Business Context in Design Thinking

Before we craft the value proposition for your business model, it is important to understand the external context your business will be operating in. Statistics do not favour the success of start-ups. Only one out of 10 start-ups ends up achieving some form of success. Most start-ups just focus on their idea and do not spend enough time thinking about the externalities affecting their business. These factors represent many aspects, the most important of
which include the following:

◾ Technology. The adage “change is the only constant” is perhaps most pertinent now and applies more to technology than any other aspect of society. Not only is the rate at which technology changes exponential but the pace or the frequency of the cycle of change is also following an exponential curve. This change spans all types of technologies, including computing, storage, networking, mobile access, nanotechnology, digital biomedicine, artificial intelligence, pico-technology, internet of things, crypto-currency, autonomous robots and cars. Unless you have a close eye on the technological trends likely to impact your business model, you run the risk of being disrupted. These technological trends, if leveraged properly, also present an opportunity to craft innovative solutions. Understanding the near-term and long-term technology trends will also help you take advantage of emerging technologies to build your business model around.

◾ Business Models. Traditional business models are giving way to new models which are upending centuries-old ways of doing business. Some of the examples include the following:

Online retailing, which incurred fractionally lower cost for every dollar of revenue it earns compared to traditional brick-and-mortar retail operations.

Peer-to-peer business model, such as the ones exploited by Uber, Lyft and AirBNB, have upended traditional taxi operations and rental car companies by matching consumers and providers with extra capacity (in their cars or homes) to consumers who need to use that capacity
in a user-friendly manner using smartphones.

Digital platforms such as Amazon Web Services are uprooting traditional IT infrastructure companies and IT departments at enterprises as well as enabling start-ups to prototype and build their companies on scalable and practically unlimited computing, storage and networking capacities. Other examples of digital platforms include
search platforms like Google and Bing and social platforms such as Facebook and Twitter. These platforms are used by hundreds of millions and even billions of people around the world. They have uprooted the traditional advertising business model with their exponentially superior capabilities in micro-targeting and allow businesses to understand the effectiveness of their marketing campaigns in a manner not possible in the past.

Cross-industry reach has blurred the lines between industries. This trend has allowed competition from players in industries outside the typical boundaries to disrupt historical business models. A prime example includes Apple, which is not just a consumer products company delivering technology-based products but is also a mobile phone provider and an entertainment provider that sells
digital entertainment (video, music and games). Apple is now venturing into health care through its wearable devices and also provides cloud-based storage capabilities to consumers. Another example is Amazon, which started as an online bookstore and is now the biggest online general retailer and the fastest-growing retailer. Amazon is also a home-services provider, with grocery delivery and retail
outlets (the Whole Foods chain is owned by Amazon) and is the leader in cloud services through Amazon Web Services. Amazon is also venturing into the prescription drug market and aiming to disrupt the health care industry through its joint venture with Berkshire Hathaway and JP Morgan Chase. More and more cellular service providers are looking for ways to leverage their vast infrastructure to provide other services, including banking services and entertainment content distribution.

Customer experience has become a competitive weapon for newcomers. Just over the past 11 years, since the advent of the first iPhone back in 2007, consumers’ expectations of consumer experience has altered dramatically. Even though when the iPhone 1 was launched it had less than 50% of the features of the existing smartphones in the market – Blackberry, HTC, and so on – the consumer experience of the iPhone was so much better that consumers flocked to buy it, even though the iPhone was more than three times the
cost of the existing smartphones. Since then, companies have realized that they can compete and build their business model around superior customer experience.

As-a-Service business models have emerged over the last decade as a viable competitive alternative. Consumer behaviour is moving away from owning products to consuming the service those products offer. This can also be thought of as a utility-based business model. What happened to utilities (electric and gas) decades ago is now happening to other products. Some examples include Software-as-aService, Platform-as-a-Service, Infrastructure-as-a-Service, Book-as-aService, Car-as-a-Service, Jet Engine-as-a-Service, Fuel-as-a-Service. Every industry is exploring and experimenting with As-a-Service business models.

Digitalization of physical products is also presenting novel business model ideas. Those products which used to be physical are now becoming digital. Examples include encyclopedias, books, magazines, home keys, medical records, training and education.

Data-driven business models will dominate the future of every industry. The human race has produced more data in the past two years than was produced cumulatively since the first homo sapiens walked on Earth. With the advent of massive social networking platforms enabling users to share not just text but multimedia content, the rise of internet-enabled devices (often called the Internet-of-Things or IoT) and online systems, the amount of data generated every minute is staggering. It is going to continue growing at an exponential pace, generating massive amounts of data.
Start-ups and enterprises are investing massive amounts of capital in gaining insights from this data and enabling data-driven business models where the revenue is generated from selling insights from the data rather than the data itself.

◾ Competition. You must look at the current and future competitive trends that will be impacting your business model. Remember that competition is not considered just as a direct product substitute. Instead, your competition is anything that replaces the need to use your solution to solve
the user’s problem. For example, for McDonald’s, competition is not just Burger King, Carl’s Junior or other fast-food chains; competition for McDonald’s is every restaurant, grocery store and home kitchens that serve or help users cook not just the three meals a day but also snacks and drinks.

◾ Industry. It is also important to consider the emerging trends in the industry you are playing. From the business model discussion earlier, you can appreciate that your industry is likely going to be encroached by players and dynamics outside your industry domain. Having a wider
lens to understand industry trends inside and outside your industry will be beneficial to crafting your business model.

◾ Macroeconomic. Business models aren’t crafted in a vacuum. Your company, your team, customers, partners and offices are all part of the macroeconomy. At the smallest level, the neighbourhood, the community and city and, on the larger level the county, state, country and beyond are influenced by numerous trends, including political climate, environmental changes, economic situation and demographic trends. In addition, your business model may also be affected by evolving demographic trends which includes behavioural expectations of various demographics. Understanding these short-term and long-term macroeconomic trends will help you craft a business model that is more sustainable.

◾ Others, including regulatory environment. Beyond the ones just mentioned, there could be several other local or global trends that might be of relevance to your business model. Thinking about any trend that might impact any aspect of your business model helps you be better prepared in warding off unexpected obstacles.

1. Business Context Template

Use the template in the figure below to explore the business context for your idea.

 Business Context  Template
Business Context Template

2. Business Context Example

Here is an example of "business context" for an idea around employee productivity business.

Business Context Example
Business Context Example

3 Guidance

Session Lead
Draw the template on a whiteboard. Make sure it is drawn large enough so that all the ideas from brainstorming can ft inside it. In general, a circle with a five-foot diameter would suffice. Do not worry about drawing the inner smaller circle, which is the business model that will be worked on in the next few steps. Select the first trend – technology – to work on first.

10-minute Self-brainstorm
Ask each team member to think about all the technology trends relevant to your idea (problem and solution) likely to be considered or that will have an impact in the next three years horizon. Give fve minutes to the team.

Now ask each team member to think about all the technology trends relevant to your idea (problem and solution) likely to be considered or that will have an impact beyond the three-year horizon. Give fve minutes to the team.

Team Brainstorm
Ask team members to come to the whiteboard one by one and paste their sticky notes in the relevant technology section. Also, discuss whether the trend is to be considered for the near-term horizon (less than three years) or longer-term horizon (beyond three years). As each team member pastes each sticky note on the wall, ask them to explain how it impacts your idea. Encourage discussion to ensure all ideas are captured and discussed. You can expect to have some difference of opinion around the horizon (within three years or beyond) in which the particular trend would impact the business model.

Complete the Business Context Map
Repeat the self-brainstorming and team brainstorming steps for all the other dimensions of the business context map.
◾ Business Model
◾ Competition
◾ Industry
◾ Macroeconomic
◾ Others

3.1 Document Assumptions

After the session, the session lead should ask the team to write down all the assumptions made and record those assumptions in assumptions template in Stage 4.

3.2 Review Prior Steps

Review the prior steps and adjust as needed with the consensus of the team.