Business Model Canvasing vs Business Model
Business plans lay out a bunch of guesses; but they do it in a long form way that obfuscates each of the premises that the business is built on, thus its cumbersome way to analyze the premises and it actually hides them so well that most people loose these premises all together. Plus, the group think ferocity that emerges from writing and collaborating on the “business plan” document gets people so excited about the imaginary story that they all want to believe it so bad that they all just pass if it as if it will work.
Instead, smart Silicon Valley success stories have realized that a business plan is just a piece of their imagination and they have no idea how it will play out in the actual world. The difference is between art and engineering: a business plan writer might image some cool sounding ideas but engineering needs to build it so it works with the laws of the physical world. Its deeper than that though, the great sounding imagined business idea needs to fit and work with humanity and society on so many aspects and levels.
Therefore a business plan outline is better than written prose. Furthermore, its not really the plan that you are wanting to test to make work in human society, its the actual business model. A plan is series of steps that go to a desired conclusion; a business model is a pattern of doing business (trading some service or product with money) that is repeatable. A good business model is self sustaining. A “startup” business model, the one’s that Silicon Valley likes, is scalable: you can inject more money into it an it will grow successfully. So, a good business model is repeatable, self-sustaining and perhaps even scalable.
Does a business model need to be tested? Most people are really convinced that what they just wrote or thought of will work, because of their experience in the field.
Let’s assume you do have a business model that does work. The first question is, how do you know that it work? You don’t. How can you convince someone else that it will work? You can’t. So, testing your business model hypothesis accomplishes these two objectives.
Testing will give you more insights into what you first imagined, so it can make your original idea even better. In this conception, testing actually turns out be more of discovery.
This is why it has been famously termed by Steve Blank, “Customer Discovery.” What is needed it to learn more about the people who are your customers. Then learn more about how to reach them and build a relationship of meeting their needs and desires in exchange to money, and to do this the most important thing is to learn how to abate and meet their fears.
The Customer Discovery methodology learns everything needed about your customer’s desires and fears, for the effect of testing your business model.
Business model validation is the comprehensive process of testing your business model. This is what RKS Agency performs.