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.
Contents
- From design thinking to business design
- Business design definition
- Why does business design matter?
- Understanding the innovation circles
- Business designer salary
- Business designer skills
- Business design examples
- Key takeaways:
- Beyond Business Design: Welcome to the new era of Business Engineers
- A business engineer borrows the customer-centered approach from design thinking but it brings it to another level with customer-obsession
- A business engineer borrows experimentation from business modeling
- A business engineer starts by following the money, but it moves through the layer of a business to find its core asset
- A business engineer understands the intricacies of a complex system, where figuring out the problem is the real problem!
- A business engineer knows that competition in the short term is linear, while it becomes non-linear in the long-run
- A business engineer knows when to use an incremental approach, and when a breakthrough approach is needed, instead
- What is Business Design?
- Why design is important for business?
- What is a business model example?
- What is b2b business model?
- Related Business Concepts
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?
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
These circles’ aim is to test and prioritize the proper questions to build a sustainable business model.
How does a business design process work?
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.
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.
Business designer skills
A business designer has a mix of skills that go from analysis, business modeling, business model innovation, business development, and lean methodologies, and combines all those things to build successful businesses that create an impact in the world!
Business design examples
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 marketing strategy 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 as well as facial hair were also developed, marketed, and released.
Philips reached the 100 million blades sold milestone just five years after OneBlade was launched.
Key takeaways:
- 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 and 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 in building and growing 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, to move away from it, in a non-linear fashion, customer obsession is a key ingredient.
It enables you to create exponential opportunities, with a bottom-up approach, that becomes very hard to predict also 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 key 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.
In short, the business engineer doesn’t take any truth for a given and business modeling becomes useful to test 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
A great way for the business engineer to start understanding other businesses is to look at the outer layer: revenues.
However, the revenue model is just the starting point for guessing what’s the core strength of a business.
And the business engineer peels off the various layers, moving from the revenue model to the financial model (understand revenues in conjunction with 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, where 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 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 markets that seem unrelated 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 main mode is dynamic, second-order effects thinking
A business engineer knows that in a complex system, there is often no direct cause-relationship dynamic, 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.
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, coupled with a new set of tools and frameworks will be needed.
In the breakthrough scenario, lateral thinking, second-order thinking, and non-linear thinking become key ingredients!
Other resources to design your business:
- Business Models
- Business Strategy: Definition, Examples, And Case Studies
- What Is a Business Model Canvas? Business Model Canvas Explained
- Blitzscaling Business Model Innovation Canvas In A Nutshell
- What Is a Value Proposition? Value Proposition Canvas Explained
- What Is a Lean Startup Canvas? Lean Startup Canvas Explained
What is Business Design?
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.
Related Business Concepts
