Business design enables organizations to deliberately craft a business model to prove sustainability in the marketplace by validating the building blocks of a business model. The business designer can help an organization build a viable business model by readily testing its riskiest assumptions against the marketplace.
From design thinking to business design
In the world of design thinking, a process of iteration is put in place to seek the understanding of a key stakeholder: the user.
The primary goal is to iterate as quickly as possible on the assumptions made about what users want, and only when data is gathered and feedback is learned that the whole process makes the product improve.
Business design is built on the same premises of design thinking, with a primary difference.
Where design thinking helps build products users love. Business design helps entrepreneurs build organizations that thrive in the marketplace via innovation.
Business design definition
There isn’t a single definition of business design.
At its core, business design is about creating a long-term competitive advantage for an organization by designing business models that can be tested and turned into value creation machines.
Indeed, business design is the set of tools that help entrepreneurs build a value proposition that generates business value, delivered via an innovative business model, to capture value in the long term.
Why does business design matter?
A business model is not a perfect creation. While that is the tool to capture value in the long run, it also needs to be tweaked and tested over and over again, to make it sustainable. Thus, business design helps enhance the process of business model testing so that a sustainable business model can be built more efficiently.
In the current marketplace, dominated by digital innovation and new models, understanding business design can be the difference between building up a successful company.
Understanding the innovation circles
One of the prevailing methodologies for business design and innovation is IDEO’s approach, based on three primary circles:
Desirability is primarily about people and understanding their deep desire for a product or service
Feasibility is about the functionality of a product or service and whether it can deliver on its value proposition
And viability is primarily focused on the business side and whether it makes sense from the sustainability of the business
A business design process wants to translate assumptions about how a business should be into a business model prototype, that can be tested, and iterated in the marketplace.
One of the key elements of a business design process is the ability to isolate the assumptions that might make a business model thick in the marketplace. So that those assumptions can be tested and iterated.
What does a business designer do?
Tim Brown, Executive Chair of IDEO, defined design thinking as “a human-centered approach to innovation that draws from the designer’s toolkit to integrate the needs of people, the possibilities of technology, and the requirements for business success.” Therefore, desirability, feasibility, and viability are balanced to solve critical problems.
Business designers take juicy, creative, human-centered innovation and make it succeed out there in the real world. We use strategy, analysis, and financial modeling as generative design tools, and help organizations turn their biggest, wildest ideas into businesses with long-term viability.
In short, a business designer is a strategist, analyst, and financial analyst able to turn insights into business models that turn out viable in the long-term
In a job description as a business designer, IDEO explains:
As a Business Designer, you will be ensuring that the viability of new concepts are thoroughly considered. In this capacity, you’ll work with the team to understand the client context, collect and interpret relevant data, develop insights, explore and define growth opportunities, define strategy, create tangible design expressions, communicate the vision, and ultimately help our clients get new offers to market.
Business designer salary
Source: comparably.com
According to comparably.com, a business designer makes on average $65K in the US. According to glassdoor, an IDEO senior business designer makes $118,141 – $135,600 per year.
As we saw, business design is the design of business. It is an approach that combines the various tools of strategists, analysts, and thinkers with the methods and philosophies of design.
While it does incorporate aspects of design thinking and similar customer-centric approaches, business design has a broader focus on profitable business models.
To that end, business designers endeavor to ensure that business ideas make the organization money and contribute to its growth.
This role has become widespread in recent years with many organizations unable to commercialize their designs and show a return on investment.
While the business design is a broad concept, we will provide some examples of how it is being used below to better explain its usefulness.
Vanderlande
Vanderlande is a market leader in global logistics and airport systems automation that was acquired by Toyota Industries in 2017.
In the wake of the coronavirus pandemic, the company and the industry as a whole was impacted by a sustained increase in online eCommerce and volatile shifts in consumer purchase and travel behavior.
To future-proof the business, Vanderlande collaborated with a business design firm to create and launch a luggage-handling system based on self-driving vehicles.
The firm undertook six months of detailed research and conceptualized a new business model that turned the dominant product-based business model into one that was service-driven.
The vehicles, which are collectively known as FLEET, use machine learning and data-driven solutions to optimize every aspect of the luggage-handling process.
They collect data on how many passengers are traveling, their final destination, and how much weight they are carrying.
Insights from these data are used by airports and airlines to better react to unexpected surges in travel demand.
The data can also be applied to analyze supply chain efficiency across multiple industries and enables airports to avoid over-investing in conveyor belt systems that are expensive and tend to be underutilized.
Johnson & Johnson
Johnson & Johnson used business design to tackle the difficult challenge of providing healthcare for individuals in Myanmar with HIV.
Existing health systems were convoluted and did not cater to those who lived in rural or remote areas. Many were also subject to the stigma associated with contracting the virus.
To better understand the needs and context of the healthcare market in Myanmar, the company took a customer-centric approach by visiting patients in person and taking an empathic approach to their problems.
Johnson & Johnson then created an electronic medical record product that simplified the country’s complex health ecosystem and improved the lives of those living with HIV.
This initiative, which took the company a step closer to its mission of improving the lives of HIV sufferers globally, was achieved in a business model with three core factors:
One-stop clinics – which enabled all touchpoints of HIV treatment to occur at a single location.
Cultural games – to spread awareness of HIV among the next generation.
Self-sustainability – to help the community grow and combat HIV independently.
Philips
Philips recognized that millennial consumers – who were quickly becoming its largest market segment – were less concerned with shaving and more concerned with grooming.
In other words, traditional shaving products were no longer relevant.
The company worked with a business design firm to launch OneBlade, an innovative and revolutionary hybrid styler that could trim, shave, and create the clean lines millennial consumers desired.
This disruptive product required a similarly disruptive business design.
A new marketingstrategy and subscription business model was created from scratch, with blades delivered to customers’ doorsteps to resonate with millennial notions of convenience and value.
Subsequent innovative products for body hair and facial hair were also developed, marketed, and released.
Business design is the design of business. It is an approach that combines the various tools of strategists, analysts, and thinkers with the methods and philosophies of design.
To future-proof its logistics business, Vanderlande collaborated with a business design firm to create and launch a luggage-handling system based on self-driving vehicles. The data-driven solution allowed airlines and airports to better respond to demand fluctuations and move away from inefficient conveyor belt systems.
Johnson & Johnson used customer-centric business design to deliver better health outcomes for HIV patients in Myanmar, while Philips used it to create a new category of personal care products from scratch.
Beyond Business Design: Welcome to the new era of Business Engineers
A business engineer combines the ability to deeply understand the technology (especially the underlying economic incentives/disincentives), comprehend how to distribute it, and the willingness to experiment fast and iterate to create closed customer feedback loops.
Thus, business engineering combines analytical skills, an overall business model strategy powered by market intuition, and a rapid experimentation workflow as a reality check.
On FourWeekMBA, I advocate for the rise of the business engineer, which in my definition, is a hybrid between a business designer, an analyst, and a business model strategist:
In short, the business engineer, through experimentation, testing, interaction, and intuition, builds and helps build and grow businesses by reverse-engineering the core asset of a business.
A business engineer borrows the customer-centered approach from design thinking, but it brings it to another level with customer-obsession
One thing about Design Thinking is the customer-centered approach, which is also a foundational element of business engineering.
Indeed, in the Internet era, there is a practical reason to keep customers as the focus; they are a bottom-up force, able to shape markets in unpredictable ways.
Thus, you can have a top-down approach where you build and try to execute complex strategies.
Or, you can simply things up by focusing on customers.
This approach is way more scalable.
And it’s a sort of simplification heuristics that helps scale businesses over time.
Yet, business engineering brings this to the next level through a customer-obsession approach.
In other words, while the competition still matters a lot, in reality, customer obsession is a crucial ingredient to moving away from it in a non-linear fashion.
Customer obsession goes beyond quantitative and qualitative data about customers, and it moves around customers’ feedback to gather valuable insights. Those insights start with the entrepreneur’s wandering process, driven by a hunch, gut, intuition, curiosity, and a builder mindset. The product discovery moves around a building, reworking, experimenting, and iterating loop.
It enables you to create exponential opportunities with a bottom-up approach, which also becomes very hard to predict for your competitors.
And therefore, it destabilizes competition, levels up the game, and provides much more value to customers.
A business engineer borrows experimentation from business modeling
Another critical aspect is business modeling. It’s another foundational pillar of business engineering.
Yet, where business modeling often becomes too much about planning. In business engineering, business modeling is used for experimenting and quickly testing the underlying assumption of a business.
Where scientists use labs to test their hypotheses through experimentation, entrepreneurs build business model experiments to test their business ideas in the real world.
In short, the business engineer doesn’t take any truth for a given, and business modeling becomes helpful in testing these beliefs in the real world.
A business engineer starts by following the money, but it moves through the layer of a business to find its core asset
An excellent way for the business engineer to start understanding other businesses is to look at the outer layer: revenues.
Business analysis is a research discipline that helps drive change within an organization by identifying the key elements and processes that drive value. Business analysis can also be used in Identifying new business opportunities or how to take advantage of existing business opportunities to grow your business in the marketplace.
However, the revenue model is just the starting point for guessing a business’s core strength.
And the business engineer peels off the various layers, moving from the revenue model to the financial model (understanding revenues in conjunction with the cost structure and cash generation) and the core moat (technology, product, distribution, and marketing).
A business engineer understands the intricacies of a complex system, where figuring out the problem is the real problem!
The business world is a complex system with a lot of noise, and the most difficult part is figuring out the problem at hand.
In short, the business engineer knows that customers are willing to enable the business model advantage of a company if that company is willing to innovate, which means figuring out the problems customers have.
In many cases, customers don’t know the problems they have, and they are not able to articulate those problems.
Therefore, the business engineer figures out ways to frame these problems and build valuable products around them.
A business engineer knows that competition in the short term is linear, while it becomes non-linear in the long-run
In a business world driven by technology and digitalization, competition is much more fluid, as innovation becomes a bottom-up approach that can come from anywhere. Thus, making it much harder to define the boundaries of existing markets. Therefore, a proper business competition analysis looks at customer, technology, distribution, and financial model overlaps. While at the same time looking at future potential intersections among industries that in the short-term seem unrelated.
In a tech-first business world, competition is tricky.
Indeed, markets develop in a non-linear way in the long term.
In fact, while in the short-term, competition seems linear, in the long-term, unrelated markets tend to cross each other, and a few industries end up consolidating into one, which eats up the previous industries.
In this perspective, the business engineer knows that one thing is completed in the short term, and another is competition in the long run.
A business engineer’s primary mode is dynamic, second-order effects thinking
Second-order thinking is a means of assessing the implications of our decisions by considering future consequences. Second-order thinking is a mental model that considers all future possibilities. It encourages individuals to think outside of the box so that they can prepare for every and any eventuality. It also discourages the tendency for individuals to default to the most obvious choice.
A business engineer knows that there is often no direct cause-relationship dynamic in a complex system, but things get more subtle.
In short, when you do something, that action might cascade at various levels of the business, thus creating complex dynamics.
Systems thinking is a holistic means of investigating the factors and interactions that could contribute to a potential outcome. It is about thinking non-linearly, and understanding the second-order consequences of actions and input into the system.
A business engineer knows when to use an incremental approach and when a breakthrough approach is needed, instead
In many cases, a market moves according to incremental dynamics. This usually happens in markets that are consolidating.
And in that context, continuous improvement is all that matters.
Yet, when a market is saturated and new markets are developing around it, new complex dynamics kick in, and those require a breakthrough thinking approach.
Current processes, frameworks, and tools slowly, then suddenly stop working.
And a new mindset and a new set of tools and frameworks will be needed.
In the breakthrough scenario, lateral thinking, second-order thinking, and non-linear thinking become vital ingredients!
Lateral thinking is a business strategy that involves approaching a problem from a different direction. The strategy attempts to remove traditionally formulaic and routine approaches to problem-solving by advocating creative thinking, therefore finding unconventional ways to solve a known problem. This sort of non-linear approach to problem-solving can at times, create a significant impact.
Business design enables organizations to deliberately craft a business model to prove sustainability in the marketplace by validating the building blocks of a business model. The business designer can help an organization to build a viable business model by readily testing its riskiest assumptions against the marketplace.
Why design is important for business?
Business design helps entrepreneurs, managers, and executives craft business prototypes of how their business might look in the marketplace and test their hypotheses quickly. Therefore, helping business people craft experiments to test those hypotheses. That enables to build a successful business, quickly and cheaply to unlock growth and traction.
What is a business model example?
A business model is a framework for finding a systematic way to unlock long-term value for an organization while delivering value to customers and capturing value through monetization strategies. A business model is a holistic framework to understand, design, and test your business assumptions in the marketplace.
What is b2b business model?
In a B2C model, a business deals with other companies. Examples of B2B include companies like Salesforce and Dropbox, which usually sell to other businesses. The B2B model offers a product or service which is wired toward a smaller set of customers compared to B2B which has different features.
A Blockchain Business Model according to the FourWeekMBA framework is made of four main components: Value Model (Core Philosophy, Core Values and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics/incentives through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.
In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.
In a business world driven by technology and digitalization, competition is much more fluid, as innovation becomes a bottom-up approach that can come from anywhere. Thus, making it much harder to define the boundaries of existing markets. Therefore, a proper business competition analysis looks at customer, technology, distribution, and financial model overlaps. While at the same time looking at future potential intersections among industries that in the short-term seem unrelated.
Technological modeling is a discipline to provide the basis for companies to sustain innovation, thus developing incremental products. While also looking at breakthrough innovative products that can pave the way for long-term success. In a sort of Barbell Strategy, technological modeling suggests having a two-sided approach, on the one hand, to keep sustaining continuous innovation as a core part of the business model. On the other hand, it places bets on future developments that have the potential to break through and take a leap forward.
A transitional business model is used by companies to enter a market (usually a niche) to gain initial traction and prove the idea is sound. The transitional business model helps the company secure the needed capital while having a reality check. It helps shape the long-term vision and a scalable business model.
The minimum viable audience (MVA) represents the smallest possible audience that can sustain your business as you get it started from a microniche (the smallest subset of a market). The main aspect of the MVA is to zoom into existing markets to find those people which needs are unmet by existing players.
Business scaling is the process of transformation of a business as the product is validated by wider and wider market segments. Business scaling is about creating traction for a product that fits a small market segment. As the product is validated it becomes critical to build a viable business model. And as the product is offered at wider and wider market segments, it’s important to align product, business model, and organizational design, to enable wider and wider scale.
The market expansion consists in providing a product or service to a broader portion of an existing market or perhaps expanding that market. Or yet, market expansions can be about creating a whole new market. At each step, as a result, a company scales together with the market covered.
In the FourWeekMBA growth matrix, you can apply growth for existing customers by tackling the same problems (gain mode). Or by tackling existing problems, for new customers (expand mode). Or by tackling new problems for existing customers (extend mode). Or perhaps by tackling whole new problems for new customers (reinvent mode).
In the FourWeekMBA Revenue Streams Matrix, revenue streams are classified according to the kind of interactions the business has with its key customers. The first dimension is the “Frequency” of interaction with the key customer. As the second dimension, there is the “Ownership” of the interaction with the key customer.
Revenue model patterns are a way for companies to monetize their business models. A revenue model pattern is a crucial building block of a business model because it informs how the company will generate short-term financial resources to invest back into the business. Thus, the way a company makes money will also influence its overall business model.
A pricing strategy or model helps companies find the pricing formula in fit with their business models. Thus aligning the customer needs with the product type while trying to enable profitability for the company. A good pricing strategy aligns the customer with the company’s long term financial sustainability to build a solid business model.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
