Business Design is a way of creating better customer outcomes that also provide more value for your organisation, enabling it to grow and remain relevant.
This is achieved by combining human-centred thinking with business thinking; and it is especially important in our fast-paced world, where uncertain market conditions mean both private and public-sector organisations are under relentless pressure to keep up with changing needs in order to survive and thrive.
As an emerging discipline, it can be difficult to picture how Business Design can be used to achieve growth (profit and / or relevancy), so the following framework aims to provide a level of context and process to help you visualise this.
As with any good framework, it is indicative and not prescriptive; so the best way to use it is as a guide that you can adapt to your own circumstances.
The framework
Business Design builds on other practices to do three things:
- Identify new opportunities to help customers
- Prove the business viability of the preferred opportunities
- Deliver the chosen opportunities to maximise value
To achieve this, organisations need to develop a deep understanding of their customers, enabling them to continuously experiment with new propositions and validating the business viability, before scaling up and optimising to satisfy customer demand.
This requires a mindset that looks outside of the organisation, rather than inwards and an ability to think at a systems level to consider the people, capabilities, value streams, financial resources, assets, partnerships, alliances, processes, policies and external market conditions that need to be taken into account to deliver the right products and services to customers over five phases of growth:
- Discovery
- Scale Up
- Optimise
- Reboot
- Disengage
Here’s the TL:DR explanation:
The Business Model sits at the heart of everything and the aim of Discovery is to identify business models that solve a customer problem and ideally do this in a really good way that is hard to replicate by other organisations, whilst ensuring it is operationally feasible and financially viable for the organisation to do so.
Once a strong Business Model is found, the next phase is to Scale Up to deliver the proposition and during this phase the organisation will change in many ways (e.g. get bigger, change structure, find new channels to market, enter new markets) in order to meet customer demand.
Eventually growth will peak and during the Optimise phase, the focus moves towards smaller, incremental enhancements and cost efficiency improvements.
In some cases, major changes to market conditions and technology will render the customer proposition and business model inadequate and a decision is required to either Reboot with a much enhanced / revitalised proposition, or to intentionally Disengage from the market.
Whilst the framework mentions a specific Discovery phase; to enable adaptability to changing user needs and market conditions, there needs to be a Continuous Discovery practice taking place throughout the other phases.
The other key component is the OODA Loop, which plays a major part in the Discovery and Continuous Discovery activities and highlights the experimental nature that is required to continually adapt to changing circumstances and new learning.
Finally the framework is best used in conjunction with a whole range of well-known tools and methodologies at different points during each phase, on a ‘pick the best tool for the job’ basis.
Here’s the detailed explanation:
The Business Model
Modern business practices emphasise working models over detailed plans and the intention of Business Design is to discover and experiment to identify Business Models that:
- Solve a customer problem or address a need
- Can be differentiated from the competition
- Can be delivered operationally / technically by the organisation
- Are financially viable (e.g. profitable or provide maximum value for money in the case of non-profit organisations)
This means there is lots to think about, everything from what market to target, who the core users are going to be, what the competition is offering, the current capabilities of the organisation and financial implications.
Perhaps the best way to think of the Business Model is to look at it as a system for creating value; both for the user and the organisation. As a system, there are lots of inter-dependant components working together and by tweaking and changing different parts of the system, it is possible to find the sweet-spot that delivers growth and relevancy.
Discovery
Much of the work in finding the sweet-spot Business Model takes place in Discovery, both in the search for new opportunities to help customers and the continuous testing and learning required to maximise the value of existing Business Models.
The starting questions for Discovery are:
- Where to play?
- Who to help?
- What are their needs?
This means identifying a specific target audience, who have a specific problem they want to overcome (or a gain that they are searching for).
There are many different techniques and approaches for understanding customer needs, but the key trick is getting to the bottom of what the real customer problem is and not settling for the more obvious surface issues.
As knowledge of the customer grows, it is also important to develop an understanding of the wider market conditions. For example, how are those customer needs currently met? How well developed is the market for products that meet those needs? Are there any political / legal / technological / social factors that play a role?
The Discovery process then moves on to test potential solutions to see what resonates with the target audience enough that they will commit their time and/or money to use the solution to try and solve their problem.
This is a highly iterative process and may result in what the Lean Startup refers to as a ‘pivot’ where a completely different line of enquiry is taken to find ‘product-market fit’; and even when that fit is found, the next step is to work out how technically, financially, operationally, legally and politically feasible it will be to provide the solution to the customer, which effectively becomes the Business Model that receives investment.
One mental model that I think is particularly relevant to Discovery is John Boyd’s OODA Loop. OODA stands for:
- Observe (actively scan for market data)
- Orient (process and analyse)
- Decide (hypothesise)
- Act (test)
The loop iterates, so each test provides more data to be analysed and in turn used to formulate a new hypothesis to experiment with. By basing the Discovery process on evidence and planned experiments (rather than gut decisions), the more likely the investment risk of backing an unviable solution will be reduced.
Other popular tools for Discovery include the Market Opportunity Navigator, the Value Proposition Canvas, the Business Model Canvas and the Lean Canvas; while methodologies like Lean Startup, Product Design and Service Design all share similar traits that complement the process.
The final point on Discovery is that it should not be viewed as a one-off activity and instead should take place throughout the lifecycle of the solution. The types of activities and resources committed to for a Continuous Discovery practice might differ from the initial Discovery process, but the world never stops moving and the organisation needs to be able to sense and respond to changing needs.
Scale Up
As the Discovery phase establishes more and more evidence of a viable Business Model, a decision point will be reached where the organisation will want to invest in scaling it up to fully capitalise on the opportunity and this can result in a major transformation of the organisation with varying implications.
For example, startups going through their initial phase of growth will experience the ‘growing pains’ involved with onboarding lots of new people and defining more structured ways of working as they evolve into established businesses.
Meanwhile, existing organisations will face their own transformation challenges to change long-established ways of working, upgrade legacy systems and re-brand or re-position themselves.
So, regardless of the type of organisation, the transformation will always be challenging and the purpose of Business Design during this phase is to ensure the balanced needs of the customer and the business remain at the forefront of an intentional growth strategy. The framework advocates the use of complementary methodologies like Business Architecture, Organisational Design and Change Management to be used help design and facilitate the transformation of the organisation.
Optimise
The classic Product Life Cycle shows a Growth phase that levels out into a Maturity phase. At this point the investment tends to levels-off and the focus moves towards smaller incremental improvements to maximise value.
If we think beyond the product and in terms of the wider system that is enabling customers to reach their goals, then the focus for Business Design is to discover what changes, tweaks and enhancements can be made across the whole organisation to provide customers with better outcomes.
For example, improvements could be made in cost-efficiency or customer service. There may be variations or complementary products and services that are launched or modified to help customers achieve their outcomes. Maybe the way users access the proposition will change or the target audience themselves will evolve to a different composition of groups of people.
The key thing to remember is that the organisation needs to be constantly adapting and moving forward, which is why it is important to maintain a Continuous Discovery practice to sense changing trends and needs; along with the experimental mindset to analyse observations, create new hypotheses to test and enact changes to the Business Model and wider system based on the outcomes.
Reboot or Disengage
Eventually the benefits of optimisation will become negligible or the market will have changed too much for the proposition to properly satisfy customer needs; and at this point a strategic decision needs to be made on whether to invest in relaunching the proposition (Reboot) or to Disengage from the market.
If a Reboot is on the cards, then a gap analysis will help gauge how far the current proposition is from meeting the needs of the market and what has to change to close the gap (such as modernising outdated technology, improving customer experience issue or realigning to a new target audience).
This work will require investment from the organisation and if the return on investment is not expected to be sufficient, then the organisation can intentionally Disengage from the market and try to direct customers to one of its other products or services (the ideal situation being to have a portfolio of propositions in place, so that customers can be migrated to alternatives).
Using the framework
In theory finding better customer outcomes that also create better business outcomes makes a lot of sense, but the reality is things don’t always work out this way and outside of the textbook, the world is full of challenges and fast-paced change.
The framework provides a structure for understanding your current customer propositions, mapping them to a phase and determining the tools and methodologies you need to drive growth.
It also serves as a communications tool to bring stakeholders onboard with the work you are doing and as a guide for putting in place structural changes like a Continuous Design practice to help make your organisation ‘adaptive’, so that it can better detect changing customer needs and wider market conditions and execute the changes needed to remain relevant.