The Art of Lean Prototypes

What is a prototype for? In terms of customer development it is there to help us discover the scalable business model that best meets our customer’s needs. The first 30 slides or so of this presentation summarise the key points really well:

  • Fail early and cheaply – don’t wait until launch to find out if your idea works, start now. The idea is to cycle through as many cheap, disposable prototypes as it takes to discover what your customers want. If you invested so little time in your prototype that you don’t mind throwing away and starting again…you are on the right track
  • Make it real – don’t just talk about your idea, show people. The prototype is how you communicate your idea to others
  • Test your assumptions – business models are based on a series of assumptions, e.g. ‘these are my customers’, ‘this is the product they want’, ‘they will pay $X for it each month’ … the prototype is where you test these assumptions. It’s also where you change (or pivot) your business model until you have something that works. Doing a survey is not enough, you need to actually verify your plan with a testable product of some sort.
  • Iterate fast – each time you bust an assumption, start again. Build another prototype that does support your assumptions… or change your assumptions

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Business Model Innovation

Note: This article was originally posted here, on InnovationExcellence. I thought I would repost it here.

Nine out of ten business start-ups, and one in six business transformations will confirm it. If you want to be part of the one in ten who succeeds, you’ll need to search for the answers first. By innovating our business model before we start executing, we can improve our chances of success and reduce the high risk and high cost of failure in an uncertain environment.

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Linking your Business Model to Strategy

This article follows on from yesterday’s post on using future scenarios to put your business model through its paces. Drawing on some of the great ideas put forwards in Business Model Generation, I thought I’d pull together my own view on using a number of strategy lenses to look a bit more closely at your business model.

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Future Scenarios and Business Modelling

The business model often evolves over time as businesses discover what really works, and adapt to their environment. By using the business model canvas to map out the business structure in response to different potential future scenarios, the business can take a more holistic view of what may lie ahead.

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Design patterns #1 – unbundling

Jumbled up business models are all around us. Banks who focus on banking transactions and winning new customers, mobile phone companies who mix up selling phone plans with managing the telecommunications network, and world famous brands who do it all from designing the devices, controlling the applications that run on them and running the stores and distribution network that sell them. Vertical integration can be a complex juggling act. Unbundled business models look at these activities across three essential business model components:

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Design pattern week

Business Model Generation was written by Alexander Osterwalder and Yves Pigneur, with contributions from some 470 practitioners. Of the business books I’ve read, this is one of my all time favourites. Practical, implementable, really nicely written and presented with lots of images. It’s an easy read and a great way to start disrupting business models. I recommend it.

I posted on the Business Model Canvas a while back. This week, I’ll be looking through their application of the canvas across a number of different business model patterns. As with my other posts, I’ll try to present my thinking as simply, and clearly as I can along with some insights as to how the patterns work  and a little exploration of how we might apply these patterns in the name of creative thinking.

Overview

Business Model generation talk about 5 key business model patterns. I’ll walk through them in the following three groups:

  • Unbundled: some business models are a bit of a mish mash of competing entities with different core business, employee motivation and interactions with the market. These business models can be unbundled to clear up this focal problem, illustrated with the splitting up of banks into transaction processing houses, customer relationship businesses and banking product creators
  • Multi-sided and free: business models with multiple, complementary value propositions and consumer segments used to support each other. Illustrated with the example of free services to end users subsidised through advertising
  • Open and collaborative: business model which reach outside of company boundaries to help define product and service offerings, illustrated with a range of businesses from fashion boutiques offering ‘design your own’ services to detergent manufacturers seeking new formulas from the open research community

The Business Model Canvas

In the beginning there was an empty screen and a flashing cursor, our only prompt that it was our turn to serve. Before the internet came into its current form we needed to create communications protocols. We needed to link together networks from schools, businesses, and government networks. And we needed to create the products and services that would give us something to do. We needed market structures, revenue streams, distribution channels, product standards and we needed consumer demand. This was not going to be an easy task…

When we plan on doing any kind of disruptive innovation and creating new markets, we need to understand the way in which those new markets are going to work. Amongst other things we’ll need to define products and services, setup supplier partnerships, create distribution channels and define cost structures. Without some kind of framework you could quickly get swamped before you even get started.

The Business Model Generation project was conceived by Alexander Osterwalder and Yves Pigneur following their doctoral research into business model innovation. Created in a collaborative effort with 470 practitioners across 45 countries, the book provides the tools to systematically understand, design and differentiate business models in any industry. You can see a preview of the book here, and follow Alexander’s blog here.

Today I’m going to walk through the Business Model Canvas, a tool for understanding the market you are in and a great starting point for some creative thinking about business models and strategy.

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