Since it’s the day after Thanksgiving, let’s have a little fun with the football metaphors and talk about how to create a business model playbook.
What’s a playbook?
When rookies join a football team, they are handed a binder of plays, aka the team playbook, which is a set of tactics that the team will pick from to implement throughout the game. The impacts of each play accumulate over time to determine if the game is won or lost.The plays can be executed separately and in any order as the teams take different factors into account like how far away they are from the goal line, the weather conditions, their competition, and the team members on the field.Having a playbook means that the team members can learn, practice and master individual plays. Since they’re all working from the same playbook, everyone on the team can study the plays and understand his role in each one, which helps the team work together as a unit.
What’s a business model playbook?
So what does this mean for your work improving complex systems?
Think of yourself as a coach for changeClick To TweetA business model playbook is a set of business models that you or your organization could implement over time. They can be executed independently of each other, or in a series. If you have a larger team or an enterprise you might execute them in parallel (which is where the football metaphor breaks down, but you get it).
What are the benefits?
You can use a business model playbook to benefit your team the same way a football coach would. A playbook can help you,
1. Organize your ideas
If you have scraps of notes everywhere of potential business ideas then putting them into a playbook could help.
2. Highlight gaps
Is there a play that you’d like to implement but you don’t have all of the required pieces yet? (ex. funding or a distribution channel)
3. Communicate with others
Football teams need to be on the same page (literally the same page of the playbook) to successfully execute. Referencing your own playbook can help your team understand what you are trying to accomplish.
4. Stay focused
Maybe you have a million ideas, so writing them down as separate plays could free up some mind space to work on other things, like executing the current play.
5. Adapt more quickly
So the market just completely changed or your partner bailed. No big deal, right? Having a playbook to reference can help save time by showing alternative plays you could implement with slight tweaks from where you are.
6. Identify risks
Creating a playbook helps you realize if all of your business plays are dependent on your star player or a key assumption that your customer needs what you’re selling. If all of your plays are dependent on high upfront costs, that’s another warning sign.
7. Build towards your vision
Is your dream to scale internationally but you don’t even have a local presence yet? Having a business model playbook and organizing a set of plays into a roadmap that ends with your vision is a way to see how your incremental decisions build upon each other.
Why business models?
Even when working with a product team, I like starting with the business model instead of the product because it helps to provide a more holistic view. It’s easy to get tunnel vision and spend the majority of the time thinking about the cool product or service you’ll provide, only to find out later that there’s no business model to support it. Exploring business models could save a lot of time by helping you identify issues and alternatives quickly.The concept of using a Business Model Canvas to generate ideas for business models has been around for a while, popularized by the book “Business Model Generation” by Alexander Osterwalder & Yves Pigneur, its companion resource “Value Proposition Design” and other models like the Lean Canvas in Ash Maurya’s “Running Lean: Iterate from Plan A to a Plan That Works” and pretty much every other book in the Lean series.All of these resources cover a systematic way to define, build, and test your ideas in the marketplace, emphasizing rapid feedback. This post will focus on the definition stage, and there will be future follow-up posts about creating a plan and testing your assumptions.
Before we dive into the parts of a business model and playbook, I’ll address some common questions and hang-ups.
This exercise is useful for you intrapreneurs. In your case, your customer will probably be other people in your organization, such as a manager or front-line worker, so you could develop a business model with their needs in mind.For example, maybe you’re providing training or a tool to help co-workers complete their tasks more easily. You may partner with another internal team or an external vendor to deliver that value.
What if you don’t have revenue streams? Some of you may be working in non-profits where your impact could be measured by the number of people served or their level of health. Maybe you are trying to increase your business’s reach or reduce the number of times customers need to call you to have a question answered.Since money may not be the only outcome, I like to use a “measurable definition of success” instead of revenue streams for planning business models, which we’ll cover further below.
One challenge that teams have when working within an enterprise is understanding where to draw the boundaries around the “business.” Do you treat the entire enterprise as your business or treat your team as the “business” and the other departments as partners? Who are your customers?Don’t worry too much about the reference point you choose to start with, you can always zoom out or in later. It’s important however to pick one and to be clear about the boundaries of your “business” before ideating business models so that you and the group don’t get confused about who is a customer vs. partner vs. part of your business.You could do a round of business model generation with one viewpoint, such as your department, and then shift your viewpoint to be either wider and include your enterprise or narrower to include just your immediate team or yourself as an individual.
The parts of a business model
While I walk through the components of the exercise, let’s make this interactive. Cause I know that Black Friday has inspired you to think about new business ideas.Feel free to open up the accompanying workbook and complete the exercise with me as we go.
Who do you serve and what are they looking for? Are all of your customers similar or do you have drastically different types of customers?
I’ll use this site as an example. I aim to create content to help three types of customers:
- Beginners or change newbies are either just starting out in their careers or have been working for a while, but are new to techniques that could help them expand their impact.
- Intermediate level professionals or changemakers-in-training are people who are employed as analysts, engineers, or designers. They are trained in some of the techniques but may need extra support expanding their skills and leadership confidence.
- Change agent experts are people who have successfully flipped teams, projects, or organizations and are an inspiration to others. They may be looking to learn from other industries, mentor others, or find a community.
How do you interact with your customers? Is it more of a self-service interaction or are you providing face-to-face support or full on concierge service? Will anything be automated or will there be a community aspect? How do your customers or potential customers want to interact with you?
Back to this site as an example, right now the business model is more of a self-service interaction with the ability for us to chat in the comments. I could add other ways to get to know you all better by providing live webinars or classes. Maybe go even further on the personalization spectrum and provide one-on-one coaching or longer term consulting services.
How do you reach your customers? Will it be via a website, email, social media, in-person or on the phone? Which channels do your customers prefer? Which are more cost-effective?
There are so many options now for channels to reach people. Digital options like websites, email, ebooks, or social media, or other options like in-person sessions, creating printed materials, and interacting via teleconference.
The value proposition is the reason people come to your site, product, program, or business instead of others. What value do you provide them through your products and services? How do you solve your customer’s problems or satisfy their needs? What makes you a better choice than the competition? Great value propositions are written from the perspective of the customer and describe the benefits they receive from your products and services.
This site provides “resources for changemakers trying to flip complex systems.” My goal is to help everyone move up to the change agent expert level. One way to do that is by sharing actionable tips, guides, and advice in a way that is accessible for anyone regardless of their background. Change agents of all levels will also have a place to find inspiration, other changemakers, and to learn new skills. And finally, it should feel like an escape, something that people will want to read, listen to, or watch outside of work, that is approachable and entertaining. Here’s another example from LinkedIn. Even though they could have listed out the site features on their sign-up page, they chose this single phrase instead. It appeals to their customer’s drive to improve their life, and it hints that LinkedIn is the best tool to get them there.
Measurable Definition of Success
I prefer to use “measurable definition of success” over “revenue” when defining business models because it covers initiatives where profits aren’t the only focus. Maybe you’re trying to provide healthcare, or increase engagement or education levels. Ash Maurya uses the term “key metrics” in his Lean Canvas, which is also a great way to think about it, but I found that “measurable definition of success” is a little more approachable for discussing business models with anyone with limited exposure to the world of metrics. You’re looking for a way to measure positive progress, to measure when you provide value to your customers. That measure could be anything from if your bank account is growing to the % of people with access to clean water or a combination of metrics. The metric(s) you pick should be meaningful enough to help you make decisions, especially if you’re trying to make a call about which business model to pick. If you’re not sure how to measure “intangibles” in your business, check out “How to Measure Anything: Finding the Value of “Intangibles” in Business” by Douglas W. Hubbard. Picking a target and a way to track the outcomes over time is very important when deciding which business models would be more valuable to pursue.
Some ways that I could measure the success of my business could be by the number of engaged readers, the number of people who have downloaded or purchased products, the number of people who have started businesses or initiatives because of the skills they learned here, the success of those initiatives, the growth of the business, the change in culture, or the amount of impact that the site has had on any single reader.
How will you provide the value? What kinds of activities will you need to perform beyond initial setup to make this solution work? Will you be actively engaged or passively involved?
Some activities could be creating written content, video, podcasts, or courses, moderating forums, coaching, consulting, building tools, or producing physical objects.
What kinds of assets or resources do you have to work with? Do you have existing products or infrastructure in place? What kinds of resources could you obtain? Do you need to build something or set up a new program to provide the necessary products and services?
This is a relatively new and small business so the key resources are limited to this site, my social media accounts, my network of contacts, my knowledge, background, and expertise, technology like my camera, phone, and computer, and software products that I already have or could obtain to create value.
Partners or Allies
Who will you work with to provide the value? Think about who you need to help create, deliver, or market the value you are creating. What will they be providing you? What activities will they be doing to support your business?
I own this url but Bluehost hosts it for me and takes care of a lot of the logistics, so that would be an example of a partner who helps me provide value. Other partners could be alumni networks, other companies such as Amazon or Teachable, graphic designers, other bloggers and business owners, forums and networking sites, meetup administrators, or school administrators. All of these partners could help me create, deliver, and market more value than I could on my own. Another example is Kiva. They work with field partners to manage the microloans locally while Kiva focuses on the interface with the lenders who loan money via their site.
How much time or money will this business model cost you? What are the most important costs in your business model? Are they fixed or variable?
Some examples of costs that I’d need to consider when implementing some of these plays are the cost of tools, renting space, buying materials, getting further training, advertising or outsourcing. I also need to consider the time spent as an opportunity cost, especially if I could have spent that time creating something of more value that would have brought in more value to my business.
Creating business model plays
As you go through this exercise there are different techniques you could use. You’ll need real or virtual cards for capturing ideas, and a chart for recording your final plays.
- If you’re working by yourself or with a partner: The workbook has some templates for you to print and cut out, along with a business model playbook chart to fill in.
- If you’re working with a group in-person: You could use sticky notes that are color-coded by category and a whiteboard.
- If you’re working with a remote team: I’ve also run this exercise remotely by creating virtual sticky notes using shapes in Powerpoint. Make some additional slides with the playbook chart so you can fill it in as you go.
If you haven’t yet, walk through every component of the business model listed above and write down as many ideas as you can. Write down one concept per card or post-it. For example, I would write “beginner,” “intermediate level,” and “expert” on three different customer segment cards. When you’ve finished generating ideas for the business model components, it’s time to start combining them into business model plays. Pick one card from each category and adjust if necessary to create a logical business model. Picking randomly from each pile could lead to interesting ideas that you haven’t thought of before. As you go through this exercise, record the business model plays in a document or record them on page 15 of the workbook. Add a fun name to each play to reference it.
Tips for coming up with business model names:
- Keep them short
- Reference existing businesses if your model is similar but with a twist
- Write the business model name from the customer’s perspective. How would they describe it to their friends?
- Try to refine “boring” names to make them more exciting. That’s not critical, but it helps to get everyone amped up about implementing the model.
Here’s a list of title formulas for inspiration:
- “existing business name” for “your unique customer”
- “existing product name” for “your unique customer”
- “value” via “channel”
- “customer relationship” + “value”
Keep going until you run out of combinations, time, or energy. If applicable, make sure you have your current business model outlined as well. That will be helpful when you build your roadmap later.
Building and refining the playbook
By now you’ll have a large set of business models written down. Look at the set and see if there are options for combining models or splitting them apart further to generate new ideas.Combine all of the plays into a binder, upload to a dropbox or wiki space, and make sure your team has access and that you have reviewed them and understand them.In your team reviews, focus on revising any ambiguous details. For example, a business model for “students” could look very different if you are serving college vs. elementary school students.Feel free to add more plays as you think of them. Football teams could have playbooks as large as 700-800 pages.
The next step is to use this playbook to make decisions about where to start, where you might want to go, to create a roadmap for change, and to test your assumptions. I’ll cover the next steps in future posts, but in the meantime you can print out the workbook again and practice on other companies, or dig into these amazing resources.
Strategyzer created the Business Model Canvas and Value Proposition Canvas and you can find more information about their books, products, and their blog on their site. You can find a copy of Ash Maurya’s Lean Canvas at Lean Stack. Happy Thanksgiving and business modeling!