Making untested hypotheses compatible to Business model innovation success

An email from Business model innovation hub (http://bit.ly/bnTd6G) landed on my laptop that stopped me to think a little harder on the whole momentum of Business model innovation. It summarized the ‘breaking’ collaborative work going on between Alexander Osterwalder, Steve Blank, Alan Smith and Bob Dorf. This is around untested hypotheses coming out of new Business models, that need a better structured and systematic way of exploring these to test assumptions, as early as possible within the lifetime of the model.

A breaking collaboration that seems really valuable

Steve Blank has summarized this first step in the collaboration in an entry on his site www.steveblank.com under http://bit.ly/9cElPf. He stopped me in my tracks (well briefly) with the statement that the “Business model canvas was at the end of the day a tool for brainstorming hypotheses without a formal way of testing them”- “a static planning tool”- the very thing I thought the canvas was taking us away from.

What the group is working upon is a “strategy stack for entrepreneurship”. A way to successfully validate and execute the Business model. All this sounds positive and interesting although it is was a little surprising to label the canvas initially that way. I would argue there are a number of other aspects that need focusing upon to validate and execute the Business model, including researching much both in formal, more structured ways and informal ways, applying given tools and techniques that clarify assumptions better.

Going beyond simply guessing

His diagram to drive home the point was highly effective- if all entrepreneurs do is ‘guess’ and on these quesses convince others to invest then something needs to be resolved to avoid this risk in the future and to build business models that have a higher chance to be successful.

Is all Business model work simply quessing? Still I don’t really want to go there as Steve Blank has some clear views on the alternatives that do make good sense- he coins this ‘Customer Development’. By spending some time on his site you will get a great understanding of his thinking and solutions and if it does reduce down this quesses then great and it raises my expectations from this collaboration.

The value of the Pivot

The heart of his own hypothesis, besides his Customer Development lies the Pivot, this is the point when reality leads you to change one or more of your business model hypotheses. Take a look at this excellent introduction to this concept from Eric Ries here (http://bit.ly/1fpIpK).

The pivot is the step you make from constantly  validating learning from your customers and then adjusting with this new knowledge your business model (in this case). It does make sense to adjust, adapt and manage the learning from implementing your Business model by adjusting to new information not throwing everything out when your Business model concept meets the ‘reality of the market place’. You pivot on what you have and adapt to new insights to achieve a better fit. Steve recommends a path to ‘discover and validate’ each assumption behind your business model and change it from fresh insight.

Where there is need to ‘test hypotheses in the Canvas

Steve offers a great visual of the different points that need testing and validating consistently within any new Bm based on the Business model canvas approach.

It strikes me this collaborative piece of work seems really valuable and ‘sensing’ the power of the minds within that meeting we should be expecting something a little different and exciting that moves both Steve’s and Alexanders work that significant step further.

I look forward to future posts on part of something that was certainly missing in the present work for Business model canvas, the steps necessary for validating and executing within Business Models. I certainly believe it will continue to evolve as we all gain from exploring Business model innovation in the future.

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