Creating Your First Business Model Prototype: 3 Major Tips

Why would you want to innovate your business model? Is that even possible? Well, a really well known blogger has used his blog to achieve a real career breakthrough.

A business model is a system that explains how somebody captures, creates and delivers value. A busines model canvas is a tool that allows you to describe, design, challenge, invent, and pivot your business model. For more on on business model canvas watch this video.

And now to the story of Alexander Osterwalder. Alex is from Switzerland, one of the best countries in the world when it comes to inventions, often topping the world in comparison to most countries. Alexander was a PhD student, who wrote a blog about the subject of his thesis titled Business Model Ontology.

After his successful thesis defense, he quit blogging for a while. In the meantime he was doing workshops on designing business models. He was challenged by his students to write a book on the subject. His mentor argued that to prove his thesis he should invent a business model for book publishing. So that is exactly what he did.

How his book publishing business model came about

First, Osterwalder and his mentor prototyped eight different business models. Anyone can do it.

Then Alexander decided to re-launch his blog, where he announced that he will start writing a book within the next six months. In the meantime, he invited his readers to co-author his book. For a fee. Why the fee? He wanted serious writers that would help create a book that he would be proud of. Not just another business textbook.

After a few calculations, he estimated that he would need a budget of roughly €250,000. To get this he used a progressive pricing model where in the the first few months before he began writing, he would only charge a fee of $24 to become a co-author. It increased from there and during the final week of writing the fee was $250. Yes, $250.

The budget was there. Writing could start. With more than 400 co-authors. The rest is history.

Here are 3 major tips for generating your first business model prototype:

1. Don’t do it alone
Find a partner or two. You’ll need somebody who is more analytical, rational with some experience in finance, if possible. The other partner should be somebody who is good at synthesising, somebody who is good at seeing the big picture and is experienced with trusting their intuition. She should be responsible more for the right side of canvas, for the Channels, Customer Segments, Customer Relationships, and very importantly Revenue Streams. Your analytical partner should be more oriented towards Key Resources, Key Activities, Key Partners and to Cost Structure of your business model prototypes. Your main role in prototyping your business models is to define and pivot around your Value Proposition. You should also be the timekeeper of your prototyping party.

2. Set up a time limit
Don’t spend too much time on every single prototype. It is very important that you have at least six, if possible up to nine business model prototypes. It is a very good measure if you spend only 18 minutes or less on one business model prototype. To come into the mood to prototype business models start with a game called Crazy Cow.

Here are some basic rules for Crazy Cow (adpated by Danny Beckett Jr.):

• Instruct your partners that you will sketch out three different business models using a cow.
• Ask them to first define some characteristics of a cow (produces milk, eats all day, makes a mooing sound, etc.).
• Tell them to use these traits to come up with an innovative business model based on a cow.
• You have only three minutes for one business model prototype.
• Sketch three different business model prototypes of a crazy cow.
• Have a good laugh before your start prototyping your business models.

3. Never write on the business model canvas
There is no such thing as a perfect business model. It doesn’t exist. Therefore do not write on the Business Model Canvas. Use post-it notes or even better stattys pads.

When you’re done with prototyping one business model, document it. Take pictures, share it with your customers and partners, try to find out what would work and what wouldn’t.

And if your prototype doesn’t work, don’t worry. It happens. As long as you realize that if failed and are able to move on (hopefully without too much expense) and learn from the experience.

You should develop the circle: —Prototype—Fail—Learn—. The secret lies in how fast you are capable of turning this cycle around. Good luck.