New Ideas for a New Year: Business Models that Work and Value Propositions that Sell

Copyright 12.92014: Scientific Cowboys – Nancy C Everitt, PMP

A Personal Lesson in Failure

About 18 months ago I sat in a mind numbing strategic planning session to create a more effective ACO analytical tool. It was clear that the collaborative group was about to embark upon an expensive and fruitless journey.

The good news, these were talented partners, the bad news is that planning process was circa 1980. Oh and the other bad news, as one of the investors my investment dollars were going to be squandered in the process.

Skip ahead…in a move of self preservation I introduced Steve Blank’s article on The Lean Start Up. Blank detailed an approach using the Business Model Canvas to create a business model and rapidly test the hypothesis before spending large sums on development.

We moved forward using the Business Model canvas. The greatest challenges to the process were the participants and the team’s ability to stay on track. The end result was mixed, but we did limit wasted time and capital.

Doesn’t sound very successful, does it? While this was no Facebook, this experience was an eye opener and has since become, in my view,  the most effective way to plan, test and innovate. Trust the process. This article will explain two planning methodologies 1) the Business Model Canvas and 2) Value Proposition Design and define the next steps for exploration and implementation.

 

New Tools, New Processes and a New Approach

The fog is clearing from my mind after several intense days in San Francisco and two red-eye flights and I am full of new ideas, business models, value propositions and applied activity.  Above all, I am both inspired and exhausted.

I just returned from San Francisco after attending Alex Osterwalder’s Master Class on Business Model and Value Proposition Design.  A. Osterwalder is the co-author of with Professor Yves Pigneur of Business Model Generation,  a global bestseller on the topic of business model innovation. Osterwalder also just completed the book Value Proposition Design.

 

Key Difference between Business Model and Value Proposition Design

Osterwalder distilled the difference between his tools as “internal value”– business model to create value for the business and “external value” – value proposition to create value for the customer.

 

How this Works

  • A canvas is used for each process:  Business Model and Value Proposition.
    • The key is to keep this high level, simple and visual.
  • You then test your hypothesis to validate if you indeed have a valuable business model that works or value proposition that customers want.
  • Testing occurs by talking to customers – not internal debate. Get on the phone or in the field.
  • Iterate. No Business Model or Business Plan survives first contact with a customer. Forget about perfection.
  • Modify and test till you are ready to prototype and test further.
  • The end game is that you reach success or failure without spending much capital.
  • Once you know where you are going and have validation – spend your funds to achieve success.

 

How to Get Started

Many organizations get started by reading Steve Blank’s article then buying the books, or jump start the process by hiring a consultant. There are also tools online such as www.strategyzer.com created by A. Osterwalder.

Below is a Business Model Canvas and below that a Value Proposition Canvas.

 

 

Success Stories

As you explore the process, there are numerous success stories from start ups, existing organizations and governmental entities such as the National Institutes of Health (NIH). In fact the NIH is using Steve Blank to guide their scientists toward the commercialization of inventions and ability to create business models and value propositions that work.

It doesn’t take a rocket scientist. You can follow this link to review the Business Model Presentation from Owlet led by two B-School students. These bright but inexperienced students used the process to create a successful company through testing and iteration. Click on the first video.  http://www.businessmodelcompetition.com/past-winner-videos.html

 

Summary:

Business Models and Value Propositions that are not customer tested are not likely to be successful. The two processes above can be used by any size or type of organization to significantly increase the likelihood of success.

Embrace the process and don’t be afraid to fail. Test, modify, test, modify, test, modify, repeat.

If you are ready to take the plunge, feel free to reach out. HEOPS through our Project Management Organization will facilitate the process for Clients and we can also refer you to other resources.

Good luck and a successful 2015!

 

About the Author:

Nancy C. Everitt, MBA, PMP  is the President and CEO of HEOPS, Inc., CentEO of CENTIPEDE Health Network and Editor in Chief of Scientific Cowboys. Ms. Everitt is lead strategist to Clients’ on the design and fulfillment of patient access solutions such as network development and provider engagement, quality analytics, Medicare Advantage STARS strategy, disruption analysis and mapping. Ms. Everitt has been involved in the strategy of each engagement and provides significant perspective on industry best practice.

In addition to serving as Editor in Chief on Scientific Cowboys, Ms. Everitt is a frequent contributing writer to the publication sharing real world advice and operational insights on process and performance improvement. Questions on this article may be addressed directly to neveritt@heops.com.

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