How to design a business model?

Alex Osterwalder outlines in his book “Business Model Generation” a five phase’s process for designing business models. I summarize in this post the most important steps and activities to be performed for a successful business model.


Design process
The Business model design process includes a 5 steps process; Mobilize, Understand, Design, Implement, and Manage.
All the activities during these steps are supported by the recommended tools below.

Business Model Generation - Design Process - 2010

Step 1 - Mobilize – Setting the scene
Activities
- Prepare for a successful business model design project
- Assemble all elements for the project
- Create the awareness for the need of a business model
- Describe the motivation behind and create a common language for design and analysis


Step 2 - Understand – Immersion
Activities
- Research and analyze elements needed for business model design project
- Immerse the team in different knowledge; customer, technology, market
and environment
- Collect information, data from experts
- Study customers, identify needs and jobs-to-be-done


Step 3 - Design – Inquiry
Activities
- Generate and test viable business model options and select the best one
- Transform the ideas and information from the previous phase into business model prototype that can be explored and tested
- Take the time during inquiry phase and select the most satisfactory
business model prototype


Step 4 - Implement – Execution
Activities
- Implement the business model prototype in the field


Step 5 - Manage – Evolution
Activities
- Adapt and modify the business model design in response to market
reaction
- Set up the management structure to continuously monitor, adapt and transform your business model based on market reaction


The Tools
There is a set of tools available that should be used during the business model design process.


- The Business Model Canvas: Designing a business model should be a team work and the best way to do it, is to print out the canvas on a large surface, plot it on a wall and let people jointly sketch out or use
post-it notes to discuss and analyze business models.
see my post here.

- The empathy map: Adapting the customer perspective is a guiding principle for the entire business model design process. What job(s) the customer needs to get done?
see my post here.


- Ideation: is the process of generating a number of business model ideas
- Visual thinking: is indispensable for business model design process
- Prototyping: is needed to test the business model in the field; the only way to be sure about your path. To be sure that you are not following a flawed path.
- Storytelling: combined with visual thinking is a powerful tool for explaining the business model
- Scenarios: make your business model more flexible, more agile. Makes also your prototyping and your test much easier.