Pivoting to find your business model
You serve the person that pays you.
Our team is launching a startup, ALEX, and we have already changed our concept (aka ‘pivoted’) several times. The business model — the way the exchange of money for a product or service takes place between the company and the customer — is a ‘variable’ or ‘axis’ on which you can shift your business. Example, a baker can test different business models: a ‘one-time sale’ of a pie or muffin or a subscription model where people are charged monthly for weekly deliveries of baked goods. Two different models that completely change the business.
How do you pivot? There are many ways. You can change the solution, the customer, the business model or, most commonly, a combination of all of the above based on customer feedback.
I will share an example from our startup ALEX, a marketplace where learners can get incremental training by investing in higher education courses one at a time.
Our original concept: Providing high school graduates with the ability to get a degree by easily taking courses at different universities. Our intended business model was to charge universities for placing students.
Our value proposition: To learners, we would be the destination for creating a customized higher educational experience that fits within their budget and meets their unique needs.
Our key assumptions (hypotheses) were:
- Learners want to take courses across institutions
- Educators will allow us to place people in classes across institutions
- We can confer degrees from taking classes across schools
We tested these by conducting user interviews of university administrators, employers, high school students, college dropouts, and others. After several interviews with schools and potential students we learned many things. Here are a few of our take-a-ways:
- Learners loved the idea of taking classes across schools and customizing their learning
- Conferring degrees to people from classes taken across schools would be extremely complex (and expensive for us to do)
- Schools have empty seats that they are excited about filling
- It is extremely expensive for us to market to high school students along side colleges and doing so would create a conflict of interest with our potential partners
After the initial round of interviews, we pivoted several times. We did this by making a list of potential customers, potential solutions, and conducting more interviews. As part of several interviews, we used prototypes to get feedback from people.
While we were ‘iterating’ (making minor and major pivots with our startup), we reviewed the ‘value map’ and ‘customer profile’ from the Value Proposition Design book, which completely changes based on the solution and customer combination that you focus on.
After lots of pivots, here is where we are: Our ‘product & service’ is easy enrollment into individual courses from colleges and universities. Our ‘gain creators’ are our partnerships with colleges and communities. Our ‘pain relievers’ are our easy registration and access to validated courses.
Our ‘gains’ are providing workers without college degrees with the training and community they need to advance their careers. The ‘pains’ are eliminating the application process and identifying which courses will help workers get promoted. The ‘customer job’ is understanding courses that are relevant to their career and affordable.
Our current business model is learners pay for a courses and we take a percentage of sales for each course sold. We are experimenting with models where learners have a subscription and can go to classes over a defined period. Another is testing whether employers would be the appropriate payers since we are effectively providing incremental ‘job training’.
We will continue through the process of prototyping — simulating the user experience — until we secure a paying customer to prove a profitable business model that aligns with our mission. A tall order, but a noble cause for ALEX.