How To Design A Winning And Sustainable Business Model
A business model is a company’s plan to generate profits and is critical for the survival of a new business. With the increasing need for efficiency and productivity, there are many new business opportunities for entrepreneurs and startups to discover. Many companies find ways to innovate and brand themselves with unique business angles to capture new audiences and new revenue streams. During R3’s recent online event on startup series, Sebastian Mueller from MING Labs highlighted different types of assets and business model approaches you can leverage to not only survive difficult times but to turn your ideas into a monetization engine for your company.
Catch the recording of the webinar on R3’s website or read on for the session’s highlights.
Being a global digital innovation company, active in both the startup ecosystem and the corporate innovation space allows us at MING Labs to observe many key emerging trends. Especially Design Thinking has become more popular and proves to be important at dealing with high uncertainty — and therefore ideal for a VUCA world and the current unprecedented times of COVID-19.
The In’s and Out’s of Design Thinking
The core of Design Thinking is about human-centric problem solving. Research shows that businesses designed with the customer at the center will be more successful and resilient. But what is so different in this approach? Looking at a problem from a designer’s perspective always starts with the customer in mind to understand their problems first. Solutions are then found and built to solve the users’ problems and fix their needs and pain points. Taking an engineer’s perspective, which is often diametrically opposed to a designer’s mindset, amounts to a solution-driven approach. Fascinated by technology, yet often looking for problems to solve after building their technology.
Using Design Thinking can therefore help businesses to ensure that their products are desirable, feasible and viable.
It forms the stable foundation of a solid company and can be applied to all layers of a business. That is why many VCs got design partners on board by now as well.
Looking at the process of Design Thinking, it consists of 5 steps: Empathy, Definition, Ideation, Prototyping, Testing. The most pivotal points are Empathy and Definition as the first stages are extremely important for success. Defining a problem determines the potential solutions you see. While solving the same problem with new tech makes for 10% better solutions, solving a better defined problem makes for 10x better solutions.
It’s essential to make sure to take the time to really understand and re-define the problem you are solving, and find a truly transformative angle.
And don’t only focus on the artefact: Don’t make journeys or personas only as a tick-box exercise. If you are short on time, rather spend it talking to people and skip the artefacts. Getting insights from real users is really where the valuable nuggets are! Be aware that artefacts are just self-suggestions and reinforcement — and reinforcing wrong beliefs can be deadly.
How Do Startups Make Best Use of Design Thinking?
We call the application of Design Thinking to startups “Venture Design”. Every single layer of a business needs to be designed: a product, service, business model, the organization, even the purpose. And when all parts are designed harmonically, they can be massively transformative. Imagine every part as a vector — jointly they form the vector of the organization. When the pieces point in different directions, they subtract. When they point in the same direction, they add up.
Venture Design is about holistically designing new organizations that tackle difficult problems. We want to ensure that all parts of the business are pointing in the same direction, which allows the venture to scale fast and have massive impact. Throughout all steps, the customer and their problem are always at the core of all considerations. Our vectors are pointing from the world as we have it today to the world we envision for the future. You then align everything you know about the world, the trends that can carry you and the customer with that vector to make it happen. You design the whole system.
Venture Design vs. Solution Design
As compared to Solution Design, the mindset of Venture Design is rarely embraced yet, both on the corporate and on the startup side. Most startups rather focus on building their MVPs, creating their product or solution, because that is the easier part. Validation on the other hand is then usually weak and quite superficial, and research and testing are rarely done. MVPs are often misunderstood or misconstrued, and do not build towards a Minimum Viable Company. Designers are then just a tactical resource that executes on requests from the product owner. The typical MVP that validates only one aspect in isolation is inherently wrong and will lead you down a bad path.
Venture Design in contrast would always move the startup forward looking at all three angles, including Desirability, Feasibility and Viability in unison, rather than in isolation. This is often ignored though and blows up, as technology leads, design lags and business is considered too late. The same goes for internal processes, mission, vision, purpose and communication that are often not aligned, and hence reduce effectiveness of deployed resources.
What Startups Need to Consider When Expanding into New Markets
When it comes to market expansion, startups are facing some cross-geographical problems. These range from travel restrictions, a global economic crisis, shrinking disposable incomes, and many industries in disarray, to bureaucratic hurdles for setting up new operations, as many governments still don’t have great online services available.
Market adaptation is quite hard, as testing is hard as well. The same goes for getting Proof of Concepts and commitments.
Therefore, your value focus needs to be on survival and existential topics, otherwise it will be a hard pitch. Getting on a client’s agenda only works if you can solve a life-threatening disease. It doesn’t work if you’re offering a vitamin.
Now Is The Time To Redefine Your Use Case
Rather than defining a market within a specific space (blockchain, for example), we look within a particular use case where this technology might offer substantial advantages. Now might be a really good time for some use cases to be reviewed, as various Jobs To Be Done are being refined and redefined. The “Way Things are Being Done” or the Sacred Cows are up for change as everybody looks more and more after their own interests. Corporations taking zero-based budgeting means new approaches. What can we spend money on that really makes sense and drives business now?
Overall, we will probably see some mainstream adoption of limited use cases over the next few years, which might be much more limited in scale and scope than assumed in the past years. Most of the use cases might be consortium-approaches, which take longer and need support by the government or an independent third party. Any use case that drives efficiency and cuts cost will see more interest — especially the ones saving manpower. What we need to see is Proof of Value and Proof of Scale.
Design Thinking Supporting Market Expansion Post COVID-19
The future will be even harder to forecast in a post-COVID-19 world economy. For startups and companies to expand into new markets, the first step should therefore be to plan different scenarios. Try to understand what might play out and prepare well for it.
Even though there is a lot of uncertainty, every leader needs to take time to understand the drivers impacting their business and the scenarios that would emerge from that — and after that move into a Design Thinking approach.
Think what the world would look like, describe it in detail and how you would react to it. Understand what that would mean for your customers and their pain points that you are addressing. Understand if you are set up for it or if you would need to pivot. Design Thinking can help with your validation and iteration that might be needed for new markets. Think of it as an experiment portfolio, start learning, and communicate your learnings rigorously with your teams.
Understand what is happening in each country, as we are moving into a splintered-world scenario. Understand the real opportunities beneath the superficial interest. Keep in mind that “until they pay for you, they don’t really care”. We urge companies to turn on their monetization mechanism and only scale based on traction.
Always take a discovery approach and embrace a learning mindset — don’t assume your product-market-fit holds.
In Summary
- Venture Design: Take a design approach to your whole business, and ensure that all elements point in the same direction to ensure you have an aggregation of velocity.
- Minimum Viable Business: An MVP is not enough, you need viable economics to survive. Unless those are proven, you still have nothing.
- Take the time to understand and redefine the problem you are solving. Find a truly transformative angle.
MING Labs is a leading digital business builder located in Berlin, Munich, New York City, Shanghai, Suzhou, and Singapore. We guide clients in designing their businesses for the future, ensuring they are leaders in the field of innovation.
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