Why is a Business Model Important for Creating Impact?

March 24, 2017

This blog was written by Isaac Jeffries, an associate of TDi.

Think about your favourite brands. What made you a fan of their work? Was it the way they went the extra mile to delight you? How their pricing structure saved you some money? How they solved a pain point? Maybe they created positive social impact?

The fact is, every successful business you can think of runs on the back of a well-designed business model. This applies to every type of organisation – including charities, social enterprises and internal teams within larger companies.

What do we mean by a Business Model?

We’re describing how your company can constantly remain Desirable, Feasible and Viable.

These are the Three Lenses of Innovation as coined by IDEO, and every good business needs to exist at the centre of the diagram. We call them Lenses, because they’re a way of examining one aspect of your business. Each lens will highlight different strengths and weaknesses, and by looking at all three, we can create strong ideas that make money.

Desirability is about understanding your customer, what motivates them, how they engage with you and what makes/breaks a purchase decision.

We need to be desirable to our customer, or else we’ll have no sales.

Feasibility is about how you make everything happen behind the scenes. This includes hiring the right people, using the right tools, working with the right partners, and focusing on the right set of activities.

We need to run in a way that’s constantly feasible, or else we’ll implode.

Viability is about the dollars; how many we earn and how many we spend. No matter your legal structure, you’ll need a surplus to survive –there has to be some money left over at the end of the day.

We need to be viable, or else we’ll go bankrupt.

You’ll probably find it easy to tick off two of the three. That third one is the killer, and it can’t be ignored.

 

“A Business Model is an elegant expression of how all parts of your business work together for success”

— Paul Steele, co-Founder of TDi

 

Intent

Before we dive into the business model design process, we want to explicitly describe our intent, so that we can then design a business model that can deliver on that mission.

In other words: Why do you want to start this business?

Or if you’re already up and running: Why does your business exist?


J.P. Morgan famously said that behind every decision are two reasons – the good one and the real one. Let’s be frank about the real reasons. What factors are driving your decisions?

Is it about making money?

Is it about creating change?

Is it about building your dream job?

Is it about building an empire?

Is it about a decision made by your board?

Is it about building something you’re proud of?


This isn’t some cliché mission statement; rather it’s a simple description about why you’re building this business.

That way, we know what elements are up for discussion, and which are untouchable.

 

Here are some examples we often hear at TDi from impact-driven businesses:

“We want to create stable lives for young people, which comes from stable jobs and stable relationships”
“We want to create a cash cow that provides $100k of surplus to fund our charity”
“To change the way people think about the clothes they buy”
“To build a job that provides me with freedom and excitement”
“To prevent waste from ending up in landfill”
“To fulfil the Christian Mission, and spread God’s word”
“To create new business units that ensure (our organisation’s) longevity”

None of them say “To create a cool bar on High St that sells $18 cocktails” or “To sell minimalist mid-priced Swiss watches online”

They might each be a great how, but not a clear enough why.


This process helps everyone understand which elements are flexible – the things that we can happily change if the idea doesn’t look like it will work.

With this knowledge, we can design a business model that complements and delivers on our intent, whilst remaining open minded about which customers we serve, what we offer them, and how they pay us.

The Canvas

Our idea needs to sit at the heart of these three lenses. Designing a business like this is tough, and it will take a fair few goes to get it right. That’s what is so good about a canvas – it’s disposable, it’s free and it’s quick to do. We can create an idea, test it, and then fix any weaknesses. Nine boxes sound like a lot, however these are simply better ways of describing our three lenses.

Desirability is explored through Customer Segments, Customer Relationships, Channels and Value Proposition.

Feasibility is explored through Key Resources, Key Activities and Key Partners.

Viability is explored through Cost Structure and Revenue Streams.

In the next part of this series, we’ll look at each box of the canvas, and get you through your first iteration.


Isaac was TDi’s first ever employee, and has worked with over 180 impactful businesses around the world. He’s currently designing and building social enterprises in India, Papua New Guinea and Indonesia. He writes at isaacjeffries.com

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