Business models are designed and operated in a specific environment. Developing a good understanding of this environment helps you conceive better, more informed and likely more competitive business models.
Scan your environment by mapping out four main areas. These are a) market forces, b) industry forces, c) driving trends, and c) macro-economic forces. Each can be divided into sub-areas that allow you to draw a picture of your business model’s environment (see image below).
Continuously scanning your business model’s environment is important because the economic landscape is driven by growing complexity (e.g. networked business models), increasing uncertainty (e.g. technology innovations) and market disruptions (e.g. new disruptive value propositions). Understanding the changes happening in this environment help you more rapidly adapt your model to shifting external forces.
You should apprehend this environment as a sort of design space. It is a context in which you conceive or adapt your business model by taking into account a number of design drivers (e.g. new customer needs, new technologies, etc.) and design constraints (e.g. regulatory trends, dominant competitors, etc.). This environment should in no way limit your creativity or define your business model upfront. However, it should influence your design choices and help you make more informed decisions.
Now we're gazing outside the meta-model which is fascinating and, given the work that I'm doing now within the Export world, is something that I've been waiting for your views on.
So… How did you come up with the four categories of forces/trends? How would each sticky note be defined? Is there another book here?
Kenneth, this is indeed a chapter of the book we're writing – but could be the topic of an entire new book
How did we come up with it? A lot of reading of the existing material (Porter, foresight studies, etc.). Post all that information on the wall with post-it notes, add expert opinions, and start thinking hard, finally regrouping the post-it notes into categories – and then designing the right framework (four areas with sub-groups). Testing with examples. Re-design. Re-design. Test. Think. Discuss. Re-design. Eventually a concept emerges that looks & feels right.
Sounds messy? It is
great stuff Alex, I always get these questions about the external forces… Where are they in the model… Cool. Thx Patrick
Excellent post. Thanks for sharing, Alex!
I have recreated your diagram to include the full descriptions of the business model components for people who are not yet familiar with the vocabulary. I hope this is alright with you.
Feel free to check it out: http://www.lewebmobile.com/
Hi Alex,
Thank you for promoting Design Thinking in the form of "business model" design.
I would like to add that the consultants/experts should be careful while selecting the level of the business model discussion. They take into account the underlying business situation and the level within the organizational hierarchy.
If the problem/audience is "too low", the business model discussion might have very little meaning to people as they are more concerned with business process/value steam/project flow.
If it is too high, the management is more concerned with "portfolio management" rather than the discussion around the business model.
If you go even higher, people are more concerned with the financial performance, e.g. aggregated P&L, cash flow, total shareholder return and stuff.
So, you need to play on the right level for the right reasons. Otherwise the exercise will not move beyond "having an interesting conversation"
Also, people should not assume that "business model" framework represents the main components of the business structure. We've learned in the hard way.
In our work we use 1o frameworks (one of them is business/value model). The frames are "hard" and "soft". The "soft" frames are very "hard", but those are the ones where the business problems really are.
The true mastery of business design is the ability to analyze the business situation, select the right set of frames and show how the issues in say "political" frame influence the issues within the "business model" frame. This is how the holistic thinking brings value to business.
Sergei Dovgodko
3M Company St.Paul, MN
sdovogdko@mmm.com
@Patrick: I get the same question, too. However, I do think a focus on value creation for the customer is just as important as understanding the competitive environment.
@Ben: Nice presentation. Maybe you want to update the Business Model Canvas in the middle?
@Sergei: Thank you for sharing your experience. I partially agree. Finding the right "level" is indeed a big issue today. Yet, it should not be so. People of all levels should simply be interested in genuinely creating value for customers with the right business model. Of course that sounds terribly naive…
Where I fully agree with you is on the mastery of selecting the right frame… which takes experience, knowledge and a lot of time…
Alex:
You probably noticed yourself during your consulting projects — that many times after the workshop nothing is actually implemented in terms of changing the business model.
That is an indication that the discussion was misplaced the reasons of internal politics, misfit with culture, organizational structures, decision rights, incentives, motivation of executives, etc.
My advise is to first to assure that no matter what the new business model is, it will be implemented. There are frameworks and tools to do that. They will help the consultant to find the right fit for business model project in the organizational/business setting of the client.
If the fitting work dome correctly, the business model exercise will go beyond and "mapping" or an academic discussion toward business transformation.
Alex, I have just changed the business model canvas. Thanks for letting me know.