business-engineering-manifesto

Business Engineering Manifesto

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 simplify things, by focusing on customers. This approach is way more scalable. And it’s a sort of heuristic that helps scale businesses. 

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 experimentation, and to quickly test the underlying assumption of a business

In short, the business engineer doesn’t take any truth as 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 layers 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.

This translates into a barbell strategy, where the business engineer moves in both ways: with an incremental/continuous improvement approach, and with a breakthrough mindset, to test if the business landscape has changed or to anticipate it. 

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. 

The business engineer looks for breakthroughs, before the business landscape has changed, to anticipate new market dynamics. 

Ciao!

Gennaro ♥️ FourWeekMBA

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