You know you need to clarify where your business model is headed.
Whether you are just starting, scaling into growth, or you are the market share leader, you are always looking new ways to generate value.
The most valued companies today never stop creating new business models.
Profitable innovators change their business models twice as frequently as their peers.
> 90% of all business model innovations recombine existing ideas and concepts from other industries.
This sounds harder than it looks. How many times have you heard from your advisors, partners, investors, or senior management that you should “be more like Netflix.” Or maybe you’ve been told, “Let’s be the Uber of __________.” “You should be the Dollar Shave Club of _________.”
Right, so easy. All you need is 100 million dollars and a dream.
Maybe you genuinely have a vision for how to be the leading data aggregator in your field, the largest 2-sided marketplace, the most profitable subscription company in your category. But you don’t have everything at the start. Startups lack resources and leverage. Big companies lack the digital capabilities to move to new models. How do you get from here to there?
Here’s a tool we’ve been using at Reason Street with startups and corporate innovators with great success: The Business Model Growth Map.
On the first axis you have time, and firm value.
The goal is to develop scenarios to help understand which decisions will create the greatest value.
The purpose of the Business Model Growth Map is to acknowledge you have more than one path to achieve your vision. You have options.
You can use this tool as a foresight exercise, a competitive analysis tool, and it’s a way to understand business model innovators and how they’ve grown.
The Business Model Options Growth Map Steps:
Let’s take a look at a startup meditation wellness company: MindTether. The founders of MindTether take meditation seriously, and they are concerned that the current app experiences provided by companies like Calm.com and Headspace are too singular, too self-oriented, too lonely. They want to create a shared experience and build a movement around meditation. Their core idea: a meditation social network.
They host a Business Model Journey session, where they define key scenarios and options for how to get started on the way to their big idea.
5 Steps to Breakthrough Business Model Options
- Define the North Star
- Explore business model archetypes
- Create multiple business model growth options
- Backcast to the present moment
- Build, measure, learn and generate new options
1/ Define the North Star
The first step calls upon your visioning and foresight skills. What is the ultimate business model in the sky, your big vision, your true north? Imagine 10 years from now. You succeeded and achieved your vision. You attracted the people, the resources, and the runway to achieve your vision. You have the largest group of meditators on the planet who trust you, engage with you and other customers everyday.
What happened? How were people’s lives changed? How many people were impacted by your company’s products, services, and ecosystem?
MindTether sees a future in which 200 MM customers from all over the world participate in localized meditation groups every day, resulting in better overall health and wellbeing of the communities they serve. They have the largest subscription-based company, while members who cannot afford subscription are subsidized by health plans, workplaces, schools – because their benefit to society is so clear. That’s their big vision.
2/ Explore Business Model Archetypes
Next tour through relevant business model archetypes. Look beyond competitors and your core industry for inspiration to the rising business models of today’s economy. Ask team members to bring ideas to a business model generation session.
MindTether looks at the way business model archetypes are playing out in their core arena – mindfulness apps and meditation groups that meet in person. They look at brain training companies, and business models from health tech, and review multiple business model archetypes.
Remember the best business model innovations are just combinations of currently existing business models – so encourage your team to start sketching their ideas.
Take a tour through our Business Model Library for inspiration.
3/ Create multiple options
After you are inspired by other business model archetypes, host a brainstorming session to generate multiple business model growth options. Encourage ideas inspired by transformer-style mashups of archetypes and companies. Did you ever play garanimals as a kid? Allow for strange sounding combinations in your session.
Call on those with the closest customer proximity to develop value proposition concepts that address unmet needs and pain points.
You can ask for sketches, concepts, use the Business Model Canvas or Value Proposition Canvas, or focus your energy with this “Value Proposition Adlibs” tool.
Choose the best ideas (use group voting or filtering exercise) based on which business models generate the greatest value.
MindTether considers three primary options:
- Real world subscription: people join flashmob-type group meditations in the real world
- Virtual subscription: individuals sign up, and there is a discount for groups
- Value-based care: selling the benefits of MindTether to insurance companies and get paid for lowering anxiety levels in a population
They map how all of these options could get them to their true north – but they want to know which first journey propels them there the fastest.
4/ Backcast to the present moment
Now that you have your vision and core business model ideas – backcast to where you are today. Backcasting is often more effective than forecasting. You start with your vision – your North Star, and then you ask the question: “What do we need to do today to reach that vision?”
MindTether already defined their North Star: 2oo MM meditators connecting together, every day.
They look to the capabilities, resources, and network they have today, and what they don’t have.
MindTether is a 3 person team – an app developer, a designer, and a mindfulness coach, with ability to develop and lightweight app. They live in NYC, which seems to be the primary launching pad for these kinds of wellness meditation apps. They are not hardcore developers. They do not have strong command of artificial intelligence, data science, nor are they highly skilled in making a new wearable device. But they decide that all of those skills are not needed to get started.
What they do know is that they have the right set of skills and resources and network to begin testing their two core ideas – virtual “free for groups” meditation and in person meditation flash mobs or planned meetups.
5/ Build, measure, learn and generate new options
The MindTether team creates a plan for the next few months to maximize learning.
They don’t just start building the app. MindTether’s team knows that the real value lies in their ability to connect engaged meditators in groups, which result in a network effect. Their first test is to understand who is in the most pain, what to build, and which business model best delivers.
To understand pain points and jobs to be done, the team starts in the real world, to deeply understand what people are looking for when they seek out meditation. By directly interviewing people in parks and coffee shops and meditation centers, the narrow in anxiety as the primary trigger for people to start meditating in the first place.
MindTether’s second hypothesis is to test how a group meditation solution would be a good match for the pain of anxiety. The team borrows a loft space from a friend and hosting their first daytime retreat. They start an Instagram feed to build interest in the event and to see which core message work best to get people to sign up and show up for the event. Not every message works. They find that anxiety is still taboo, or a lonely experience in search of a lonely solution. Their messages most resonate with a younger generation that is more willing to talk openly about anxiety and share their experiences publicly.
The third hypothesis helps MindTether narrow in on a target segment that has the most pain, but also respond to the call for group meditation and pay for the experience. They started to notice that those that were the most likely to follow up after the in person event were recent college grads, new to the city. These grads are overwhelmed with student debt payments, rent payments, and struggling to bring purpose and meaning to their first jobs out of school. They were also just forming and re-forming their friendships for their newly adult life.
MindTether is now ready for an intense Lean Startup-style validation effort, but their approach is more strategic, and they’ve built up their business model pattern matching skills.
MindTether’s team decides to pursue option 2 as their first business model to start testing through prototypes, and they continue the build-measure-learn cycle until they have the early prototype and marketing messages tuned for product-market fit.
They know that once they find that high signal value-market fit, it will be time to focus their energies and attention on execution, customer development, product velocity, and later customer growth.
For now they need to keep their growth options open.
Have you struggled to make sense of multiple business model options? Are there two or more paths you could pursue? Let us know at Reason Street – we’d love to hear from you.