We use in our innovation projects a five step development and learning process to create and implement new business models. A special focus is the implementation in rapid development cycles similar to agile methods in the IT world like SCRUM.
The creative task to develop an initial business idea is an important element. However, we move very quickly into a rapid prototyping mode to tune and test an idea under real market conditions. This tuning often sets free new creative forces that hardly ever can be achieved with any brainstorming or 6 hats method.
1. Business Idea:
In our past newsletters (August 2015 and October 2015) we already talked about sources of inspiration to develop new business ideas. Market trends, competitors, desires and needs of potential customers and users as well as own organisational capabilities are wonderful launching pads to develop new business ideas.
While classic market research, deals with trends and competitor analysis, the world of design thinking provides a series of tools and methods to better understand and address the needs and desires from potential users. Another promising starting point is the analysis of our own capabilities that can be done by the relatively new management method of “effectuation” or the more traditional SWOT-analysis.
2. Business Model:
The core function in business design is the visualization and understanding of the business elements to provide a holistic view on how the business creates value for its customers, how it earns money and how it differentiates itself from the competition.
Dr. Patrick Staehler (a co-founders of fluidminds Pty Ltd – now Orange Hills Australia) is the father of the business model canvas that later was adopted, modified and used a blueprint by Alex Osterwalder, Yves Pigneur, Mark Johnson, Clayton Christensen and others. Today the business model canvas is a tool that is essential to gain a solid understanding of the core components needed to design, run and execute a new business.
Besides the development of the business model we focus on the measurement of success. Integration of KPI’s in the business model canvas allows us to continuously improve the model already in early phases of its development.
3. Hypothesis & Experiments:
The visualization of a business model is only the beginning of a successful innovation project. In our projects we use a lot of energy to answer the question: “What is our bet for the future within our new business model?” In other words, what hypothesis are contained in the individual elements of our business that are important for the success of it but have a high degree of uncertainty that they actually work. Ask your innovation team or founders for the five core hypothesis on which their new business model is based and you will be surprised how many will struggle to articulate a plausible answer. You need to define the hypothesis and find ways to test them candid, quick and cost effective.
4. Initial Market offering:
Besides hypothesis and experiments we need to answer the question what elements from our planned products and services we integrate in our initial market offering. On the one hand we want to integrate many elements and functions into our offering to make it compelling and feature rich, on the other hand we need to go to market quickly to test our central hypothesis in reality. Not all hypothesis can be tested with simple experiments ahead of market launch. The magic words are “strategic priority setting” to define what elements of our future vision find their way into the initial offering.
5. Action planning:
The defined steps create a series of tasks that need to be worked through by the team. You need to conduct the experiments to validate the hypothesis and you have to develop the initial market offering. We keep the project cycles in short time-frames. Usually we plan 7 weeks for one iteration. This ensures that you create results quickly and focus on the important tasks. At the end of each project cycle we conduct a reflection exercise to analyse our learning and implement needed improvements into the next cycle. This approach ensures that a continuous learning culture is established and innovations find a way to market quick and already tested.