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The 8 Essential Tools That You Need for Solid Business Design Work

How to become a Business Designer (3/3) — the tools

Find out what could be the business model behind this.” 

— it was my first appointment as a Business Designer. And I just stared at the blank page. Where should I start?

If this horror vacui feels familiar, our Business Design tools are your cure.

The Power of Tools

Some years ago you needed to be an expert in your field to know where to start this kind of analysis. Today, the internet has democratized access — if you know where to look! In the all-sharing entrepreneurship scene, several frameworks are available that help and guide you through this process. There is a body of knowledge engrained in tools that are openly available and waiting for you to apply them: while each project is new, the underlying questions are not.

These Tools Get You Started With Business Design

Although this is the final article in our series on How to become a Business Designer, don’t worry if you have not fully developed the mindset and mastered all the skills just yet.

As a beginner, I used these tools to approach the field and got familiar with the mindset over time. As with any skill, reading is the first step but to learn it you must practice!

This article outlines the tools which are the bread and butter of a Business Designer across the four phases of the innovation cycle. You can use it together with the innovation cycle as a manual for your next Business Design venture.

Fig. 1 — The innovation cycle guides the Business Design process and groups 8 tools in 4 phases: (1) research, (2) synthesis, (3) concept and (4) prototype. However, the process is not linear but also iterates among phases.
Fig. 1 — The innovation cycle guides the Business Design process and groups 8 tools in 4 phases: (1) research, (2) synthesis, (3) concept and (4) prototype. However, the process is not linear but also iterates among phases.

1. Research — Gain Knowledge from Reports and Experts

Start with thorough desk research to get an idea of your topic, market, and customer. Find articles, studies, reports, books, and conferences on your topic to get a good overview over the industry. Set an alert on google to follow the news about your topic and sign up to newsletters. As you want to build quantitative models watch out for statistical data and check local or regional statistics.
 
I start every project with a deep dive into the industry and connect with experts: complement your desk research with primary customer voices, stakeholder requirements, and expert knowledge. Asking questions and interviewing users is an art in itself. For recruiting experts use directories like LinkedIn or dedicated networks. Meetups provide access to local knowledge. Organize your research with mindmaps and searchable archives. Once you have a good overview of the market, you are ready to move into the synthesis step.

2. Synthesis — Understand the Business, Market and Value Creation

The next step is to make sense of your findings about the market, the prevailing business models, your competitors, and the customer.

Calculate the size of your available and target market to see if it is worth the effort and analyze your competition to check the market potential of your offering. You can start by mapping your competitors on a 2x2 matrix — the hard thing is to find meaningful axes. I use iterations with different axes to understand the market from different angles. The BCG matrix is a classic for product portfolios that compares based on market size and growth. Learn about your competitors by benchmarking their numbers. Find them in their annual reports, public registrars, press articles, and interviews from (trade) press.

If you want to quickly get an understanding of a business model, a value network or ecosystem map helps to understand an industry and to analyze the flows of values among stakeholders. It is also a good tool to evaluate the robustness of an economic system. An alternative is the classic value chain analysis of cost drivers and profit centers.

To synthesize the outcome of your primary and user research, use frameworks from design thinking: create personas to get an understanding of your target customer, map customer journeys to immerse into their life, and identify jobs to be done to inspire ideas how to solve their needs.

As soon as you are sure of the customer need you progress into concept phase. But beware: the innovation cycle is not a linear process. Sometimes it is best to build a value network and use the findings to inform another round of research.

3. Concept — Design a New Business Model

Now the preparations are done, and you are ready to get creative and design the new business model! Draw information from your research and your synthesis and add a spark of inspiration: you can use the following frameworks to guide and document your design process.

There are many ways to spark the creative process: you can get inspiration from collections of business model patterns and examples of revenue streams, or get your thinking started with innovation cards like the spark cards, brainstorm cards, or innovation types. These inspiration tools open your perspective and encourage divergent thinking.

Once you have a few ideas, business model frameworks are a great method to communicate them, get feedback, and discuss different alternatives. The Business Model Canvas and Lean Canvas help you to structure a business model and make you think about its components. Blue Ocean Strategy helps to find a new market for your offering instead of competing in red water, and a service blueprint shows the players and steps involved in the value creation and makes the idea more tangible.

Now that you have an idea of the problem solution fit, your assumptions need to be tested and validated with a prototype

4. Prototype — Test Your (Financial) Assumptions

Next you develop a prototype to test your most critical assumptions. You build a minimum viable product (or RAT) to maximize learning and iterate on the critical components of your business model: I once stopped a very early project after we did initial prototyping and found out that our pricing was far from realistic and we would never make enough revenue to be viable.

In Business Design your main prototyping tool is the financial plan — a spreadsheet that provides an overview and forecast for your business idea (it can get very elaborate). Use it as the basis for a hypothesis driven approach. Figure out what are the most important key performance indicators (KPIs) — e.g. with a sensitivity analysis — and which ones you should verify first. Use some “quick and dirty” methods to build a fact base on which you can test critical financial metrics: for example, I approximate customer acquisition costs with a marketing campaign to a landing page or do customer research to find out about the usage frequency of a service.

Good performance management and well-defined, actionable KPIs help measure the progress of your venture, informing decision making and strategy. Discovery Driven Planning provides a set of tools to evaluate a business idea early on and decide on the effort of strategic initiatives.

This process of identifying critical assumptions and meticulous validating them through testing helps you to continuously learn with an efficient use of your resources. If you falsify one of your assumptions you can easily go back to a previous phase. If your assumptions hold true you take a further step towards executing your business idea.

Bonus: Support Tools — How to Communicate and Work in Teams

Next to these Business Design tools there are some skills that always come in handy: a big part of your job will be to communicate your ideas and persuade others to follow your guidance. Whether it is a classic presentation or a pitch — both need storytelling and clear communication of your findings. If you display quantitative data, think through how to best visualize it.

Business Design is an intersectional discipline and you co-create a lot of ideas. To design and facilitate co-creation workshops is an art in itself which requires a certain mindset: balancing structure and creativity. Make sure to prepare an agenda and set the format while also being open to new ideas and discussions you have not scheduled for. If done right, workshops are a very efficient way to ideate, communicate, and iterate concepts.

Since businesses are composed of people, good stakeholder management is a key skill for a Business Designer. It keeps stakeholders aligned and makes sure that politics do not get in the way of great ideas. Besides empathy and relationship building, more formal tools will help as well. Make sure to do structured project planning to get everyone on the same page and clarify roles. I found pre-mortems to be a great tool to identify project risks and do after action reviews to facilitate learning.

Conclusion

There are hundreds of tools and frameworks even beyond what I have linked here that can help you with your Business Design projects. Follow the innovation cycle as a guideline and apply the appropriate tool for the appropriate problem. If they fit your purpose, go with them, if not, try something else. Over time and with practice, you will build up a portfolio of tools for each situation, strengthen your skills, and learn the mindset. You will become faster in evaluating new tools, and eventually you will come up with your own frameworks.

I am costantly learning from my colleagues in the field, who are coming up with new tools and frameworks that inform my work and make me a better Business Designer. Now that you have completed my series on How to become a Business Designer, I hope you are ready to join us in the Business Design community!

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