We’ve all experienced it — the moment you buy something, take it out of the package and lay your hands on it, you feel like it was designed just for you. Unfortunately, those moments are few and far between, which is why we need to take the creativity process that we talked about in our last blog to the next level. In this blog, we look at how design thinking and business model innovation combine to form a dynamic duo that can help bring brilliant products and services into our daily lives.
Everyday, we use an array of products or services that make us scratch our heads and wonder why nobody has come up with something better. There are so many itches to scratch and niches to fill around the world, yet time and time again, a new product fails to satisfy the market. That’s because the focus has traditionally been more centred on the product itself rather than the people using it. Recently, however, two new schools of thought have emerged that help realign this focus: design thinking and business model innovation.
Design thinking looks through the eyes of the end user to solve problems; in the context of business, it’s about focusing on the needs of the customer to develop a solution.
A business model is defined as how a company plans to create, capture and deliver value to customers. Business model innovation is focused on finding ways to reinvent or evolve the business itself to align customer needs with what the business provides.
What design thinking has lacked in the past is a structural business framework to accompany it. However that all changed this year when Alex Osterwalder wrote Business Model Generation and created a brilliant canvas that breaks a business model down into nine essential components.
Click Here to see full size Canvas
Combining a simple, ubiquitous tool (the business model canvas) with the creative, uninhibited mindset of design thinking can help companies reset their focus on their business model rather than their next product release.
Without a rock-solid business model, no company can survive over the long run. Finding that perfect way to “create, capture and deliver value,” however, requires unique customer insights and a creative touch. Design thinking is a great catalyst to set the process of finding the right business model in motion, as it helps a company identify the specific problem that affects a segment of the market and come up with a solution.
To show how business model innovation and design thinking can combine to knock the socks off the market, let’s look at PayPal and how they pioneered the online payment industry.
Click Here to see full size canvas
PayPal, which was started in the late ‘90s, was originally meant to be a mobile application to transfer money between PDAs. When the founders realized that this wasn’t something that anybody wanted they shifted their focus to the growing Internet, and especially eBay, to try and save the company. What they quickly realized is that no one had come up with a solution to painlessly make payments between buyers and sellers. Other companies had tried to implement e-currencies to fill the gap, but had missed the mark. PayPal focused on designing a customer-centric solution based on existing infrastructure – they used email as the medium and made use of pre-existing bank accounts and credit cards to facilitate user-friendly e-payments on eBay. Their solution was simple and it worked. Once users began adopting the solution, PayPal began looking for the business model to scale the company. Originally, they thought that they could make money from the interest on payments held in escrow between accounts. They quickly, realized, however that this idea wouldn’t work and changed the model to a commission-based model per transaction, which has helped them become an industry leader and pioneer in the digital payment world.
PayPal was not the first company to focus on the e-transaction market, nor were they the first company to create a payment acceptance application for merchants. They staked their claim by developing a user-friendly solution and finding the perfect business model. It’s a classic example of how design thinking and business model innovation were used to make the business scalable, and more importantly, give customers something worth getting excited about.
+ Download a copy of the business model canvas (click here)
Overall, the business model innovation/design thinking combination can be used to create new businesses that put great products and services in the hands of customers. Very few businesses fail because the technology wasn’t good enough, or a product wasn’t durable enough; it’s because they didn’t design their business to provide what the customer was looking for.
Edited by Mr Peach’s Editing Services
Check out Part V, where we discuss why its crucial to Let the Market be your Guru to determine whether your new idea or concept has merit …
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