Developing a new business model can be a complex and challenging process. However, if you proceed in a structured manner in individual steps, it can be managed well. Here I have written down the first steps to develop a new business model:
Identify the customer problem
Before you start developing a new business model, you should be clear which customer problem you want to solve or which market potential you want to exploit. This may be a new market opportunity or a need for the customer to reduce costs as well as increase efficiency. An exciting method for customer-centric innovation is, for example, design thinking.
Conduct extensive research
Once you’ve identified a customer problem or market opportunity, it’s time to do research to better understand your customers, competitors and industry. This may include market research, customer surveys, and analysis of industry trends. A lot of research can be done internally, for example, by asking salespeople about their observations or analyzing where the most complaints occur. A popular tool for describing the customer side is the Empathy Map.
Define your value proposition
A value proposition is a clear statement that explains how your company’s products or services solve the customer’s problem or meet their needs. It should be clear, specific and compelling. This step is key to attracting and retaining customers in your business model. Experience shows that companies without a clear value proposition vis-à-vis the competition will not survive for long. Methodically, a tool like the Value Proposition Canvas helps here, for example.
Identify your target customers
Knowing the target customers is crucial for any business. This includes demographic data, needs, desires and problems of the target customers. The idea of “I deliver to all customers” usually leads to a belly-shop business model and is not goal-oriented. Here, too, the empathy map can be used to clearly depict customer needs.
Define your revenue streams
A revenue stream is the way a business generates money. Research the various ways your business can generate revenue, such as through the sale of products or services, licensing, advertising, or subscriptions. At the St. Gallen Business Model Navigator you will find a number of so-called patterns that can provide inspiration for possible business models.
Define your cost structure
This is the total cost of operating your business, including the cost of goods, labor, and overhead. Make clear what your fixed and variable costs are and how they might change depending on different scenarios. It is important to decide between services that you perform yourself and services that you buy in. Take a look at the Business Model Canvas tool, where all elements of a business model can be entered.
Create a prototype
Once you have a rough idea of your business model, it’s time to create a prototype to test. Don’t make the mistake of developing the final product or service before you go to market. The probability that you will miss the customer is almost 100%. The prototype can be a model of your product, a simulation of your service or a minimal version of your business model. With a prototype you can test the assumptions you made before.
Test and validate
Now you test your prototype with (potential or existing customers) and get important feedback. This way you can validate or invalidate your assumptions and determine what works and what doesn’t. This step is crucial to make necessary adjustments and improvements. Read more about the danger of assumptions here .
Implement and scale
Once you have a validated business model, it’s time to implement and scale it. This now includes further steps, such as securing funding, building the team, and bringing the products or services to market. It is helpful to have an investor if you do not have the funds. Helpful for scaling is e.g. the Lean Startup – method.
Remember that developing a new business model is an iterative process. This often requires going through the steps several times before you arrive at a final, validated model. Even if looking at other companies in the market helps, there is basically no one-size-fits-all business model. Therefore, it is very likely that you will have to make adjustments and change direction some as you learn more about your customers, the market and the industry.
