Lean Business Modeling: Rapidly Visualize, Analyze, and Design Business Models

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"Every system undergoes continuous iteration from the complex through the simple to nothingness while getting its job done. Otherwise, the system dies." Rod King.

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There are two distinct approaches on the spectrum of business modeling: "Fat" Business Modeling and "Lean" Business Modeling. "Fat" Business Modeling includes the first generation of business modeling tools such as Porter's Value Chain and Five Forces; Kaplan & Norton's Balanced Scorecard and Strategy Map. Tools of Fat Business Modeling are becoming obsolete because they are slow, boring, and not easy to use especially in the world of entrepreneurship. Fat Business Modeling tools do not focus on "business model" as unit of analysis.

"Lean" Business Modeling, which is pioneered by Rod King, focuses on a "business model engine" as a unit of analysis and design. Lean Business Modeling has tools such as the Business Model Iceberg, Business Model Strip, and Value Engine Map. Lean Business Modeling tools are specifically designed for use in rapid documentation, analysis, prototyping, and design of business model engines. Designed to eliminate waste that is inherent in use of existing tools, Lean Business Modeling tools are simpler, faster, and funner to use. Between Fat and Lean Business Modeling is Alexander Osterwalder's Tool of the Business Model Canvas as well as Mark Johnson's 4-Box Business Model. A spectrum for business modeling tools is shown below.

Emerging tools for Lean Business Modeling include the Business Model Iceberg and Business Model Strip. The leanest tool is the Business Model Strip which applies a graphical approach to business modeling: business models are visually represented using nodes (dots) and linkages (lines) as well as arrows to indicate dynamic relationships and interactions. A node may be a stakeholder or organization such as a supplier, enterprise, firm, customer, government, or non-profit organization. A linkage between two nodes may represent a relationship, transaction, or flow involving a good (product), service, information (data; Intellectual Property (IP); contract/rights; money; exposure; reputation; experience (delight/pain); emotion; influence; (bargaining) power).

A Business Model Strip represents a business model engine that consists of three engines: Customer Growth Engine, Enterprise Engine, and Value Engine. For a given business, an Enterprise Engine creates value; a Customer Growth Engine delivers value; a Value Engine captures/shares value. In an industry, a business usually gains competitive advantage by having an unfair advantage regarding the performance of an engine in the stack of Customer Growth, Enterprise, and Value Engines. Competitive disadvantage can be explained by lackluster performance of a weak engine that slows down or constrains performance of a Business Model Engine. Business Model Strips can be used to quickly illustrate business model engines, patterns, and archetypes.

To illustrate how the visualization tool of Business Model Stripping can be applied to business model visualization, analysis, and design, I've applied it to present an overview of the business models of three giant retailers in the US: Wal-Mart, Target, and Costco.

Customers of retail stores have a goal or "Job To Get Done" of obtaining food, drinks, and hard goods. Although success criteria for getting this job done vary from customer to customer, the typical trade-off that customers make is at the physical level and in particular between Cost (Inaccessibility) and Quality (Differentiation). Below is a Value Engine Map of Cost (Inaccessibility) vs. Quality (Differentiation) for the aforementioned job to get done. While Wal-Mart and Costo directly compete for the same "low cost" customer segment, Target competes for a different focus. Nevertheless, all three giant retailers currently use a 1-sided business model.

Using the approach of Lean Business Modeling, the revenue model of Wal-Mart, Target, and Costco is illustrated below.

Advantages of using Lean Business Modeling include greater simplicity, speed, and fun especially in business model conversations, analysis, and design. In the above Lean Business Model diagram, similarities and differences between the business model of Wal-Mart, Target, and Costco can be easily seen.

Diagrams of Business Model Strips can be expanded to Business Model Icebergs, Business Model Canvases, Strategy Maps, and Value Chains. Business Model Strips provide flexibility in design as a designer can zoom in and out of specific parts or engines of a Business Model Strip. At no point in time has it been simpler, faster, and funner to model businesses. In time, I expect Lean Business Modeling and use of Business Model Strips to provide the foundation of Business Model Engineering as well as ROD's Business Notation which involves a comprehensive graphical notation system for rapidly illustrating, analyzing, and designing business models; ROD is an acronym for "Red Ocean Disruption."

As the above spectrum of the Lean Business Model indicates further simplification of tools for business model visualization would occur. For instance, we could have simple apps and Software as a Service (SaaS) for doing Lean Business Modeling and in particular, Business Model Strips. In the meantime, I'd appreciate it if you could use Lean Business Modeling and share your Business Model Strips. I intend to compile as well as share a document of Business Model Strips for enterprises in diverse domains.

So, would you join us to translate into reality our dream of freely providing a compendium of Business Model Strips for various industries?

I look forward to hearing from you. And thanks in advance ...

Rod.

Note: Dr. Rod King offers coaching and consulting services on Lean Planning which includes Lean Business Modeling. Dr. King is also available for delivering inspiring talks and seminars on Lean Planning to leaders, managers, and employees of organizations especially existing and prospective practitioners of lean improvement, lean innovation, and lean business modeling. For more information, contact Dr Rod King (rodkuhnhking@gmail.com & 1-559-2486230).

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