We recently discussed the arc of development and the power of graphically representing business models; today I’ll introduce you to three common ones used by strategists. (To go deeper, there’s a survey of even more here.)
All business models answer a common question - what is the block diagram of the customer value delivery system. Business models are maps; you’ll have a different business model for software as a service (SaaS) business from a device business, as you would have a different set of maps as a boat captain from an airplane pilot. But they function for the same purpose. The other commonality you find is whoever authored the map puts their role in the middle.
The first, most current and widely used tool is the business model canvas made popular by the book Business Model Generation. You can download a wall sized PDF at the first link and go to work. The framework is licensed as open source and includes a large library of models publically available to serve as starting points for your work. Its cousin, the Value Proposition Design book and map, are very useful to working out the extremely important relationship between value proposition and customer.
I like this tool when working with large diverse groups to communicate the business model and gather input. Being intuitive and approachable, it’s a great tool to use with customers and partners as well. I have clients who have used them with their bankers, customers and partners to get everyone on the same page.
Larry Keeley and team at the Doblin Group developed the second tool I’ll highlight. Their work is built around the book Ten Types of Innovation, and uses a building block approach to develop and tell innovation stories. By mixing and matching building blocks, interesting new derivatives can be developed and ultimately value released for the customer.
These tools work well with committed core teams working to get outside the paradigm of their current business model. By using the chart and supporting book, you can use “gameification” to explore questions like “what would happen if we explored direct distribution.” By using the “mix and fix” iterations, unique approaches will emerge.
The third tool I’ll highlight is from Mark Johnson of Clayton Christensen's Innosight firm. In his book Seizing the White Space he outlines a four-box model that you can see and use some helpful resources here. In addition to his simplified model, Mark also includes a catalogue of business models to use as starting points. (You can also get the list in the HBR article.)
This tool brings forward the profitability portion of the model and works well with groups that are doing the deep analytics around current and proposed business models. Since all good business hypotheses have a visual, analytic and narrative component, this tools serves a nice visual gateway to a more analytic discussion.
Other Popular ways to get started:
1) Do an “as is” sketch of your business model and ecosystem. Keep it on the wall of your office and invite everyone to offer contributions with post-it notes. Be sure to open the gate wide and include everyone from frontline sales to R&D. Share the feedback in team meetings, strategy sessions and customer dialogues to be sure everyone is on the same team.
2) When you are doing something new, map it with these tools. Ask what if questions, and perform thought experiments. There is good data that says if you alter two elements of your business model map in service to your customer, then the returns on your firm will be higher than your peers.
3) Map your customer and suppliers. By developing upstream and downstream business model maps, you will be able to have rich discussions with your partners, and potentially deliver much higher value.
4) Bonus tip - do a “perfect competitor” version as an exercise to limber up and jolt yourself into action - because I guarantee you someone else is looking at the same map.
Scott Propp, a former fortune 100 executive, is a consultant, coach and speaker who work with change agents and executive leaders to create a sustainable path to growth and innovation. You can sign up for his popular newsletter here, and follow him on Twitter and LinkedIn.
- See more at: http://capsule.us/blog/scott-propp-the-intersection-of-design-thinking-and-business-models-the-too/#sthash.uBlZaVUu.dpuf
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