What is business design?
Business design is a key activity of strategic planning. That’s where the big decisions get done, so you might want to employ the best practice to do it. You need to understand the design drivers, like the trends, discontinuities, and constraints in the environment, and formulate the business models of your enterprise accordingly:
- Product categories
- Customers and their segmentation
- Value proposition
- Value system players and their earning logic
A drill-down to the value system reveals many types of relationships between the value system players, for example:
- Inquiries and requests
- Contracts and agreements
- Product transactions
- Financial transactions
- Knowledge flows
- Partnerships and alliances
These relationships imply activities of some sort in both parties of the relationship, forming the basis of your process architecture, information systems requirements, and resource needs. But the ingredients evolve continuously. The practices around business design need to change from an annual strategy marathon, to a continuous stream of short and fast sprints. The QPR ODM methodology shows how business design fits in the big picture:
1. External analysis: Monitor opportunities and threats to your business models emerging from trends, discontinuities, and weak signals in the 5 competitive forces (competitors, suppliers, buyers, substitutes, and new entrants) and PESTEL (Politics, Economics, Social environment, Technology, Ecology, and Legislation).
2. Business design: When detecting significant changes in the external environment, adjust or redesign your business models accordingly, responding to opportunities and threats.
3. Internal analysis: Discover the strengths and weaknesses of your current operating models against the adjusted or redesigned set of business models.
4. Operations design: Adjust or redesign your organization, processes, and information systems accordingly. Feedback to business design about operative constraints.
Business design, as the entire strategy process, should not be a one-off activity. You should continuously test your business models with market and customer data. You can use business intelligence, machine learning, growth hacking, process mining, or any method that anchors your design to the observable real world. Feed back the results continuously to business and operations design, and test again. Keep track of the evolution of your business models. Let them represent the accumulation of your continuous learning. Remember that the best business models are designed to change.
An enterprise is a complex socio-technical system, more complex than its products. Like products, managing business and operating model design requires supporting systems, consisting of competences, methods, and tools. A new category of business support systems is emerging for this purpose, called Business Operating Systems (BOS), just like Enterprise Resource Planning (ERP) systems emerged over a couple of decades, integrating many fragmented point solutions. Fragments of a BOS are available today from many sources. These include tools for enterprise architecture and business process analysis, portfolio management, work effort management, enterprise collaboration, and performance management. However, a full-blown integrated BOS offering is still a rarity. The spectrum of competences required for it does not exist in many companies. It is a capability very hard to create and trade, just like any company-specific strategic asset.
To learn more about business design, check out our webinar below.