On our last post, we discussed business models, how to put one together, and why this tool helps your business stay relevant.
The author, consultant and speaker also warns that you should be concerned when your own team has problems developing new improvements, or when your customers begin to find better alternatives to products and services.
In this post, we will better understand how Design Thinking can help “treat” these symptoms.
Creating an improved business model for an existing market is the definition of a disruptive idea, according to the author and professor at Harvard Business School Clayton Christensen. In his book “In Reinventing Your Business Model” he emphasizes the importance of staying focused on the value proposition for the client.
Identifying this aspect in the formula for profit, processes and resources not only improves your offer, but it also makes it hard for the competition to copy or even react.
“[Business models] are, at heart, stories—stories that explain how enterprises work. A good business model answers Peter Drucker’s age-old questions: Who is the customer? And what does the customer value? It also answers the fundamental questions every manager must ask: How do we make money in this business? What is the underlying economic logic that explains how we can deliver value to customers at an appropriate cost? – “Why Business Models Matter” (HBR)
Design Thinking for business models
Once the need to adapt your business model is identified, what is the best way to do it?
One of the main purposes of design is to bring solutions to any type of problem. Your business model can benefit greatly from adopting Design Thinking tools to find out who your customers are and what they really want, think, and feel.
Design Thinking’s user-centered approach is enriched by research, visualization, and cross-data tools – tools that can be very useful in designing business models.
The three stages of Design Thinking are designed to learn more about your target audience, to discover and investigate problems and opportunities, as well as build, test and implement solutions created throughout the process. Let’s take a closer look at them.
Immersion and analysis: know the target audience and the competition
In order to understand your business’ target audience, it is important to keep in mind that customer behavior changes much faster today. In the past, it was enough to do a few punctual cycles of Immersion, today however, they need to be carried out periodically.
It is very common for companies to spend long periods of time without talking to their customers due to lack of time or even resistance (thoughts like “we already know our client” or “my idea [product or service] sells itself”). However, “diving” into this early on can avoid possible dissatisfaction and even the loss of some of these clients to the competition.
What is the competition offering that your business does not offer?
What are the most attractive value propositions for consumers?
What is your competitive advantage?
These questions can be answered through research and observation techniques such as semi-estructured interviews, personas, hidden client, shadow and value curve.
Ideation: co-create an assertive value proposition
The use of the tools mentioned above allows you to obtain a series of information. After their consolidation and analysis, they can be transformed into ideas that help materialize an effectively competitive value proposition that meets the needs of the identified target audience. During this stage, co-creation workshops and brainstorming sessions reveal a wide range of ideas created from the inputs collected during the Immersion and Analysis stage.
Prototyping: Create real competitive advantage
Acceptance testing is an important part of the process of developing a business model. Through them, it’s possible to minimize the challenges related to the generation of a pricing offer for a product or service, for example.
The variables that make up the price strategy are numerous: labor costs, marketing costs, depreciation costs, perceived value, demand, sales forecast, expected return, direct costs and overhead costs.
The connection between these variables is complex. For example, if you need to reduce labor costs and indirect costs, how does this impact direct costs? Or, if it is necessary to serve a luxury market, is it possible to reduce sales forecast a bit and increase the perceived value by charging more for that product or service?
The idea is to prototype a variety of options for different strategic combinations. There are also acceptance tests (using low, medium and high fidelity prototypes) to know if a product, service or business to be launched will be embraced by the public.
You are now ready to innovate in your business model
Being attentive to the business’ movement and its signals is essential to decide the best way to adapt the pillars of the business model to a new context.
Having a methodology like Design Thinking to rethink the business model can be a good way to plan how to follow that route.
LEARN MORE ABOUT INNOVATION IN BUSINESS MODELS BY CLICKING HERE.