On Business Models, Prototypes, Love, & Entrepreneurship

February 7, 2012 Editor 0

From Business Model Alchemist

Few of the entrepreneurs I meet spend sufficient time exploring alternative business models for their products, services, or technologies. Too often I see them fall in love with their initial idea and then they immediately dig deep into spreadsheets and business plan writing. That has a great risk!

Failing to explore alternative business models before you choose a direction bears the great risk of getting ‘ankered’ with an inappropriate, mediocre or even bad business model. It becomes very hard to explore alternative business models when you’ve refined your first idea too quickly.

Of course there’s a reason that so many entrepreneurs and intrapreneurs stick to their initial business model idea. Few actually realize that the same product, technology, or service could have very many different business models. Now how could they do a better job to increase their success chances of creating a successful new business (model)?

This is where we business people should look to the design professions for help. After all it’s their business to create new things. This is what the Weatherhead School of Management of Case Western learned when they worked with star architect Frank Gehry and his team. Among other things they realized how important prototyping could become to design new strategies. Watch the video to see what they discovered:

I particularly loved the following quote at the end of the video by Jim Glymph of Gehry Partners:

“If you freeze an idea too quickly, you fall in love with it. If you refine it too quickly, you become attached to it and it becomes very hard to keep exploring, to keep looking for better. The crudeness of the early models in particular is very deliberate.”

Every serious entrepreneur and intrapreneur should apply the same type of attitude if he or she wants to find the best business model for his or her technology, product, or service. Here a couple of tips what you should pay attention to when making business model prototypes:

• Use the Business Model Canvas Poster to sketch out as many different business models as possible.
• Don’t discuss and decide which business model to sketch out on the Canvas. Do them all! Only then can you have a valuable discussion on what could work or not.
• Don’t spend 60 minutes sketching out an early and unproven model in detail. That hour is better spent by sketching out four to five ideas in a very rough manner.
• Sketch out each idea on a separate Canvas. For example, use two different Canvases for two very different customer segments.
• Sketch out diametrically opposed models. For example, ask yourself “what if I offered my product for free…” vs. “what if I offered my product only to the very high-end market…”

In Business Model Generation – A Handbook for Visionaries, Game Changers, and Challengers we tried to make a clear case for business model prototyping. I think the following spread from the book visualizes our thinking pretty clearly:

In the book we also outline different types of business model prototypses, ranging from the Napkin Sketch to the Business Model Pilot.

I hope this convinces at least some entre- and intra-preneurs to spend some more time on their business model rather than on their business plan… Don’t fall in love with your idea too quickly!

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Categories: Business Model

Tags: Business model, Entrepreneur, gehry, prototype