In her presentation in the series “Practice Meets Science”, Dr. Laura Reder showed a procedure model for the consistent development and verification of business models in interaction with the product development process. In the second part of the series “Ten” on the subject of business models, we will present the “10 steps to developing business models”
1. Focus on the customer
The customer is at the centre of every business model! Focus on customer needs and create added value or a suitable offer for your customer.
2. Success factors
Your success factors are a structured use of established methods, a holistic, cross-organizational development and a fast and flexible testing of your model at the right time.
3. Business model pattern
90 percent of the business models are based on 55 classic patterns. The business model patterns can help in the design. (St. Gallen Business Model Navigator)
4. External perspectives
Involve external partners and customers. This way you will receive direct feedback and can concretize processes.
5. Key questions
A business model describes the basic principle according to which an organisation creates, communicates and secures values. Therefore, you ask yourself four key questions when developing a business model:
Who are our target customers?
For a successful business model, every company must know what the relevant customer segments are. This is the only way to reach customers in a targeted manner and set priorities.
What do we offer the customer?
The focus here is on the value proposition to the customer. What exactly does the company offer to satisfy customer needs? What benefits does the company’s performance, whether product or service, bring to the customer?
How do we produce the performance?
Which processes and activities are required to produce the promised performance? Which resources are involved along the entire supply chain?
How do we generate and secure value?
How does your company generate value, i.e. turnover, with the planned performance? Which cost structure and which turnover mechanisms are necessary and make sense?
6. Analysis/ Initiation
Start with an analysis of your existing business model and the integrated players. An impact analysis clarifies who and what influences your business and how.
The business model innovation is divided into four sections: Service innovation (improvement of products or services), process innovation (more efficient production of products and services), market innovation (identification of new and development of existing markets) and social innovation (changes in personnel, organisation and legal aspects). Evaluate your old business model and consider whether you are aiming for innovation in individual sub-areas, for a combination of several sub-areas or in all areas of the business model. Develop ideas.
8. Development and elaboration
Numerous methods can help you develop your new business model. In addition to the core questions, there are stakeholder analyses, capability assessments, mapping procedures, business canvas, the Blue Ocean Strategy and many more. For the development you can use Gemini or a classical business plan.
Evaluate your new business model. Using a scenario analysis, you can run through different cases and check your model for consistency.
You now bring the prototype of your model into the application and test the model in practical use. As soon as everything is up and running, the introduction is completed. However, it is necessary to question the model again and again and to develop it further if necessary. In times of digitalisation, new technologies, chances and possibilities constantly arise, whose added value you should also check for your company.
In conclusion, not only are market conditions subject to constant change, but the methods and procedures for developing business models are also evolving. Dr. Laura Reder has developed an extended process model for business model development using Lean Startup. Minimum Viable Products (MVP) are used to test business model approaches.