Business Models: Do the right thing


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Remco Blom
Posted by Remco Blom on Feb 27, 2012

Business Model Management

Welcome to our blog. This is an archived post, most of our knowledge and advice remain valid but some material or links may be outdated. Click here to see our most recent posts.

This is the first post in a series on business models, innovation, implementation, cases and tools!

At BiZZdesign we have a successful history of designing businesses. As a spin-off of the Dutch Telematica Instituut (currently Novay) we started as an innovative software, training and consulting firm in the field of Business Process Management (BPM). Halfway the first decade of the 21st century, we invested heavily in Enterprise Architecture (EA), to help organizations get a more holistic view on their enterprise and get grip on complexity and change. The Open Group standards TOGAF® and ArchiMate® are important tools in this field.

With BPM and EA we help our clients to optimize (implementation of) change and operations. Here the focus lies on: “Doing the things right!”.

Today we see clients struggle with the question: “Are we doing the right things?” Clients, partners and competition demand that flexibility is the standard. Innovation of who you are, what markets you are in and how you make money in these markets become relevant issues! It’s time to reinvent your business model!

A good business model by itself is not successful, but a good business is! Of course you need a good implementation plan and proper execution of this to become a successful player in the markets you have selected. The connection between the business model and the implementation and operation becomes an important factor for success. Imagine you have a great idea: let’s say an innovative toothbrush (we call it the ToothBrush 3.0).

You can create some prototypes of this product and sell it to wholesalers and/or retailers (e.g., supermarkets). But is this the way to maximize profit? (Or should we refer to effect? Not everybody’s motive is money!) You might want to figure out a way to engage your potential customers more, because recurring sales is very important in the FMCG/health market. And what about partnering options with dentists, health insurers, toothpaste manufacturers, etc.? Are you building this product yourself? Will you brand it under your existing label, or invent a new brand? All these decisions are part of your business model design process to invent your optimal business model. “A business model describes the rationale of how an organization creates, delivers and captures value” (Alexander Osterwalder, Business Model Generation, 2009)

A great way to describe and design your business model is the business model canvas by Osterwalder and Pigneur.

You can download the business model canvas pdf here. You can describe and innovate business models by putting sticky notes in the nine boxes of the canvas and create a high-level view of your business model.

At BiZZdesign, we have very positive experience with the canvas in practice and have used it for:

1. Start-ups
In green field environment design, define, test and implement your business model. Working with creative workshops using sticky notes, continuously check completeness. Apply patterns from other verticals. Typical stakeholders in the business model process are Entrepreneurs, sometimes with VC and/or other partners

2. Strategic search of new direction
The results of a SWOT-analysis plotted on the canvas. What are we good at today? What are the trends out there? Describe your current Business Model, use the epicenter innovation approach, apply elements from other models and verticals. How does the new model effect the old / existing model? Typical stakeholders are Strategic Management, LOB-management, Business Development and Innovation Management. Occasionally Enterprise Architects join these sessions. I would like to encourage all enterprise and business architects to introduce the business model approach and join these conversations!

3. Communication and implementation
Put your Enterprise Architecture in a business context and/or put your BPM efforts in this context. The business model approach will help you get traction at CxO-level. You can visualize impact of change in the architecture on the canvas and vice versa. Create roadmaps for implementation by defining business model work packages containing architecture building blocks that need to be created, updated or phased out. Typical stakeholders involved are Project Managers, Enterprise (business) Architects, Business analysts.

4. Be smart
The business model canvas helps you to ask the right questions. You can check completeness during a meeting by sketching the business model canvas “on the back of a napkin” and do a global analysis of the impact of a (proposed) change. You can go one step further and ask about relations between the business model elements (mostly represented by sticky notes). Everybody that knows and understands the canvas can benefit from this application!

In several practical applications, we experienced different pros and cons of the business model canvas approach:

Pros:

  • Hands-on tool that fosters understanding, discussion, creativity, and analysis.
  • Easy to understand and explain. People get excited and can start almost instantly.
  • Is very well described in books and on websites. The available material looks great.
  • Has a large and active user community on http://businessmodelhub.com/
  • Is great for innovation!

Cons of (or opportunities to improve!) the business model canvas approach:

  • No explicit space in the canvas for goals, kpi’s, measures, etc.
  • Competition is not described on the canvas. You select your own competition by selecting your own market. But where and how do you put your competition in relation to your own organization? HackFwd makes competition a more explicit aspect in the model they suggest in Phase 2 of their start-up approach;
  • Organizational structure is not considered to be part of the business model canvas. This might be an implementation aspect, but is seen by many as part of the business model;
  • Not very intuitive for modeling networks of organizations (e.g. value chains). This is more explicitly present in an alternative business model approach like STOF and e3value;
  • The methodology in the Business Model Generation material is very brief. We give our clients more guidance in the business model innovation process then provided in the business model generation book;
  • The step to implementation is key! The final page of the Business Model Generation book refers to Enterprise Architecture as a related field of interest. We see this as a very relevant relation that deserves more attention. Therefore, we participate in collaborative research with partners and clients to make this relation more explicit;

In the following blogs, we will discuss trends, the process of innovation, a case study and tools in the field of business models. More about BiZZdesign’s Business Model services and a reference to recent webinars on this subject can be found here.

Product Webinar Enterprise Studio & HoriZZon

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