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Service design, Strategy

Why the Business Model is the First Step in Innovation

By Valentina Pedrazzini, Design Strategist at Backelite France

 

If you look at the most successful companies, you might realize that their success is not just about products or technology. Their secret? They have something behind the curtain: a strong business model. Going deeper, you’ll discover that it’s not something which remains unchanged: it’s always evolving. Remember how Amazon began by simply selling books? Where are they now? A large part of their revenue comes from providing their servers to the B2B market (Amazon web services).

Alex Osterwalder and the strategyzer team came up with two powerful tools which help to understand your business: the Business Model Canvas and the Value Proposition Canvas. At Backelite, our design strategy team loves using these powerful tools. With one look at these tools, you can see the entire picture of your organization and the link between all the different parts (blocks on the canvases).

 

 

How do they work?

Everything begins with the customer’s Job to Be Done. It’s a known fact that the number one cause of product failure is that nobody wants said product. So, stop to think for a moment about what might be the perfect solution (services or products) for your customers. Then get out of your labs and offices to actually observe and talk to your customers: you’ll learn so many things.
Use the value proposition canvas to summarize your research and identify pains / gains for your customers before transforming them into business opportunities: This way, you create the fit.

 

 

This is an iterative approach: Don’t hesitate to come back to your customers multiple times to see if your value proposition is strong enough to fit their needs.

Now that you’ve measured the desirability, you can go deeper into exploring the feasibility. Return to your office and analyse the key activities / resources needed to make your idea a reality. Do you have everything you need? Do you need to find additional partners? You can adjust your value proposition if it seems too complicated; again, this is an iterative process. We strongly advise: start small, grow tall.

Last but not least: viability. How can you generate revenue with this idea? How much does it cost? It’s important to find out how much your customers are ready to spend on your products. Don’t hesitate to go back to your customers — the research is not just at the beginning of the process but all throughout.

Desirability, feasibility and viability are all very important factors. Desirability is obviously the first step, but the last two are also important.

 

 

If in testing your business model you receive positive feedback for all three of these parts, this means you’re on the right track. If you receive negative results, that’s good too. At least then you’ve learned something; failures are part of the innovation process. Jeff Bezos, CEO of Amazon, once famously said, “Failure and innovation are inseparable twins.”

So if you want to build services and products which create buzz, stop spending your time just filling out beautiful spreadsheets: get out of your building and use visual tools to create a common language with your stakeholders!

Images by @holgernilspohl