustments get implemented coherently, until new, radical business model innovations might become necessary once again!

In this article, we introduced you to the business model design process for social enterprises. As seen, the process is comprised of 6 different stages: (1) mobilization , (2) research , (3) ideation , (4) testing , (5) implementation and finally (6) management .

We believe aspiring changemakers can hugely benefit from having a clear understanding of this framework. In fact, they’ll need to master every single one of those steps in order for their social enterprises to become (and remain) successful.

But what about you? Do you think you have all it takes to run a BM design process effectively? Drop us a message in the comment section and let us know what stage you’re in! 🙂

Did you like this article?

If so, then don’t forget to check out for more at Social Business Design .

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Module 4: Circular Business Models in the Tourism Industry

Topic 1 business model design processes.

Business model design generally refers to the activity of designing a company’s business model. It is part of the business development and business strategy process and involves design methods. We can highlight the difference between crafting a new business model when none is in place, as it is often the case with academic spinoffs and high technology entrepreneurship, and changing an existing business model, such as when a furniture company shifts from selling its products to a leasing model.

Business model design (to) refers to the process of crafting a business model when none is in place and business model reconfiguration is the (for) process of changing an existing business model, (also) it highlights(ing) that the two processes are not mutually exclusive, meaning reconfiguration may involve steps which parallel those of designing a business model. As such, innovating the business model can help coordinate technological and organizational innovations and secure partner networks or capabilities that are required to successfully preserve and utilize the embedded value in resources.

By rethinking the three value dimensions; for example, how value is created, delivered and captured, business model innovation provides a more holistic approach when seeking to align the value creation logic of the company with principles of circularity.

The design of many business models follows a similar process:

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Business model design

Entrepreneurs who are in the process of designing their business model require an approach that allows them to understand if and how a value proposition can be successfully scaled up to a profitable business. The purpose of this workbook is to help you through the process of developing a comprehensive business model.

Download and use this workbook to:

This workbook is part two of a two-part series, Fundamentals of entrepreneurial management , covering the creation of a value proposition and business model. Each workbook adds to the foundation of the previous one:

MaRS workbooks are comprised of two elements―the workbook guide , which contains instructions, examples and activities, and the workbook template , in which you can write your responses. You can personalize the workbook template by adding your company name and logo.

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Business Model Design and Design Thinking: Use Business Model Canvas to Make Better Designs

Zerong Yang | MDes Seminar | Winter 2021

Design and business are intrinsically linked. Business model design and design thinking are two strategies that are widely used in their own field. There are many previous studies showing business model innovation through design thinking, but few of them indicated how design thinking could be improved with considerations of business model design. This article analyzes design thinking and business model design through the comparisons between the design thinking process and business model canvas. Revenue, company background, and cost are the three potential factors to improve design thinking for designers. A new design thinking process with an extra stage, “business validate,” was introduced. Designers may utilize the modified design thinking process to practice their business skillsets and make better designs.

1. INTRODUCTION

Designers have become increasingly entrepreneurial, and more and more designers are now getting involved with business development and growth. “The power of design is amplified when it learns how to connect with the business side in a way that actually enables the design to be executed at the highest level.” (Muratovski 2015) There are lots of research about how to use design thinking to improve business model, but as a designer, I can see one thing is missing from all of these research articles. Considering the opposite way, I want to explore how designers could utilize business model design to make better designs and possibly modify the design thinking process.

Business model design sets out to define how an enterprise or organization creates, delivers, and captures value. It is part of the business development and business strategy process. Entrepreneurs need to develop and refine a business model to seek clarity about what they are doing, discuss with other stakeholders, and identify opportunities in their internal and external environment. The business model is like a blueprint for a strategy to be implemented through organizational structures, processes, and systems.(Osterwalder, Pigneur, and Clark 2010)

Design thinking uses extensive user research, feedback loops, and iteration cycles to help understand the user, challenge assumptions, redefine problems, and identify alternative strategies and potential solutions. (Mueller and Thoring 2012) Design thinking provides a solution-based approach to solving problems, and it is becoming more and more popular among business schools and other fields.(Osterwalder, Pigneur, and Clark 2010) 2. COMPARATIVE LITERATURE REVIEW

In order to compare these two strategies, I will introduce the nine building blocks of the business model and five stages of the design thinking process. Business model canvas is the most commonly used tool to map out and plan different components of the business model. The design thinking process has five stages that provide a solution-based approach to solving problems.

2.1. Business Model Canvas

Business model canvas is a tool used for prototyping a business model. It provides a visual representation to describe, design, and invent business models using an ontology developed by Alexander Osterwalder. A business model can best be described through nine building blocks that show the logic of how a company intends to make money: customer segments, value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partnerships, and cost structure. (Osterwalder, Pigneur, and Clark 2010) The nine building blocks form the business model canvas. Figure 1 shows a business model canvas template, which allows people to collaborate and discuss each business model element. This tool fosters understanding, discussion, creativity, and analysis.

Customer segments define the different groups of people or organizations and enterprise aims to reach and serve. Businesses must identify and understand their customers and then group them into different segments with common needs, behaviors, and characteristics.

Value proposition describes the bundle of products and services that create value for a specific customer segment. They are the reasons why customers will pay for the product or service rather than choose others. It solves a customer problem or satisfies a particular customer need.

Channels describe how a company communicate with and reaches its customer segments to deliver a value proposition. It is how a company interfaces with customers through communication, distribution, and sales.

Customer relationships describe the types of relationships a company establishes with specific customer segments. In order to acquire and retain customers and boost sales, companies need to maintain relationships with their customers. There are many categories of customer relationships ranging from personal to automated.

Revenue streams represent the cash a company generates from each customer segment. There are two types of revenue streams: transaction revenues from one-time customers and recurring revenues from ongoing payments. To generate one or more revenue streams from each customer segment, companies should answer what value each customer segment is truly willing to pay.

Key resources describe the most important assets required to make a business model work. Key resources can be physical, financial, intellectual, or human. These resources ensure that value is created, delivered, and captured efficiently.

Key activities describe the most important things a company must do to make its business model work. Key activities differ depending on business model type: software development, supply chain management, production, and problem-solving.

Key partnerships describe the network of suppliers and partners that make the business model work. There are four different types of partnerships: strategic alliances between non-competitors, strategic alliances between competitors, joint ventures, and buyer-supplier relationships.

Cost structure describes all costs incurred to operate a business model. All businesses incur costs through fixed costs and variable costs. It is also important to consider whether the business model is cost-driven or value-driven. Cost-driven focus on minimizing costs wherever possible and value-driven focus on greater value creation.

2.2. Design Thinking Process

Figure 2 shows the five stages of the design thinking process: empathize, define, ideate, prototype, and test.

The first stage of the process is to empathically understand the problem from the perspective of the end-user. In this stage, immersion, observation, and interviews can help gather information and understand the user’s problem, need, and behavior.

The define stage will help designers to analyze the information gathered during the empathize stage and define the core problem as a problem statement in a user-centered manner.

During the ideate stage, designers start to generate ideas and look for alternative ways of viewing and solving the problem. There are many ideation tools to use, such as brainstorming, mind mapping, doodling, and other techniques. The objective is not to find the right answer but to generate as many ideas as possible.

During the fourth stage of the design thinking process, designers pick several ideas and build simple prototypes. The objective at this stage is to quickly and cheaply produce some prototypes to test in real-world and possibly identify the best solution.

At the last stage, designers test the complete product from the prototype stage. The goal is to get feedback from failures, make adjustments, and improve the prototype. Iteration is a fundamental part of design thinking. The process of ideate, prototype, and test is repeated until the prototype meets the needs of the end user.

After introducing the nine building blocks of business model canvas and five stages of design thinking, I want to make a comparison between the design thinking process and the business model canvas. Table 1 shows how the nine building blocks could fit into the five stages.

3.1. Similarities

User-centered: Both design thinking and business model design are user-centered. Design thinking takes the perspective of the users and focus on empathizing user’s need and problem. Business model canvas has customer segments to indicate all the customers, channels to interact with customers, and customer relationships to improve customer experience.

Problem-solving: Both strategies try to identify the problem statement and solve the problem using a product or service. Design thinking defines the problem from the feedback gathered in the previous stage. The business model canvas shows a value proposition that solves a customer problem or satisfies a particular customer need.

3.2. Differences

An iterative process to generate solutions: Design thinking is an iterative process to solve problems, and business model canvas is a tool to help create a business model. There is no iterative process when creating a business model canvas, because there is already a product when people try to fill the business model canvas.

Revenue: The Design thinking process aims to solve the problem, and it barely focuses on how to make revenue. Business model canvas lists the revenue streams from each of the customer segments and separates them into transaction revenues and recurring revenues.

Company background: Key resources, activities, and partnerships are the keys for a company to form, grow, and develop. Key resources enable the company to provide its products or services to its customers. Key activities are the most important actions a company must take to operate successfully. Companies build key partnerships to optimize their business models, reduce risk, or gain resources.

Cost: The design thinking process explores the emerging and existing technology in order to make better design solutions. Designers focus more on the concept rather than the cost. However, cost structure plays a very important role in business model design. It is important to define the major fixed costs and variable costs and consider whether the business model is cost-driven or value-driven.

The current design thinking process is inclusive enough and has been using in many other fields, but as designers, can we modify the process in order to have a sense of business? “Designers with the most success in our industry are business-aware.”(Rumsey n.d.) Can we improve design thinking to make better designs? From Table 1 of the comparison, there is a potential to improve design thinking by taking revenue, company background, and cost into consideration. A new stage shown in Figure 3 called “business validate” may be added after the ideate stage and be included in the iterative process. Before prototype, designers will have a chance to validate the idea through the lens of a business person.

For revenue, designers could start identifying transaction revenues from one-time customers and recurring revenues from ongoing payments. Based on the type of revenue, designers could estimate the value of the product the user is willing to pay. Then, designers will have a limit or budget in their minds when they design. For designers who work for companies, Understanding the company background is also important. Familiarizing key resources, activities, and partnerships of the company can help designers understand its culture and core value. Proper alignment between design and company culture can be inspiring and motivating. Cost is another necessary factor to be considered. Design decisions have a large impact on the cost of the product. A small difference in design may end up a huge cost difference due to manufacturing. Designers should first identify whether the business model is cost-driven or value-driven and then evaluate if the design minimizes cost for the cost-driven business model or create greater value for the value-driven business model.

Large businesses have started placing more emphasis on the importance of design by introducing designers to executive roles (e.g., Apple, Nike, Coca-Cola, IBM). These designers have been promoted to executive roles not only because they are designers, but because of their ability to align design with business interests and communicate how design can add value in business terms. (Muratovski 2015) By using the modified six stage design thinking process, designers may have a chance to start practicing their design skills from a perspective of a business person. There will be more opportunities for designers who operate on the intersection of design and business.

More and more designers are now getting involved with business development and growth. To help designers learn more from the business world, I mentioned the business model design with design thinking. In order to have a deeper understanding of these two methods, the nine building blocks of the business model and five stages of the design thinking process were compared. Revenue, company background, and cost are the potential factors to improve design thinking for designers. A new design thinking process with an extra stage, “business validate,” was created for designers to consider the importance of design decisions in business. Designers could utilize the new design thinking process to practice their business skillsets and make better designs.

Marelisa. 2017. “How to Apply Design Thinking to Your Life.” January 18, 2017. https://daringtolivefully.com/design-thinking.

Mueller, Roland M, and Katja Thoring. 2012. “DESIGN THINKING VS. LEAN STARTUP: A COMPARISON OF TWO USER- DRIVEN INNOVATION STRATEGIES,” 12.

Muratovski, Gjoko. 2015. “Paradigm Shift: Report on the New Role of Design in Business and Society” 1 (2): 22.

Osterwalder, Alexander, Yves Pigneur, and Tim Clark. 2010. Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers : A Handbook for Visionaries, Game Changers, and Challengers . Chichester, UNITED STATES: John Wiley & Sons, Incorporated. http://ebookcentral.proquest.com/lib/washington/detail.action?docID=581476.

Rumsey, Ryan. n.d. “Business Thinking for Designers — DesignBetter.” Accessed March 16, 2021. https://www.designbetter.co/business-thinking-for-designers/need-know-business.

More from Zerong Yang

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Zerong Yang

Business model design.

Discover everything you need to know about business design. we explain what it is and how it can help you build profitable businesses through customer centricity, business model innovation, and evidence-based learning., business model innovation sprint., a new robust business model for your organization., 4 steps of designing an innovative & sustainable business model., trusted by fortune 500 and global innovators..

business model design process

Research has shown that business model innovation can create up to 25x greater competitive advantage compared to product and process innovation. However, only 17% of companies have invested in evaluating their business model design. And while we observe more and more companies understanding the importance of business model innovation, they still have a hard time translating high-level business modeling concepts to practical techniques and tools while designing or redesigning a busines

The goal of our business model design program is to research, ideate, model & evaluate business models together with you.

Know your industry before diving deep

In the first stages of business model design, we will map your industry & most dominant business models. This will help us identify long-held beliefs that might be ready for disruption.

Also, know the numbers behind your industry. You’ll understand exactly what you need to know about the market you’re going to operate in.

Don't rely on 1 business model, ideate at least 5

Most teams run with the first business model they come up with.

We’re a huge fan of ideation because we know there is value in spending time on coming up with creative models. With tailored exercises, you’ll end up with 5 models that could work for your business.

Model your business to understand it better

Ideas are great. But if they stay on post-its, they tend not to make it off the paper.

You will further develop your business by modeling and structuring the most important aspects of your company. This will help to further ideate on features of the business model as well as uncover critical assumptions to test.

Evaluate your business models

A lot of business models that are only ideated and modeled don’t make sense simply because they don’t add up (or have a very low chance of adding up in the future).

During an evaluation session, you’ll challenge your own business model to see if it has a chance of surviving in the real world.

What-is-business-model-innovation-2-500x341

Program overview

At Board of Innovation, we have a holistic approach to business modeling. We design businesses the same way we design products. Combining target segment & user research, we carry out comprehensive market & competitor research. We focus on outlining the dominant business models & most important long-held beliefs that can be disrupted. When we prototype solutions, we design different relevant business models together with you. Our product reviews are followed by business model evaluation exercises. And finally, while trying out different prototypes, we experiment with different business models, too.

Our 3-day business model innovation sprint is structured into 4 stages which are detailed below.

Goal: understand your market, identify unknowns that need to be further researched

Goals: 3-5 distinct business models that could work for your business

Goal: structure your newly ideated business models and uncover underlying assumptions

Goal: figure out if the business model you came up with has a chance of survival in the real world

Let's get in touch!

Business model design

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Board of Innovation makes Fortune 500 companies innovate like startups, mixing proven methods from design thinking and lean startup strategies.

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IMAGES

“Lean Startup, or Business Model Design, or Design Thinking?” is the Wrong Question
The 16 billion euro business model
Digital Transformation = Culture & Business Model Change
Business Process Modeling
Business Model Design
Business infographic : Proposed basic research lens for the design thinking process

VIDEO

The best business model
Cellbazaar Founder Kamal Quadir
Introduction to Business Model
CAS Business Model Innovation
แผนธุรกิจร้าน สุกี้ตี๋น้อย(Suki Teenoi)
Developing an Effective Business Model

COMMENTS

Guide to Business Model Design Process
All business model design projects are unique and present a challenge to the participants because there is no one formula or prediction for how
How to Design a Winning Business Model
Other experts define a business model by specifying the main characteristics of a good one. For example, Harvard Business School's Clay Christensen suggests
Business Model Design Process
Every business model design project is unique, and presents its own challenges, obstacles, and critical success factors. Every organization.
Business Model Design
At FromHereOn we consider Business Model Design to be the process that defines four sub-models that together make up a complete business model.
Business Model Design process for Social Enterprises
As seen, the process is comprised of 6 different stages: (1) mobilization, (2) research, (3) ideation, (4) testing, (5) implementation and finally (6)
Topic 1 Business model design processes
Topic 1 Business model design processes · Value proposition · Value Configuration (creating value) · Revenue model (capturing value) · Be aware of the hypotheses
Business model design
Understand the process of designing a business model · Complete a Business Model Canvas · Clarify and test your business model assumptions · Evaluate and update
Use Business Model Canvas to Make Better Designs
A business model can best be described through nine building blocks that show the logic of how a company intends to make money: customer
Business model design
4 steps of designing an innovative & sustainable business model. · Translate long-held beliefs to opportunities for disruption (opposite thinking for BMs)
The business model design process according to Osterwalder and
Business model (BM) innovation is vital for today's businesses. However, BM innovations can be irreversible, and therefore, in comparison to product, service or