Business modeling is about designing the blueprints of a new idea and how it actually functions (cost, revenue, channels, resources, value proposition, etc.), and then, instead of sinking in a load of money and time to see if the whole thing flies, going out and testing your key assumptions. You need a product/market fit with your customers, an infrastructure to get it done, and it needs to capture value for the team/organization.  A common misconception is that this work only applies at the enterprise level and only relates to making more money out in the marketplace.  Business model innovation techniques can be applied to internal teams, non-profits….you name it.  It has, at its core, a commitment to starting with the customer at the center of the whole thing.  As far as keywords (or buzzwords!) that are in the same orbit: design thinking, Lean startup methods, validation and testing, customer centricity, innovation, visual thinking.

What are some key lessons you learned over the years in business model prototyping?

You have to talk to your customers. When it comes to prototyping and testing, yes, you get feedback and can iterate on what you are building.  But, there is an added bonus — by engaging your customers in this new way, you are changing and strengthening your relationship with them.  They enjoy being part of your design process and there are business development benefits as well as product or service development benefits.  Another key lesson that I learned is the importance of organizational culture – it always comes up, and there is no better way to start changing it than to create conditions where people are encouraged to change their behavior.

What are some core activities or tools you use to do business modeling? What are the most useful method(s) or framework(s) for capturing the value of a new service to share with the organization?

Design Canvases.  The business model canvas, for example, is so versatile — it helps you understand how your business works in its current state; you can design brand new offers out of the smallest kernel of an idea; it is a storytelling tool with the 9 chapters of how a team creates, delivers and captures value.  We never look at business models in isolation though.  There are great canvases out there to explore the context in which your business operates, your vision for the future, creating value propositions that resonate with customers’ lives, etc.

Something gets built that nobody wants in the first place, the environment has shifted and it is no longer relevant, or something better comes along.  For most services, it is likely a matter of time before ‘failure’ occurs.  Limping along with something that doesn’t work without experimenting and changing things is where folks can get into real trouble.  There is no ‘golden business model’ – having a gallery of options that are in various stages of development helps keep you nimble and ready for change.