Validate your Business Model
Verify the viability of your solution
To achieve extensive usage, a new solution idea needs to be not only attractive for target users, but also viable from a business perspective. This method will use Business Modelling for representing, improving, and validating the resources that will be required for successfully deploying the solution at scale.
Develop the business model for your solution idea.
Project team (Business Executives, Consultants, Designers), Business Sponsor, IT Architect
2 - 3 hours
Before You Start
- Create a prototype of your solution idea
- Before you create a business model, you need to have a clear idea of what your solution is about. A prototype will help you gain clarity on what your solution should be able to do, how it should work, and how it might be perceived by your target users. Here you will find methods and best practices to help you create a prototype of your solution idea:
Materials you will need
Templates for Download
Baseline Business Model
Build the Baseline Business Model for your prototype by completing the Business Model Canvas. Follow the sequence outlined below:
- Customer segments: describe the different customer / user types that will be addressed, with a maximum of 5 segments.
- Value Propositions: create a distinct value proposition for each customer segment with a bundle of products and/or services targeting their specific needs. The composition of products and services can remain the same, but the offering should be made attractive for each segment.
- Customers Relationships: think how to reach your selected customers and keep connected with them.
- Channels: describe the way that the solution will be delivered to be contracted and used.
- Revenue Stream: think what will you get from the customers when they are satisfied. This is not only about money, but anything of value for your business like data or references.
- Key Activities: describe the essential tasks you must perform successfully to fulfil the promise of the value proposition. Write a maximum of six.
- Key resources: describe which capabilities or assets you need inside the organisation to execute the key activities, such as people, technology, buildings, etc.
- Key partners: indicate who will provide the capabilities or assets you need outside the organisation to execute the key activities.
- Costs: identify the effort required for the operation of the business model.
Make sure that each Value Proposition + Customer Segment pair is well thought through. They are the foundation of the business model; if they are solid, the rest will naturally flow.
Look for weak spots in your Business Model, such as missing resources or missing channels, and find ways to strengthen these areas.
Identify internal and external competitors you will have to face once the solution is available. Then ask each participant to pick one competitor and write down 3 ways
in which it could endanger the business model’s success.
Place each of these forms of “attack” on the canvas in the areas that would be affected. Review the canvas and adjust it to better resist the competitor’s incursions by adding new post-its with the actions you would take and/or adapting the existing entries.
Make sure that all 9 segments of the Business Model Canvas stay in balance when adjusting it. For example, if you realize that you will need a call center for customer support in the Customer Relationship area (box 3), then this may become a key activity (box 6) that could be executed with internal resources (box 7) or with a partner (box 8), and therefore it should be also reflected on the costs (box 9).
Identify the assumptions
Review one by one all the information in the adjusted business model following the sequence of step 1.
For each entry on the canvas, identify what assumption was made so that the entry becomes true and write the assumption down in a post-it. For example, if you have “subscription fee” as part of your Revenue Stream (box 6), you are assuming that the “customer is willing to pay a subscription fee for the offered service”.
Insist the team to find the assumption for each piece of the business model. This is the moment when reality hits the dreams.
Using the “Validate Assumptions template”, prioritise the assumptions according to the level of risk they represent to the business model if they were not true (vertical axis). Identify “killer” assumptions. These are assumptions that would make the complete model fall down if they were not true.
For each assumption, write down a validation activity. This could be research, surveys, tests, expert consultation, meeting, interviews, pilot, etc. Place a post-its with the validation plan beside the corresponding assumption on the Validate Assumptions template. Start with the “killer” assumptions (assumptions placed at the high end of the y axis in the Validate Assumptions template)
Now evaluate the assumptions according to the effort required to validate them and position them along the horizontal axis of the Validate Assumptions template. This overview will help you decide what validations could be left out if there are not enough resources. For example, killer assumptions with a low validation effort could be validated first, while assumptions with high effort and low risk could be left out.
For each of the assumptions that you decide to validate, identify the success metric and the action you will take as a result of the validation. Write this down on a post-it and place it beside the assumption on the template.
If after the workshop the business model needs to be adjusted as consequence of the results of the validation activities (which is very likely), make sure to keep it balanced.
You have now a sound business model that will be able to thrive in the market. It will be ready for launching once you have executed the validation plan.