Innovation through iteration - Improve your business model through Design Thinking
There's a lot of talk about failure being a part of success. But let's be honest, who likes to fail? It's especially painful when the implementation was already costly and time-consuming, or the original idea has gained emotional value. As contradictory as it may sound, the key to success is to fail fast. The sooner you can rule out the wrong paths, the sooner you can find the right ones.
This is exactly what Design Thinking tries to do. The six-step process developed in collaboration with Stanford University and the Hasso-Plattner-Institute focuses on user orientation and iteration. Ideas should be aligned along customer wants and needs, tested in the real-world using prototypes, and later represent an optimal value proposition. While this methodology is often used in product development, it can also be used to validate entire business models. Most importantly, it can minimize the risk of making the wrong decisions right from the start.
Business model development along the design thinking process
1) Understand
The first phase serves primarily to jointly understand the status quo. Since in the best case an interdisciplinary group is involved in the development of a business model, the foundation for a functioning communication among all participants should be laid in this phase. From the very beginning, one should be careful to use uniform terms, define the target picture and establish reliable resource and risk management. To be able to use fast failure profitably, a consolidated team and a common goal are required.
2) Observe
The success of a business model rises and falls with the resulting sense of value for the customer. In the second phase, the behavior of potential customers should be observed and wishes, challenges and tasks should be named. Particular attention should be paid to identifying social and emotional needs. In order to gain consumer insights, it has long been a question not only of market research, but also of direct contact with people. Talking to customers and observing their behavior can help define buyer personas. In addition, so-called bodystorming can be used to put one-self in the customer's perspective in terms of space, time and emotion. Especially when developing a business model, these emphatic insights should be incorporated into a comprehensive stakeholder analysis and aligned with B2B, B2C, B2B2C or B2G purposes.
3) Define point of view
Now that the buyer personas can be better assessed, the team must establish a common starting point for developing solutions. A formulated problem statement helps define this.
4) Ideate
Based on the previous problem definition and business model sketch, the way is clear for creative solution ideas. The focus is now on developing the right business model and working it out properly. "Design the right thing, then design the thing right." It often helps to use Visual Thinking as a guide. With the help of pictures, drawings and sticky notes, the core idea can often be worked out more quickly. In addition, the reference to the corporate strategy and the relationship to the value network can be conveyed more quickly. Alexander Osterwalder's Business Model Canvas provides us with a framework for breaking down any complex business model to nine essential building blocks: Customer Segments, Value Propositions, Channels, Customer Relationships, Revenue Sources, Cost Structure, Key Partners, Key Activities, and Key Resources.
5) Prototype
In the ideation process, some approaches will be dissimilar, contradictory, or even mutually exclusive. It is at this point that the key is to fail fast and validate costly decisions as early as possible. Each approach has an inherent hypothesis that is to be tested on the customer. These hypotheses must be weighted and prioritized according to their impact on the business model. The Lean Startup method (build-measure-learn) is strongly based on the basic requirement of focus. Once an assumption has been specifically tested, it can be accepted or rejected and forms a new starting point for the business model. With each iteration, one moves from an uncertain estimate to a vali-dated reality. So, each early failure (rejecting an assumption) reduces the risk that the business model will fail.
Prototypes can also exist for business models in various forms. From a napkin sketch, elevator pitches, landing pages, replicas of MVPs (Minimum Viable Products), service blueprints to field studies, anything is possible. In principle, early prototypes should involve less effort and cost, while they are allowed to increase in resource intensity as they become more certain.
6) Test
With the help of prototypes, data should be generated in customer contact that justify decisions. In addition to many qualitative testing possibilities, landing pages, for example, enable quantitative evaluation with the help of A/B testing. Two different variants can be compared with each other, for example a new model against the old one. For A/B testing, each of the variants is given a landing page that run under the same URL. Half of the website visitors are shown variant 1, the other half the alternative variant 2. Afterwards, various performance indicators, for example through evaluation via our partner Hubspot, can provide information about which of the two variants was better received by the customer under the same conditions. A good side effect: landing pages usually have the goal of collecting customers' contact data if they are interested - so the sales funnel is already filled with leads in the test phase, which can later be converted into customers.
Neverending story...
The assumptions confirmed by prototyping and testing can then be incorporated into the business model or serve as the basis for new approaches. The question of when the business model is finally developed cannot be answered. After all, one of the most challenging variables in business development is time. With it, macroeconomic trends, market participants, customer requirements and the entire ecosystem around your business are constantly changing. The iterative process of learning to build should therefore never be considered complete. Only those who constantly reinvent themselves will be able to survive in an increasingly globalized and digitized world in the long term and withstand crises.
Rapid Analysis and Design Workshop
For years, BECEPTUM has been developing targeted business and sales models based on the capabilities and know-how of the customer organization, which successfully serve the market and forecast trends. In the Rapid Analysis and Design Workshop, the Design Thinking process is run through in a practical and compact manner in order to systematically identify relevant problems. The efficient method allows to develop user-oriented solutions together with you and your stakeholders and to create a fundament for future cooperation.
