Think Business, Not Product
Especially in technical and product-driven organisations, "innovation" means refining existing products or building new ones with killer features. No complaints here. Our point is that every new product and every killer feature lives within a business context – a business model that explains how a company creates value for customers and for itself. That perspective is way broader than just thinking about features. And it covers all the ingredients necessary to become a successful innovator.
Bernhard Doll
Business Design Maverick
Whatever the task is – inventing a new product or launching a new service – we always think in business models. Every product or service needs effective sales channels and strong brand perception. Every product or service depends on development and production processes, people with the right skills from engineering to marketing, and partners who provide parts of the value chain the company doesn't want to handle in-house. And we always want to understand and design the economics: revenue streams, operational and capital expenditures, and a decent profit margin of X%. Welcome to the world of business modelling. Business modelling is the holistic perspective on all the ingredients needed to run a business. Our job is to design all these elements and the interplay between them to ensure lasting business success. Here is an overview of all elements that constitute a business model:
External view:
Target groups incl. customers & users
Primary customer and user segment
"Job(s) to get done" of primary customer
Pains and gains
Brand & messages
Marketing & sales channels
Customer relationships
Offerings:
Products & services
Core value
Internal view:
Key resources and processes
Partners
Partner channels
"Unfair advantage" of the organisation
Financials:
Charging patterns
Revenue streams
Operating expenses (OPEX)
Capital expenses (CAPEX)
We use the Business Model template to quickly visualise these models in a Business Design project.
Keep in mind: A business model is NOT a business case. Forecasting future revenues, expenses, and earnings is important – but only half of the story. First understand what your business looks like before you start crunching numbers. A business case is nothing more than the financial projection of a business model.
Check out Phase IV of our End-to-End Innovation Process for more details on how we think business, build, and validate business models.