Business Model 1.0

I read Tor Gronsund’s blog on iterating the business model earlier this week with special interest. I had written an earlier blog along similar lines a few months ago as I was looking at how the product development and customer development processes mirrored one another. Ever since I was introduced to the business model map (Thanks Tor) I have playing with embedding it more deeply into my day-to-day work with start-ups. I have used it as a place mat style investor presentation using headlines in each of the different components to guide a lunch discussion with an angel investor. Most recently I have used it to help focus a start-up on the parallel stream of activity associated with building their business while they build their product.

Your Company is a Product

The concept, as I saw it, was to treat the business model as a product with each of the components offering features to the user (company). Make assumptions about the features the company wants (partners, revenue streams, customer segments), test them as the product launches and optimize or pivot. Rinse and repeat until the market (in this case the company and current & future investors) gets what it wants (product market fit).

The first release of a business model for a particular company I am working with has 26 features (the presentation below contains them all). To generate this first feature set we used a simple sentence to determine the desired features of the business model.

“The company should be able to…”

…define potential partner universe (Partner Network)
…identify shelf-life of key skill sets (Key Resources)
…define a referral plan (Customer Relationship)
…define rationale for direct or partner approach (Distribution Channels)
…define target market eco-system(s) (Customer Segments)

After assembling a list of desired features for each element of the model a selection of the critical ones relevant to an early stage venture was made. Recognition must be mad, for example, that a company may not know certain specifics but should be able to define criteria of what it thinks it would want. We know that with a product release the goals was to have an initial point-of-view then quickly get out and learn not to nail the answer out of the box. The same is true in a business model release.

The Bonus

In addition to providing the company with a clear focus the process has the potential to provide some great by-products as well.
Awareness – the entire organization (small but not for long hopefully) is now more aware of the implications of changes in one element to others. Pivots on the product may lead to re-evaluation of needed skills sets, partners or distribution channels.
Confidence – current investors can now have more visibility into not just the product development process but also the customer development side of the business model. This visibility can allow for focused outreach and some key feedback from advisors and investors.
Language and tracking – with the company being treated as a product the entire organization is can now speak in terms of features, releases and pivots. Also, project tracking tools (I am using Pivotal Tracker for my business model development project) can be consistent. This may not seem like a lot but any reduction in the split between product and business development means less friction, higher speed and faster path to cash.

I look forward to seeing how this approach plays out in the coming month. Add your thoughts below.

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2 responses to “Business Model 1.0

  1. Thanks for the mention J. Interesting approach the 26 features. It would be intersting to see more of how you use Pivotal Tracker in business model development.

    Tor =)

  2. We have set each business model “feature” in Pivotal Tracker and assigned them to different members of the team. They are using the attachment functionality to upload research data, Word and PPT docs. We are then using the comment function to allow everyone to participate and finally the approve/disapprove function when we have an agreed upon v1.0. This feature set will then be our assumptions for the private beta and fact-finding customer discussions. in this way we have an iterative business model that is moving at the same pace as the product and when we go out for the next round we will not need to build it from scratch.

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