Using the Business Model Canvas when developing Digital Strategy
This is the first in a series of posts that describes techniques that are useful in the development of Digital Strategy.
It is impossible to overplay the transformative power of Digital, much has already been written about how traditional business models and entrenched organisations are being disrupted by Digital. e.g. Hotels and Airbnb, Personal transport and Uber. The impact of these disruptive forces is not limited to industries targeted by Silicon Valley start-ups, the transformative power of technology affects all businesses, whether they realize it yet or not. I’m not going to labour this point, if you’ve been awake in the last 5 years you know it.
I find many organisations are eager to understand what this means for them and how they can harness Digital to transform their business and the value they deliver to their customers. But in a world of so much change, so much disruption and so many possibilities the question that is often asked is:
Where do we start with Digital strategy?
Well, if strategy development is about making decisions about the direction of your business then first of all, its useful to understand where you are and what the context and landscape is around you.
There are various different techniques out there to help you, but a really useful type of map that is easy and informative to build and easy for your stakeholders to understand, is the Business Model Canvas:
There are already some great articles online describing the business model canvas so we won’t go into it here, and of course there is Osterwalder and Pigneur’s excellent book http://businessmodelgeneration.com/book?_ga=1.114473922.49991169.1452607558
The Canvas and Ideation
If the development of your Digital strategy simply takes its context and scope from your Business plan objectives then you will not achieve the Digital Business Transformation you require. The relationship between your business plan and your Digital Strategy should not be linear it should be iterative, as you develop your Digital strategy you will naturally uncover new strategic opportunities that may materially affect your business plan. To accommodate this iteration there needs to be flexibility and play within your strategy development.
there needs to be flexibility and play within your strategy development
The Business Model Canvas can accommodate that flexibility and ideation, I find it a great tool for use in strategic ideation workshops.
Visualising your business enables you to ask new types of questions around the key component parts of your business for example:
• Key activities: Are there new Key Actives that we need to introduce? Are there things we wish to stop doing or do more efficiently?
• Key Partners: How might we collaborate more effectively with our key partners? are there new partnerships we might uncover that helps improve our business model?
• Value Propositions: Are there new Value Propositions that we need to create? Are there Value Propositions that are no longer relevant?
• Channels: how might you deliver value through channels to your customers? which channels are most used? most costly?
• Customer Segments: Are there new customer segments that we need to target and understand? How are we meeting the needs of this customer segment.
• Cost Structure: how might digital enable you to transform you cost structure? What costs might we remove or restructure? e.g. can we make better use of our people by automating, removing wasteful tasks?
• Revenue stream: Are we getting revenue as efficiently as possible? can we improve our revenue collection costs? Are there new forms of revenue we want to pursue?
The Business Model Canvas provides a great high level overview of the business, enabling us to plot the key components of your organisation.
Here is a simple example of a hypothetical Housing Association:
Here we have mapped out the key components that make up the Housing Association’s business model. Once we’ve developed the Canvas for the organisation we can then use the base model to produce some insight to inform the Digital Strategy.
When developing a Digital strategy it is useful to ensure it aligns with any existing business strategy/plan. In this example of a hypothetical Housing Association we map the key elements of the business strategy/plan onto the Canvas:
The key elements of the hypothetical Housing Association, lets call it ‘Hypos Housing’, are:
· Hypos Housing intends to Remove/reduce the reliance on repairs contractors (Key Partners) by setting up a Direct Labour Organisation (DLO) to transform their Asset Management (Key Activity) and by doing so reduce their Property Maintenance (Cost Structure) costs.
· For commercial reasons Hypos Housing has decided to move away from delivery of personalised care (Value Proposition), which removes the need for Care and Support (Key activity).
· To continue to support its Tenants (Customer Segment) it plans to invest in Communities (Customer Relationship) through increased Community Investment (Key Activity)
· Hypos Housing intends to increase its Property Development (Key Activity) to increase the number of New Properties (Value Proposition) for sale, increasing its number of Freehold (Customer Segment) customers.
· Hypos Housing intends to increase the amount of Development (Key Activity) of Aspirational retirement living (Value Proposition), increasing the number of Retirement (Customer Segment) customers.
· In the face of threats to its revenue streams Hypos Housing needs to look at making better use of its People (Cost Structure and Key Resources). Hypos Housing plans to do this by transforming customer Self-Service (Customer Relationship) through Digital Channels e.g. Web (Channels), reducing the need for traditional costly channels such as Phone and Mail (Channels) and reducing Personal Assistance (Customer Relationships) to only those interactions that benefit from person to person interactions.
Building on the Canvas
Using the Canvas we can start to visualise the business strategy and also start to see relationships between the objectives of the strategy and its impact on the components of the business model. We can start to ask ourselves, how can we use/change these components to enable Digital Business Transformation?
We can also augment this high level view of the business with other complimentary views. For example, I find clients get real actionable insight from Value Chain Analysis, the Key Activities section contains the names of those key Value chains, and our analysis has highlighted that there needs to be significant transformation of Customer and Asset Management and improvement of Property development and Community investment, in order to achieve the strategy.
In future posts I’ll discuss Value chain mapping and introduce other complementary techniques such as Wardley maps and Business Capability Modelling and discuss how they work together to inform and communicate your Digital Strategy.