4 steps to design & prototype a better business model

As part of Pollinators’ Catalyst program for social entrepreneurs in Geraldton, we ran a workshop on ‘Getting the model right’ to suit the diversity of participants ventures — community groups, freelancers, businesses and government. In the preparation and follow up on the workshop, it’s turned out the tools and tips we shared have been very relevant in all sorts of other situations. – from market stalls to multi-million dollar state-wide projects and even negotiating coffee discounts at our local cafe!  While we can’t condense the already-intensive 4 hour workshop or years of experience in enterprise and innovation into a few words and images, but we can give you a taste.

This blog posts gives a quick overview of 4 steps to designing and prototyping a better business model. We’ll break that idea down into its components: ‘design’ + ‘better’ + ‘business model’ + ‘protoype’. These tools and steps can be relevant to any business, community group, NGO, freelancer… basically anyone that does anything that involves creation and sharing or exchange of value.

Design

Design means something different from ‘evolve’ and implies a conscious process of thinking about and planning something. This is quite different to copying what everyone else is doing or just doing what you’ve always done. A good metaphor for thinking about design is to think about bicycles. Lots of people walk into a shop or browse online and say ‘I want a bike’. But bikes aren’t bikes – there are some that will be better suited depending on the purpose you will use it for. Around the world people have designed bikes for racing fast on flat roads, climbing rocky mountains, carrying children, folding up and carrying on the bus, or even looking incredibly hip when sipping a cuppa.

So, if you want to evaluate your current bike (or business model) and be sure it matches your tastes, environment (customers, geography or technology) and needs, its worth thinking about the options. This great little video featuring Tim Brown from IDEO gives a good introduction to design thinking, as it applies to books, bikes or business models:

Better

Better can mean very different things to different people. In Catalyst, we looked at business models from three broadly different perspectives (1st person, 2nd person and 3rd person). Considering alternative perspectives is critical to defining ‘better’, as what’s better for you (‘I get paid to do what I love!’) or your customer (‘They love the service we provide’) or the world (‘This product will significantly reduce waste going into landfill’) are all different. You’d think about your business model very differently depending on which perspective you were looking from. Looking from all three is actually really helpful and to do that you need to be able to empathise.

Empathy sounds easy, but when it comes to the crunch many people really struggle to truly stand in the shoes of another person and see what they see, feel what they feel and think what they think. Its difficult because we just probably don’t practice it so much. So to make it easier, we used this cute little ’empathy map’ from the book ‘Business Model Generation‘ to ‘map out’ the experience of an other. Once we can understand the others’ perspective (e.g. customer, funder, community, ecosystem) we can then define ‘better’ from THEIR perspective as well as our own.

Once you’ve empathised and considered all the ways in which your project, venture, service or product could affect those most important to its success, you can create some criteria by which you evaluate any subsequent business model ideas. These criteria should also come from your mission, values and your current situation For example, if you have not startup capital and no money to eat, it would be wise to add the criteria that any business model must not need a huge upfront investment of cash and time. Other examples of criteria:

• It must generate more revenue than it costs in the first 6 months.
• It must create a feeling of love and affection for our brand.
• It must be deliverable using our existing skills, resources and partners.
• It must generate a new positive social impact and change people’s lives for the better.

Business Model

‘Business models’ get talked about all the time, but frankly a lot of people can’t tell you what one is, or even what there’s is in any comprehensible way. Now not being able to explain your business model is fine if it’s working, just like you don’t need to know how to fix the gears on your bike if they’re working fine. But if you want to try a new business model, or design a new one, or your old one is broken, then understanding what one is and how it works is pretty important. This is undoubtedly the same sort of logic that lead Alex Osterwalder to work on the business model template and make ‘business models’ more transparent, understandable and ultimately make designing new ones easier. Click on the image below and it will take you to a video that gives a short introduction to the business model template. You can download copies of this template from the Business Model Generation site.

One technique we recommended to generate ideas for your business model using this template is to start with a few key areas and brainstorm ten different ideas into each ‘box’ e.g. ten different value propositions, ten customer segments. You can then effectively use different coloured lines to play a game of visual ‘mix and match’ to come up with business models that use the ideas in different combinations, like we did for CityHive way back in 2010 (below). We credit Jason Clarke from Minds at Work for sharing this great creative thinking technique.

Prototype

Once you’ve started designing, decided on what’s ‘better’, and brainstormed some different business models, you need to DO something! Rather than pursue all ten or one hundred ideas you’ve had, use your criteria (see step 2) to narrow it down to 3-5 models. Then figure out a way to prototype them. ‘Prototype’ literally means the first version from which further ones may be developed – so it doesn’t have to be perfect – it just has to have enough features in common with the ultimate model that you can test if it works. Testing may mean that you do more market research, you pitch it to someone, or you just build the first one and see if it ‘works’. For example, if it’s a product, does anyone want to buy it? If it’s a bike, does it move you efficiently? If its a program for government funding, does the staffer on the other end of the phone think it’s a good idea?

Prototyping, like all the steps outlined above, is worthy of a book on its own. And then there’s actually making your business model or prototype work! That’s the next phase or our Catalyst program, so look out for more updates and ideas in the future.

They key thing really is to get the mindset right:

• It is possible to use a combination of logic and creativity to ‘design’ or redesign your venture,
• Knowing your values and stakeholders needs and values is critical to choosing the right model,
• There are many, many models for generating, share and earn sustained income,
• Once you’ve chosen one, try it out as quickly as possible to learn if it’s worth taking any further.

Share

So, that’s a very brief overview of some steps to design and prototype a better business model. As we said, this has proven useful in recent conversations with our Catalyst participants and other social entrepreneurs, but also with government agencies, peak community sector representative bodies and even with our Board.

We hope you find it useful too and if you’d like to learn more tricks, tips and great tools or share some of your own then join Pollinators as a member and you can join our free lunchtime learning sessions as well as all of the other benefits which come with joining a community of social entrepreneurs.