Business Model Innovation Guide Why business model innovation is crucial and how to approach it Issue: April 2016 Author: Eefje Jonker van Dun Strategy Designer & Managing Director Business Models Inc.

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Where will your business be two years from now?

Boom! The world is constantly changing. Fact. New start-ups are challenging the established order. Online is a new business dimension. Customers are more demanding. In a world that's constantly changing, there are lots of opportunities. Doing what you've always done in the past isn't enough anymore. It's crucial for every business to start working with business model innovation to continue creating value and satisfy changing customer requirements. Developing a promising new business requires an agile, forward-thinking approach. What does this development mean for your organization? Is it a threat or an opportunity? What steps can you take to stay ahead of the game?

A changing world isn't just difficult—it also offers countless possibilities for companies to create and add value and build successful businesses in new ways. But in order to do this, you have to look at your business in a different, forward-thinking way. Business model innovation helps you to do this, because it's fast and pragmatic. Preparing your organization for the future requires new tools, new skills, and most of all, a new mindset! This Business Model Innovation Guide provides you with insights into the Business Model Canvas and the steps you can take to convert the changes that are taking place into opportunities for your business.

Throw that business plan away! There are countless variables which we cannot influence but which help determine the success of our business. And this number keeps increasing. That's why it doesn't make any sense to write a business plan full of assumptions about the outside world. By the time you've finished writing your plan, it's already out of date. And of the people whose job it is to implement the plan, only very few will even read it.

Think like a designer We spend a lot of time thinking about the direction we want our business to go in, especially now that the traditional way of doing things has changed. But how do you make sure you understand the changes? And how do you make sure you can translate these changes into benefits for your company? You have to think like a designer of your business. So you think and work differently. You start by looking at things from the customer's perspective. You work and think visually, and stop writing out plans. You create a product or website to try things out rather than building final solutions right away. You work on multiple options and don't rely exclusively on just one solution. But how do you take the first step in this new way of thinking about your business?

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KEY PARTNERS CORE ACTIVITIES VALUE PROPOSITIONS CUSTOMER RELATIONS CUSTOMER SEGMENTS

KEY RESOURCES CHANNELS

COST STRUCTURE REVENUE STREAMS

BUSINESS MODEL CANVAS

The right tool: the Business Model Canvas The Business Model Canvas is THE new strategic tool. Over the past five years, the model has received a huge amount of interest from millions of companies all over the world. It helps you understand how to run a business in this day and age, or in other words, how to add value for your customers. You can also use the Business Model Canvas to update or innovate your business. You can discover how to transform your existing business model from old to new.

The Business Model Canvas is a visual tool in which nine blocks are set out to explain how a business creates, delivers, and retains value. In order to plot out your existing or future business properly and gain a good perspective of it, you need to co-create. Design your business model together with your colleagues, partners, and customers. This visual tool provides you with ample opportunity to do so.

Gather together a group of motivated people with different backgrounds: someone who has daily contact with customers, someone who works on operations behind the scenes, and someone who has lots of financial or technical know-how.

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The nine Business Model Canvas questions: 1. Customer segments:

Map out specifically whichcustomers you are serving.

2. Value propositions:What is your added value?What differentiates youfrom the competition?

3. Channels: What is yourcommunication anddistribution strategy?How do you reach customersand how do they contact you?

4. Relationship: How do youkeep in contact with yourcustomers? How well doyou know them?

5. Resources: What are your mostessential business resources?What can you not do without?

6. Revenue model: How do youearn your money? Where doesyour revenue come from? Haveyou set your prices correctly?

7. Core activities: What activitiesare necessary for your modelto work properly? How do youstay ahead of the competition?

8. Key partners: Which partnersare important for beingsuccessful?

9. Cost structure:What fixed costs do youhave? How can you manageyour costs better?

Combining various perspectives creates a strategic dialog. And that's where the added value comes from in this approach. Together you arrive at completely different insights. And by using the business model structure, you can do this without endless meetings.

Go outside! Mapping out your existing or future business model is just the first step. Because, just like a business plan, a business model is also full of assumptions we make together. About who our customers are, for example. About what their main issue is, if our value proposition is really relevant to them, if our products or services resolve their issue, and if they're prepared to pay for it. And then there are the countless assumptions about the extent to which we as a company are able to deliver this value proposition, on time and within budget.

Validate! In order to validate these assumptions, we need to view our organization from the outside looking in. Investigate if these assumptions actually stack up in reality. By observing customers, really understanding them, and putting yourself in their shoes. By talking with them and, most importantly, carefully listening to them. By looking at their behavior. This doesn't have to be complicated and expensive. It can be small-scale, simple, fast, and low-budget. And the following applies: the more we learn, the better. Because this means we're distinguishing ourselves from all the other businesses and enterprises with the same idea.

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Experiment! This world full of possibilities requires an approach in which we can try out multiple options in practice. So don't just go looking for the one right solution or single future business model. Don't do it! Think like a designer, who first sketches out a number of ideas and discusses them with clients. A designer then uses feedback to make adjustments, tests the outcomes again, and repeats this process over and over. The same mindset helps to design future business models. Create multiple options and try them out as soon as possible to experiment and learn. Involve your (potential) customers in this process. This isn't just very valuable—it's also a good way to learn, and gives you a connection with the customer right away, from the very beginning.

Innovating in this way prevents you from having to invest in a business model that will ultimately be unsuccessful. It does, however, require flexibility to deviate from your original idea, and adapt your business to the insights you've gained.

Ready for the future? We are currently seeing whole industries transforming. For example, these days every bedroom is a potential hotel room thanks to Airbnb, and every car is a potential taxi thanks to Uber. Technological advances are often a main driver here. You can use this technology to provide the same things you've delivered in the past, but more efficiently and more affordably. This leads to operational excellence and cost-efficiency. Consider for example the reduction in the number of errors through automation, the standardization of things that don't necessarily need to be customized, improved stock management, more efficient administrative processes, and better financial insights.

Technology as a driver of growth Technology can also be used at the core of your operational management. In the value proposition to your customers. Can you serve customers better by having a better understanding of when a certain need arises? The fridge of the future can let you know when you're out of milk, for instance. Or you can use data to make targeted information more personal and relevant. And navigation systems can suggest a faster alternate route to avoid a traffic jam.

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How do you innovate your business model? Step 1: Map out your existing business model together with your team Step 2: What are your model's strengths and weaknesses? Step 3: Identify developments in the market that will affect your business model Step 4: Explore new business model options Step 5: Leave the building to try new things out, and learn from your customers which option you are going to implement

Technology can also be used to personalize products and services or improve discoverability. A good example of this is online dating sites, which use profile matching to increase the chances of finding a good date. Some business models go a step further and make physical products virtual: a line of 3D jewelry, for example, where you buy the design and then print it out yourself. E-books you can download immediately after purchase are another good example. Placing products in the cloud makes your business model very scalable. After all, you can then deliver them worldwide, 24/7.

Organizations and enterprises who understand their customers and stay relevant to them at all times will constantly be transforming their business models, enriching the right customer information to ensure the best data can be readily applied at all times.

And your organization has the key for this. Software is a guide for all these developments. It helps you understand customers, stay relevant, and organize all this in a scalable way.

So as you can see, this changing world is full of possibilities. Are you ready to take advantage of these opportunities? Is your company ready for the future?

Business Models Inc. is a strategy design agency that helps organizations be innovative with their strategy and business model.

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