When developing business models, it is a good habit to always define three alternative business models – or even more.
We often have a reasonable desire to make the businessmodel right the first time, so we can move ahead with the business, but thus we never discover alternative models that are not obvious.
Designing at least three different business models is a simple way to make a creative obstruction for yourself.
These are the steps I ususally follow:
1. Describe a business model by using Business Model Architect ELEMENTS and/or the Business Model Canvas.
2. Choose a focal point for alternative business models, for example:
- What if we choose segment B or C instead?
- What if we focus on being good at activity B or C instead?
3. Design alternative business models for each of the selected alternatives (e.g. segment B and C or activity B and C). Most often, the majority of business models to be overlapping, but there may be key differences).
4. Place all business models so you can see them all. Look at them and consider
- Where are the strengths and weaknesses in the business models?
- Is there a clear winner?
- Do the business models represent parallel business models in the same business?
- Do the different business models represent different stages in the life cycle of your business?
This exercise is a good way to find that the same basic idea can be realized with very different business models.
I have repeatedly found that three alternative business models will often show a pattern that you haven’t seen before – such as a natural development for the company over time.
For an enterprise software-startup we actually found three different business models when we considered three alternative sales channels: 1) Direct sales, 2) Value-added resellers and 3) Online sales.
By making three different business models based on three different channels and looking at them simultaneously , we understood that the obvious path would be to get the first customers ourselves, and when we had proven the value of the product, it would be attractive for value-added resellers (consultants) and finally, when it had (hopefully) become the industry standard , we would be able to use the cheaper online channels, since a lot of people would know how to apply the software.
Actually we even had a fourth business model based on creating a niche solution for a specific industry, where industry organisations would be a potential partner and channel. However, we saw that more as an alternative strategy than a development phase.