Design Thinking + Business Model Innovation

A lot has been said and written about what design thinking is, so I will not go there. Instead, I will take a typical design thinking process and show you how it can be applied to business model design.

As the design firm IDEO has been one of the early advocates of design thinking, let us use one of their design thinking processes as outlined in the Design Thinking for Educators Handbook. Other processes are fairly similar and I found this one to be easy and clear enough to be understood quickly by people without a design thinking background.

The design process has five phases: Discovery, interpretation, ideation, experimentation and evolution.

1. Discovery
The discovery phase is all about gathering data. You want to gain inspiration for your new business model. The question is where to look for this inspiration. One of the principles of design thinking is to start with people, aka customers, and trying to understand their needs and frustrations. There is actually a growing body of evidence that looking outside of your company and to customers’ needs will lead to more innovative ideas, than purely looking internally. Solving customers’ needs is the key to a successful business. So you will need to go outside. (Note that I wrote you! Don’t outsource this to a market research agency. Get first hand experience!) Talk to customers. Satisfied ones, unsatisfied ones, potential customers, people who would never buy your product or service, and also people you have never considered as a potential customer. Talk to your competitors’ customers. Ask them about what makes them happy with the current businesses and offerings in the industry, why they buy or do not buy from you, your competitors, and other industries. Ask them about their job-to-be-done or need to be fulfilled and their expectations. Try to understand the steps in the customer journey they need to take, what delights and frustrates them. What are their pain points?
The design process is what puts design thinking into action. (IDEO)

Besides the customers, it has also proven helpful to look at the typical business models within and outside your industry. Understanding the logic of how an industry works and what its dominant business models are, can often help to identify what is not working well in the industry and why. Services like the Business Model Gallery can help you to gather data on existing business models.

Besides looking outside of your company, you might also want to talk to your “internal customers” and ask them what they think about the way you do business, or assess what your company is really good at, what skills, capabilities and assets it possesses that can be leveraged. Such things can be particularly interesting for established organizations. Often you do not need to depart far from your existing business area to invent a completely new growth business with a new business model.