Business Design Frameworks & Methodologies (2/4)
A Guide To Business Design | Part Two of Four (2/4)
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There are many well-known frameworks and methods for practising Business Design. All are useful in the proper context. I want to stress, however, that no single framework or method has all the answers, and often the real magic comes from following your intuition, instinct and insight, best practice be damned.
Business Model Canvas.
One of the first frameworks I came across as a young, bright-eyed and bushy-tailed entrepreneur was the Business Model Canvas by Alex Osterwalder. This is the quintessential business-design-on-a-page.
The Business Model Canvas contains Key Partners, Key Activities, Key Resources, Value Propositions, Customer Relationships, Channels, Customer Segments, Cost Structure and Revenue Streams. You can view the image or click the link above for more detail about each building block.
The simplicity of the Business Model Canvas makes it practical for startups but don’t let its simplicity dissuade you from using it in established businesses — I’ve used it with corporate executive teams many times, and they’ve always found the exercise productive.
In addition to the Business Model Canvas, you can find a canvas for value propositions, culture maps, product architecture, etc. These lightweight canvases embody the idea of rapid prototyping, testing, and iteration — all lean methodology stuff. The idea is to test, fail and learn on paper before investing cash into building something. If you haven’t already, try them.
Desirability, Feasibility, Viability.
One of my favourite frameworks is DVF / DFV (I’m never sure if the F or V comes first). The underlying idea is straightforward: at the intersection of Desirability (what people want), Feasibility (what can be built), and Viability (what can generate profit) is probably a solid business model. MBAs will likely be acquainted with this framework.
Desirability, feasibility and viability exist explicitly or implicitly in many Business Design frameworks and methodologies. Take the Business Model Canvas, for example — it’s organised this way.
It’s a mistake to think that design is only relevant to desirability. The exceptional Business Designers of our time are creative, innovative and disruptive thinkers who understand what it takes to build and operate a company profitably. They’re not just big thinkers. They stress the details.
Exponential Business Design.
Exponential Organizations by Salim Ismail, Yuri van Geest and Michael S. Malone is essential reading for those who want a better understanding of modern and future Business Design.
“An Exponential Organization is one whose impact or output is disproportionately large — at least 10 times larger — compared to its peers because of new organizational techniques that leverage accelerating technologies. In other words, it grows faster, bigger and cheaper than its competition because it has a Massive Transformative Purpose and scales as quickly as tech does.”
Exponential organisations are designed to scale rapidly at low marginal cost. When you hear about a tech unicorn, it's generally referring to a business that’s scaling as fast as its technology can scale (which at the time of writing is pretty damn fast). Disruption occurs when one of these information-enabled businesses transforms an existing market or invents a new one.
Exponential Organisations contains a framework for exponential organisation design — The ExO Formula. The authors propose that all ExOs are led by a Massive Transformative Purpose and characterised by ten attributes organised into left-brain and right-brain categories.
The left brain attributes are Interfaces, Dashboards, Experimentation, Autonomy, and Social Platforms, with the acronym IDEAS. The left brain is characterised by order, control and stability.
The right brain attributes are Staff-on-Demand, Community and Crowd, Artificial Intelligence and Algorithms, Leveraged and Shared Assets, and Engagement, with the acronym SCALE. The right brain is characterised by creativity, growth and uncertainty.
The ExO framework can immediately broaden people’s understanding of modern Business Design. It clarifies some critical differences between exponential and linear/legacy companies, like deploying shared and leveraged assets rather than owned assets (for example, Uber doesn’t own any cars, and Facebook doesn’t own any content), and it starkly contrasts traditional views of business.
If you’re interested in learning more, you can find most of the content online at OpenExo. There are even programmes to teach ExO design.
Business Design and innovation.
Innovation and Business Design are close relatives, if not twins, if not the same person. Look no further than Doblin’s Ten Types of Innovation for the direct link (if it’s not already obvious).
Initially developed in 1997, the Ten Types of Innovation theory resulted from almost 40 years of studies and research on over 2000 successful companies, such as Amazon, IBM, and Ford. The Doblin team aimed to identify patterns in companies that have successfully innovated in the past and the reasons why innovation initiatives often fail.
The Doblin model is a complete Business Design framework with ten building blocks organised into three categories — Configuration, Offering, and Experience. The Ten Types are:
Profit Model — the way in which you make money.
Network — connections with others to create value.
Structure — alignment of your talent and assets.
Process — signature or superior methods for doing your work.
Product Performance — distinguishing features and functionality.
Product System — complementary products and services.
Service — support and enhancements that surround your offerings.
Channel — how your offerings are delivered to customers and users.
Brand — representation of your offerings and business.
Customer Experience — distinctive interactions you foster.
Each building block is accompanied by a smorgasbord of relevant Tactics that you can use to assemble a business model. Think of these Tactics like lego-bricks which you can just put together, and voila, you have a new business design. Using this framework, you can assemble your existing business model or the models of other businesses and test changes in different areas, like Profit Model or Channel.
Using Tactics cards randomly to make changes you never would have thought of is fun. Remembering that innovation is often serendipitous and unforeseeable, trying things you wouldn’t usually try can be an exceptionally powerful exercise. You can buy the physical Tactics cards here to facilitate workshops or play around.
Note: At the time of writing, Doblin’s website is down, and I can’t find better images to share. My apologies.
The most significant value is often found in changes to business configuration and experience rather than offering, meaning you probably don’t need to invent a new product or service (and doing so is generally the least profitable form of innovation anyway).
Ten Types is an excellent way to generate ideas, test hypotheses, and explore fundamental changes to your business, regardless of size or scale.
Leading with Purpose.
No matter what business we’re building, aligning hearts and minds, defining a vision for the future, and creating a shared understanding of what, how and why are essential to success. For these reasons, I like defining Purpose as the starting point of Business Design.
To show how Purpose flows through the business model, I devised the 7Ps Business Design method, encompassing Purpose, People & Partnerships, Product, Practices, Positioning and Performance.
The model starts with a clear definition of Purpose (an art in its own right) and then flows Purpose into strategic narratives for each of the other 6Ps. We then ask what information, technology, R&D and leadership we’d need to execute and support these narratives.
The idea is that Purpose aligns People & Partnerships, it’s embodied in Product, it’s fostered through Practices, and it’s reflected in Positioning, all of which is measured through Performance, which informs us how optimised our execution is.
The goal of the 7Ps model is to instil strategic clarity across critical aspects of an organisation. This makes prioritising business model improvements easier and often leads to breakthroughs in thinking that can significantly impact performance and value. Like any framework, the 7Ps model has gaps but is useful nonetheless.
Visualising the business model.
Business Design aims to visualise business models accurately, clearly and thoughtfully. Playing around with different ways of visualising and organising business designs is fun. Here’s a neat little example of a visualisation I made where I challenged myself to try and articulate a business model as a series of nodes and edges. Is it useful? As a thought experiment, yes. I wouldn’t use it in practice without developing it further, but it certainly has a little novelty.
Honourable mentions.
This isn’t an exhaustive list of frameworks and methodologies for Business Design by any stretch — I haven’t covered any strategy frameworks like Competitive Strategy by Porter or Blue Ocean Strategy by Kim and Mauborgne, which I mentioned in Part One. There are many more to discover. To wrap things up, here are a few honourable mentions:
- Open Innovation: An approach to innovation and strategy that dissolves the tendency towards secrecy and silos in large organisations. Open Innovation is a method where organisations don’t rely on internal knowledge, capabilities and resources for innovation; instead, they actively engage individuals and organisations outside their boundaries to source ideas, solve problems and co-create IP. You may be familiar with Open Innovation in the form of initiatives like Bug Bounties, where a technical problem is presented to the public to solve in exchange for cash.
- Your Strategy Needs a Strategy by Haanes, Reeves and Sinha. This fantastic book addresses the biggest problem with strategy — a lack of execution!
- NABC: Need, Approach, Benefit, Competition. A fantastic framework for fast idea validation and communication of a value proposition famously used at Stanford Research Institute (SRI).
If you want to suggest frameworks or methods, feel free to leave them in the comments.
Embracing Business Design.
For existing businesses, embracing Business Design begins by clearly capturing the current state of the business. From there, the goal is to answer the question, “What’s the optimal design for this business today if time and money were no constraint?”. Subsequently, constraints can be introduced to refine the design. Once we have a clear picture of the current state and a design for an ultimate future state, we reverse-engineer interim states of the system to form a forward roadmap.
Strategy acts as the guiding plan to transition between different business states. Tactics encompass the actions taken to fulfil the strategy at each stage. Governance oversees and orchestrates the strategy and tactics over time, embracing ongoing testing and refinement of the strategy and tactics such that the business designs can continuously evolve and adapt as new insights emerge and circumstances change.
The idea of Business Design is to start at a conceptual level and then work our way into reality by adding more layers of detail at each stage.
You can do the above with or without a framework. It’s up to you.
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This brings us to the end of Part Two. I’ll show you how Business Design, knowledge and technology intersect in Part Three.
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This article is one of a four-part series focused on Business Design. Part One is an introduction to Business Design. Part Two is an overview of relevant frameworks and methodologies. Part Three discusses the relationships between Business Design, knowledge and technology. Part Four is a case study of Business Design in practice.
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I want to acknowledge Stefan, my Business Design Sensei, and Aaron, my Innovation Sensei. You’ve both taught me a great deal, and I appreciate you. You know who you are. Thank you.
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Links & References
Business Model Canvas by Alex Osterwalder
Doblin — 10 Types of Innovation
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