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Business Model Innovation – The What, Why, and How

In the last couple of decades, we’ve seen a dramatic increase in the popularity of business model innovation – and for good reason.

Technology has made it easier than ever to adopt a wide variety of novel business models effectively. At the same time, increased pace of innovation and global competition has made differentiation more important than ever.

In addition, with the havoc caused by COVID-19, we’re already seeing that even though many businesses are battling for survival, there are also winners. Those winners usually possess very robust business models, which further outlines the importance of business model innovation in times like this.

In this article, we’ll look into what exactly it is, why it is so important, as well as how one can make it happen with the help of quite a few examples.

Table of contents

The Definition of Business Model Innovation

One of the common mistakes people make when it comes to business models is that they simply look at them very narrowly as just the pricing model for their products and services.

While it certainly is a key part of the business model, the term is actually defined as the way an “organization creates, delivers and captures value”.

Business model is the way an organization creates, delivers and captures value.

Successful business models thus take a very holistic approach by integrating these different aspects of the business into a well-organized and thought out system.

Business model innovation, then is simply a novel way to put these pieces together to hopefully create a system that produces more value for both customers and the organization itself.

A good business model, like any other system, is after all much more than just the sum of its parts.

Why Is Business Model Innovation So Important?

Without realizing it, a business that doesn’t explicitly focus on their business model as a whole often ends up compromising their initial strengths.

For example, many businesses start to gradually drift apart from the true needs of their customers unless they specifically focus on avoiding that. Some might focus too heavily on just optimizing the delivery of their products and sacrifice their ability to create value.

There are many reasons for these phenomena. Perhaps management focuses too heavily on what the competition is doing, or perhaps there’s pressure from shareholders to optimize for short-term profit.

Regardless, there are countless industries where the true interests of the customers and those of the service providers have become opposite.

The healthcare sector is a prime example of this: a private hospital has strong incentives for wanting you to be chronically sick so that you’d keep coming back regularly and they could charge you for each visit. You naturally want the hospital to take good care of you, but ideally, you’d just want to stay healthy and not have to go to the doctors’ in the first place.

So, even if the individual doctors are doing their best to take care of you, the business simply isn’t very likely to invest in keeping you healthy because that’s the worst thing that could happen to their business.Contrast that with business models like flexible subscription services where the provider has to constantly create value to keep the customer. The longer they are able to keep their customers happy, the more profit these businesses make, which creates very strong incentives for aligning shareholder and customer value.

Business model innovation is simply put probably the most important tool for building a business that creates maximal value for all stakeholders: customers, shareholders, employees, and the society at large.

This obviously leads to a wide variety of benefits:

To conclude, business model innovation is a flexible tool for building a great business irrespective of the industry. That’s why you’ll see most of the fastest growing and most disruptive businesses including business model innovation as a key part of their “innovation mix”.

Examples of Business Model Innovation

Before we get into the part where we look at how to actually do business model innovation, let’s first take a look at a few examples of business model innovation to get a better picture of what it can look like in practice.

Subscription models

Subscription models are a powerful way to turn one-off purchases to a more predictable, and over time larger, stream of revenue while ensuring that the customer keeps getting value and is also able to better afford higher-end services due to the purchase occurring over time.

Subscription models are equally applicable for both B2B and B2C businesses.

On the B2B side, Software as a Service (SaaS) products like Microsoft Office 365 and Infrastructure as a Service (IaaS) offerings like Amazon Web Services are great examples of this approach.

Where businesses previously used to buy the new version of Office products perhaps every five to ten years, now the same companies pay a comparable, albeit slightly lower, amount every year for their Office 365 subscriptions. However, for that increase in price, they get constant updates so that everyone’s always on the latest versions, as well as many more value-added services that customers used to have to purchase from someone else, like Microsoft Teams, plus the added flexibility of canceling unused licenses and upgrading or downgrading certain users to appropriate plans. It’s quite obvious that this is a deal where everyone wins.On the consumer side, Dollar Shave Club is a great example of a subscription business that simply makes sense. The consumer gets great products more conveniently and affordably than they would from traditional brands in regular stores, and the company again gets a very predicable revenue stream, while cutting out the middlemen.

Subscription businesses tend to have quite distinct, straightforward value chains but do require some capabilities that many product businesses might not be very strong at, such as delivery and customer support.

Freemium

Freemium is a portmanteau of the words free and premium. It refers to business models where a company offers a free version of their product, typically with certain limitations, in order to attract users and eventually upgrade them to paying “premium customers”.

For businesses with a good product, high gross margins and high customer acquisition costs, such as most content and software businesses, this can be a very powerful model, especially in crowded markets.

For example, at Viima, virtually all of our paying customers have first signed up for the free version of our product, seen the value that it can provide them, and then ultimately became paying customers as their use of the tool grew.This obviously drives our customer acquisition costs down and allows us to offer our customers a better product at a price more affordable than the competition, which allows us to also serve businesses that the competition isn’t interested in serving, which leads to fast growth, while still maintaining solid margins that we can use to reinvest in the business, further accelerating our Flywheel of Growth.

The Freemium model is quite common for B2B software products that tend to have bottom-up adoption like Slack and Zoom, but also for many B2C services, such as Spotify and Apple iCloud.

The downside is that without strong value creation, freemium models might make it difficult for the business to capture enough value.

Platforms

In essence, platforms are places that aggregate and/or facilitate supply and demand meeting. Platforms are characterized by their distributed approach to creating value.

In practice that means that they’re basically either matchmakers or marketplaces, but still come in many shapes and forms. They typically earn money by either taking a commission of the transactions, or by charging the supply side for the value-added services they provide.

These days you mostly hear the term being used for digital platforms, but the business model far predates online services. Shopping malls and classified ads in newspapers are just a couple of examples of traditional platform business models.

Digital platforms, however, have made the business model much more lucrative. Platforms, such as ones mentioned above, used to be very local but now it’s possible to create global platforms with tremendous economies of scale and minimal costs for getting started.We’re all familiar with the examples: YouTube, Airbnb, Uber, Alibaba, the App Store, and the list goes on. While it probably isn’t a good idea to try to compete with these giants directly, there are still many niches where platform business models could create plenty of value.

The challenge with platform business models is that it’s often really hard to get platforms off the ground and achieve a critical mass where they become self-sustaining.

Direct-to-Consumer (D2C)

Both consumer and industrial goods manufacturers have traditionally relied on a, often complicated, supply chain of wholesalers and retailers to sell their goods.

Before the Internet, that allowed them to have a much larger geographical reach and thus benefit from economies of scale.

However, with the rise of e-commerce, we’ve seen a rapid rise in the popularity of the Direct-to-Consumer business model in many categories of consumer goods.

This approach provides the manufacturer with higher margins as the middlemen are removed, gives them much more control over the brand, customer experience and relationship, and provides them with more data, that is also of higher quality, on demand and customer preferences.

We’ve seen a wide variety of success stories in this area, for example Tesla in electric vehicles, Warby Parker in eyeglasses, Casper in mattresses, and the aforementioned Dollar Shave Club.While not yet as common, the same approach is also gaining some traction on the B2B side of things with companies like Berlin Packaging.

Ads, affiliates & sponsorships

For as long as there have been content and communication channels, there’s been advertising in one form or the other, and that hasn’t changed recently.

With the rise of the Internet, smartphones, and the democratization of content creation, we’ve seen a dramatic increase in content, which has made the traditional business model of monetizing content with advertising and sponsorships harder since there’s so much more competition for people’s attention.

For the right kind of audiences, typically in very specific niches, it can still be a viable business model in itself and for other businesses with a sizeable following, it can become an additional secondary source of income.

For example, while Spotify generates the vast majority of its revenue and profits from its subscribers, advertising revenue does provide the company with a solid secondary revenue stream that can be used for investing in growth.

Loss leaders & add-on services

While there’s nothing new in selling professional services, we’ve seen many interesting novel business models built around them.

A great example of this is the business model of open source software companies like WordPress, Red Hat and Elastic. These companies have built very popular open source software products that they let other companies use completely for free.

When you give away great software for free, it tends to become extremely widely adopted, as has certainly been the case for the aforementioned three products. Without the open source model, these companies would never have been able to reach the kind of market share they’ve actually managed to get to.

Once their products have been adopted at scale, the open source companies are obviously well positioned to either sell professional services or offer hosting services for this large base of users.

The same basic logic of giving something away for free, or at a loss, and then sell additional products or services to that wider customer base is also known as a loss leader strategy. It has been widely adopted across many industries, such as retail where stores might offer a real bargain for certain attractive products to lure in more foot traffic.

In general, selling maintenance contracts and other add-on services has become a ubiquitous business model especially in B2B, but also for more expensive B2C products, such as cars.

Razor & blades

The razor and blades business model is actually just another form of the aforementioned loss leader strategy, but is specific to goods with a longer lifecycle.

The idea is that you provide a product, like the razor, at a very affordable price – typically at a loss – and then make the profits by continuously selling complementary, consumable items for it, just like the blades for the razor.

Interestingly, just like with so many other stories of innovation, the story of the business model being invented by Gillette when he first created disposable razor blades isn’t true. In reality, it was invented by the competitors that entered the market once Gillette’s patents expired.

Since then, the model has been adopted by many companies selling goods like film cameras, printers and Nespresso capsules.

Hybrids

While the aforementioned examples cover some of the innovative business model patterns that we’ve seen gain popularity in the recent years, there are many others as well: franchising, auctions, micropayments, pay-what-you-want, the list goes on.

The Business Model Navigator is a very convenient and easy-to-use tool for browsing these patterns.

There are literally countless ways you can combine the different business models together with different product and service offerings to try to maximize the value created by your products and services.

As a result, many of the most innovative businesses in their industries actually have hybrid business models that actually combine multiple of the aforementioned patterns in a way that is tailored for their specific business. This is true for both traditional businesses and startups alike.One example of a successful hybrid model is the aforementioned Spotify. As mentioned, the freemium approach is the core of their business, but they also use ads as a way to both capture revenue from their free users, but also incentivize their users to upgrade to paid plans. Even though the ads obviously don’t directly provide value for their customers, they can get away with that because their free plan simply provides the users with so much value that ads are just a small nuisance in the grand scheme of things.

Another example of this is Peloton. They sell high-end exercise equipment like bikes and treadmills for home use, and couple that with a subscription service that provides exercise programs, virtual classes and many other engaging features to accompany the bike. According to the company, even though their devices are quite expensive, they aim to sell them at break-even and then make money with the subscriptions.

This obviously means that to make a profit, they need to ensure that their customers stay motivated and keep exercising, which is what ultimately keeps them fit and creates value for everyone involved.

The leadership of the company may not have managed the business optimally, which has led to severe financial challenges after the lockdowns ended but that doesn’t take anything away from the fundamental strength of the business model. Still, this is a great reminder that while a strong business model is a great foundation, there’s more to running a successful business than that.

How Do You Create Business Model Innovation?

The examples above have hopefully provided you with some inspiration on what kind of new business models might be possible.

However, if you’re looking to create a business model innovation for your business, here are a few tips that can help you find the right model for you.

1. Start with customer value

The first step, as with every innovation, is to start with customer value.

Once you have a clear answer to these questions, you’ll already be well on your way.

2. What are your strengths?

Every business should obviously build their business models to benefit from and take advantage of their own strengths and unique capabilities.

For example, if you have plenty of data and when and how your products break, you’re obviously the party that’s best positioned to provide novel maintenance services, or maybe even insurance for these products.

3. What are your objectives for the business?

Some businesses want to focus on profitability, others want to grow as much as possible, and some simply want to do as good of a job as possible for their customers.

These goals ultimately matter a lot when you’re trying to design the perfect business model as different business models are better suited for different kinds of goals.

Some companies might simply want to find ways to expand their current business with minor tweaks to their model where others might be looking for bigger, more transformative kind of changes.

For example, if you’re looking to maximize growth, you should choose a business model where the customer gets almost all of the value and keep costs down to maximize adoption.

In the short term, you will take a financial hit compared to some of the other models, but this can make the business unattractive for competitors, thus providing you with a big competitive advantage in the long run. The Freemium and open source models are obvious examples of this approach.

4. Look for patterns by benchmarking leading innovators

As mentioned, the best business models are tailored to the needs of your customers, the characteristics of your industry, as well as your business objectives.

Thus, whenever you’re looking to design a new business model, it’s usually a good idea to benchmark what the most innovative companies in the world are currently doing.

You should obviously know where your competition is but remember that the point of business model innovation is to find a way that allows you to provide much more value than they do, either at a lower price or with better margins, maybe even both, so don’t just copy them!

Thus, the best benchmarks are often from very different industries.

As mentioned, the Business Model Navigator is a great resource for this benchmarking process. It’s a website that features 55 different business model patterns that you can try to apply for your own business, including most of the examples we presented above.

5. Put it all together to identify the right model

The next step is to combine your findings from steps 1, 2, 3 and 4. Find ways where you can create as much value for your customers as possible, that uses your strengths, and allows you to capture a fair share of that revenue as determined by your business objectives.

This is obviously the creative part, so it might take some time and effort to get this right, but remember that you can always look at the examples we’ve mentioned above.

You can use the matrix below to map your alternatives and compare them with your objectives.To generalize, if you currently sell services, you typically want to scale the business to a larger audience and improve margins. For both goals, the way to achieve these goals is to productize the offering. If you succeed in this, you can provide most of the value at a fraction of the cost, which can naturally help you scale the business to a much wider customer base, but also improve the margins of delivering that value.

On the other hand, if you are selling products, you probably want to turn one off sales into a more predictable stream of revenue, as well as grow the amount of business you get from each customer. In this case, the solution is to either sell add-on services that help your customers make the most out of your products, or to look for ways that you could use to turn those one-off product sales into subscriptions with some service components.

6. Validate and iterate

As with any other kind of innovation, you typically don’t get business model innovation right the first time around either.

In the end, the only way to know if it works is by testing the business model in practice.

The challenging part with many business model innovations are that they often require drastic changes to your current operating model, which you obviously shouldn’t do unless you have strong evidence for the transition being worth it.

Thus, it’s crucially important that you validate the assumptions that you’ve done in the steps leading to this point, starting from your most critical assumption, and pilot that with a small subset of your customers.

Validating the business model at smaller scale obviously saves costs and resources, but has another key advantage: speed. Learning and moving fast is essential for innovation success.

Learning and moving fast is essential for innovation success.

Seemingly small tweaks in the business model can make or break even the most brilliant products, so if you have great offerings, be prepared to iterate the business model based on what you learn and don’t give up too easily.For example, both Post-It notes and Nespresso machines didn’t see commercial success until their respective companies were able to figure out the right ways to package these products with the right business model.

It can sometimes take quite a few of those tweaks to figure out the right business model, even if your products are brilliant, which is why you need to learn, iterate, and move fast when your window of opportunity is still open.

Conclusion

To conclude, business model innovation is a powerful, yet still very underappreciated tool.

It’s one of those topics that is quite straightforward to get the hang of, and can thus help make a difference quite soon.

If you’re not seeing the business results you think you should be getting with your products and services, or you’re looking to take significant market share from entrenched competitors, give business model innovation a try.

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The ‘why’ will guide the ‘what’ and the ‘how’

We are distracted from distraction by distraction, filled with fancies and empty of meaning.

In Start with Why, Simon Sinek (2011) explains how Martin Luther King Jr., Mahatma Gandhi and Nelson Mandela were able to drive large-scale cultural changes in a non- violent way. The common thread is that they articulated their vision from the why, to the how, to the what. Inspiring leaders start with what they believe in first, making their worldview and motivation explicit. Sinek suggests that once we are clear about why, we can define the values that will guide our behaviour and inform the systems and processes we put into place. The why defines the how in an action-oriented way. In a nutshell, why offers a purpose, cause, or belief; how expresses the values that guide our actions and how we aim to manifest the higher purpose in action; and what refers to the results of those actions.

The design guru Tim Brown, CEO of IDEO, writes in Change by Design “Don’t ask what? ask why?” and continues: “asking ‘why?’ is an opportunity to reframe a problem, redefine the constraints, and open the field to a more innovative answer. […] There is nothing more frustrating than coming up with the right answer to the wrong question” (2009: 236–237).

Warren Berger reminds us of the power of inquiry, encouraging us to ask ‘beautiful questions’ using why? and what if? as a path to breakthrough innovation. The art of asking beautiful questions is about i) challenging assumptions, ii) inquiring about things normally taken for granted, and iii) wondering about new possibilities (Berger, 2014).

The practice of living the questions together starts by frequently asking yourself and others: are we asking the right questions? Which questions will help us make wiser decisions? What if we did things differently? What informs our current perspective? If we answer the question “why is the human species worth sustaining” in a neo-Darwinian way, along the lines of ‘because we are the most intelligent and competitive species and therefore should continue to exploit nature for our benefit’, we are unlikely to find timely responses to climate change and ecosystems degradation, and will be confronted with deepening ecological, social and economic crises.

We will live into a very different future if we answer the question in a different way: we are co-creative participants in a 14-billion-year process of universe becoming conscious of itself. We are a keystone species capable of creating conditions conducive to all life. We can design for human, ecosystems and planetary health, and nurture resilience, adaptability, transformability and vitality. We care; we are compassionate beings able to love and to express this unifying emotion through poetry, music and art. Like all other species we are life’s gift to life, creating meaning by being in and through relationship.

In a conversation I had with Professor David Orr in 2006, he suggested that we must ask why humanity is worth sustaining before considering how we might do so (see Introduction). He did so in response to a question I had asked him about the role of spirituality in the cultural transformation and transition ahead. David started his answer by saying:

Humans are inevitably spiritual and the question is not whether we are, but whether we are authentically spiritual or not. It bubbles out of us. We are meaning-seeking creatures, and if the highest meaning in my life is soccer, I will make soccer my religion and it will orient my life. It will give my life meaning and gravity and direction. It just happens to be a bad religion. I could make environmentalism a religion. That happens to be a bad religion, too. We can’t help but make something into a belief system, and you can argue why this is for us. This goes back to the early cave paintings. This is part of humanity. As soon as we identify the human species, we see a species trying to grapple with: what does this mean? Where are we? Who are we? How did we get here? You see these questions being asked. They pop up in early philosophy, early art. This is what it means to be human.

David Orr, personal comment (2006)

He emphasized that to ask “why we should sustain humanity” is not an “idle debating question, and it takes you to the core of spirituality. What do we owe? How are we obliged? What do we owe to the far distant future? What do we owe to the distant past? What does it mean for us to be stewards or trustees?” Finding answers to all these questions can help us to re-contextualize our existence in a meaningful universe rooted in our interbeing.

Beyond all religious dogmas or denominations of faith, beyond all our differences, we can find common ground in the communion of our interbeing with each other and all life. The future of our species depends on finding this higher ground as humanity, as nature, as life, as expressions of a living, transforming whole capable of self-reflection.

All the world’s faith groups could express the meta-narrative of interbeing in diverse ways without opposing their foundational scriptures. At the heart of spirituality and the root of all religions lies a process of making sense of the relationship between the intimate and the ultimate.

In Lamps of Fire — the spirit of religion Juan Mascaró offers a synthesis of the spiritual essence of religion through selected passages from Hinduism, Buddhism, Jainism, Taoism, Confucianism, Shintoism, Judaism, Christianity, Islam and Sikhism. Mascaró believed in the recuperation of a profound humanism to unite humanity beyond its differences (east and west, north and south) and offered his book in the hope that it would become “a light in deep darkness and a refuge in the storm” (1961: 9–11).

In the face of gut-wrenching attempts to justify inhuman barbarity with the misguided righteousness of religious fundamentalism inciting crimes against humanity, on the one hand, and ever more urgent warnings from the scientific community that we have dangerously over-shot planetary boundaries and are facing catastrophic climate change, on the other hand, humanity needs to find common ground for a coordinated, cooperative response.

We also need to find a higher ground of shared meaning and significance so we all know why we are in this together and why it is worth transcending and including all our differences in pursuit of a shared vision of thriving together.

[This is an excerpt of a subchapter from Designing Regenerative Cultures,published by Triarchy Press, 2016.]

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Daniel Christian Wahl — Catalyzing transformative innovation in the face of converging crises, advising on regenerative whole systems design, regenerative leadership, and education for regenerative development and bioregional regeneration.

Author of the internationally acclaimed book Designing Regenerative Cultures

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План самостоятельного обучения DDD, CQRS, EventSourcing

Если вы собрались плотно погрузиться в тему Domain Driven Design (DDD), о том как его применять, как использовать, для чего он нужен, и как с ним связаны Command and Query Responsibility Segregation (CQRS), Event Sourcing то можно воспользоваться планом обучения, который последовательно погрузит вас в эти темы и поможет сориентироваться. Часть информации на русском, часть на английском языке, так как русскоязычных аналогов я не смог найти.

Я рекомендую сначала ознакомиться с Базовыми видео, от основателя этого термина Эрика Эванса, чтобы понять его философию и причины возникновения.

Основы DDD от основателя. Видео.

Боремся со сложностью в сердце программного обеспечения от Эрика Эванса https://www.youtube.com/watch?v=dnUFEg68ESM&t=2270s

Канал конференции по DDD где можно найти другие выступления Эрика Эванса и других спикеров https://www.youtube.com/channel/UC3PGn-hQdbtRiqxZK9XBGqQ

Погружаемся в DDD

Быстрая обзорная статья по DDD от Microsoft

Статьи на русском по основным принципам DDD

Книги по DDD, «о которых все говорят»

Эти книги точно стоит приобрести и прочитать, а потом много-много раз в процессе работы к ним возвращаться. Когда вас спрашивают, насколько вы знаете DDD, можете щеголять цветами прочитанных книг, посвященные в тему вас поймут 🙂

Зеленая книга Вернона (для начала) Domain-Driven Design Distilled 1st Edition by de Vaughn Vernon

Красная книга Вернона (для погружения); Implementing Domain-Driven Design 1st Edition by Vaughn Vernon

Синяя книга Эванса (для полного просветления); Domain-Driven Design: Tackling Complexity in the Heart of Software by Eric Evans

План обучения

Я бы даже назвал его план последовательного освоения материала, чтобы именно погружаться в тему постепенно, а не бултыхнуться в нее с кучей неизвестных терминов.

Для части пунктов не приведены ссылки сознательно, обычно одна статья покрывает несколько пунктов, поэтому воспользуйтесь ссылкой из пункта выше, чем тот который вас интересует.

SWOT Analysis: What, Why and How to Use Them Effectively

Updated on: 10 August 2022

SWOT analysis is used across industries to measure Strengths, Weaknesses, Opportunities and Threats of a business venture. Although it’s mainly used to assess business ventures, it can also be easily used to measure almost anything that is influenced by external and internal factors. Now that you know what a SWOT analysis is, let’s look at why you should use them and how to use them.

Why Use SWOT Analysis?

With hundreds of methods to assess a business venture you might wonder why use SWOT analysis over other methods. Well here are few reasons

There are many more but these are the main reasons why you should choose SWOT over other methods. Keep in mind though that some specialized methods like BPMN offer different advantages.

How to Use SWOT Analysis Technique Effectively

Now you know what and why it’s time to learn how to use them effectively.

Creating a SWOT Analysis Diagram

SWOT diagram comes in various shapes but the key thing is to list down the strengths, weaknesses, opportunities and threats in an easily identifiable manner. You can get started easily by using one of our professionally designed SWOT analysis templates.

You can modify any of those templates online using our SWOT analysis software. If you prefer there are some templates in PDF form so you can easily download and take a printout for offline usage. Below is a blank template you can start using immediately.

Blank SWOT template for quick download and printing

Now lets look at how to enter data to the SWOT diagram.

Adding Data to the SWOT Analysis Diagram

The first thing you can do is add strengths and weaknesses. Because they are internal factors they are generally easy to identify. Depending on what you’re using the SWOT diagram these factors can vary significantly.

Depending on the organization there can be many more areas that can be a strength or a weakness. For example for a company like Apple brand loyalty is a great strength while for Samsung it could be low production cost.

As mentioned above adding internal factors are somewhat easy. The hard part comes when adding external factors, opportunities and threats.

Fortunately there is a formal process called PEST analysis to assess those opportunities and threats. Check out our SWOT vs PEST article to learn about similarities and differences.

PEST stands for Political, Economic, Social and Technological factors. Sometimes it’s referred as PESTLE analysis with Legal and Environmental factors added to the mix.

How PEST analysis help in SWOT analysis

PEST provides you a structured and a formal way to assess the opportunities and threats. Different departments can work on different areas and come up with the necessary data needed for the final SWOT diagram. For large projects there is simply no option but to direct these to different departments.

Below is a breakdown of different areas and some important factors in those areas.

Obviously all the factors don’t apply to every organization. For example if you’re selling computers then weather patterns might not interest you but they are definitely important if you’re selling rain coats.

Who Needs/Creates SWOT Diagrams

SWOT analysis are used by decision makers who are part of the planning of a venture. So most of the time they’re used by managers and senior executives. But as I mentioned before they can be applied in many scenarios so almost anyone can be creating SWOT diagrams.

If it’s a large project then they are usually created during lengthy multiple meetings. Managers of different departments, senior level executives and many others might get together and work on the SWOT analysis.

A software like Creately with it’s real-time collaboration tools helps teams to collaborate on SWOT diagrams easily while always visualizing the changes made by others. The revision history is preserved so it’s clearly visible who made the changes and this makes it easy to reverse decisions as well.

Different Uses of SWOT Diagrams

SWOT can be used to cater to hundreds of scenarios. Here’s a look at some common situations where SWOT analysis becomes very useful.

I personally feel personal SWOT analysis is underutilized. It’s a great way to prepare for an interview. Especially so if it’s an internal interview for a promotion and you know who you’re up against. This enables you to focus on your strengths and how those strengths align with opportunities for the company. And it helps to stay clear or talk less about your weaknesses. Check out this FORBES article for a in depth look at doing a personal SWOT analysis.

Another area where SWOT analysis is heavily used is marketing. Marketing is all about getting ahead of your competitors and knowing their strengths and weaknesses helps to focus your message and highlight the strong points.

For example in our case we’re the only diagramming software that offers an online solution and an offline desktop solution that syncs with each other. This is obviously useful for frequent travelers who want access to their diagram from anywhere in the world. And we make sure to highlight this in conferences and meet-ups. Check out this article about using SWOT in marketing to see how you can apply them to your marketing plans.

I hope this article has helped you to understand what SWOT analysis are, why it’s used around the world and how you can use it make better decisions. As always if you have any question feel free to ask them in the comments.

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Design Thinking Guide: What, Why and How

For many companies, the design process is still locked inside a small creative room. Designers do not effectively contribute to building the business as the design is seen as a tool rather than a strategy. On the other hand, a quick look at the markets can tell us more about how the holistic approach of design can help building a successful business. Companies such as Apple, Microsoft, IKEA, Lego, Google, and other successful companies are integrating design at the top of their company strategies using the design thinking, and design managers make a high-level contribution with the executive body to take strategic decisions that can contribute to the product success.

So, what is the difference between design-driven companies and other companies, and what can design do for companies in terms of product development and other factors such as achieving innovation and business success? In this article, we investigate the term “design thinking” as one of the terms that were highlighted in the last few years as one of the methods that can help build a holistic understanding of the design processes inside companies. In addition, we look at the benefits that can be acquired through applying design thinking inside companies.

What is Design Thinking?

There is notable confusion about the meaning of design thinking, and this confusion can be observed inside and outside the design body. This confusion is caused by the way we define design in relation to its own components and the other fields of human knowledge, including science and art. Therefore, before moving to define the design thinking, we should have a clear definition of what is design. In his book, Designerly Ways of Knowing, Professor Nigel Cross provided a holistic definition for the design as following:

“Everything we have around us has been designed. Design ability is, in fact, one of the three fundamental dimensions of human intelligence. Design, science, and art form an ‘AND’ not an ‘OR’ relationship to create the incredible human cognitive ability.”

Science — finding similarities among things that are different
Art — finding differences among things that are similar
Design — creating feasible ‘wholes’ from infeasible ‘parts’

In terms of the design components, Steve Jobs successfully defined design in one of his quotes as: “Most people make the mistake of thinking design is what it looks like. People think it’s this veneer — that the designers are handed this box and told, ‘Make it look good!’ That’s not what we think design is. It’s not just what it looks like and feels like. Design is how it works.”

Based on the above, design can be seen as a process that created the “wholes” from the “parts,” those parts include not only the look and the feel of the designer product but also how it works. This process is the design process, also known as the design thinking process.

Design thinking is a user-centered methodology that is used by designers to solve problems and find desirable solutions for consumers. it is a process that is based on a consumer-driven strategy that aims to ensure that the user is at the heart of the design process stages, starting from defining the problem, ending by delivering the solution in a form of a final product, and getting the user feedback that will be part of a continuous iterative process that will be used to improve the designed product or service in the future.

KEA LAMPAN table lamp provides a practical example to their Democratic design strtegy (source: IKEA)

Tim Brown, the CEO for IDEO, the leading design company, defines design thinking as: “Design thinking can be described as a discipline that uses the designer’s sensibility and methods to match people’s needs with what is technologically feasible and what a viable business strategy can convert into customer value and market opportunity.”

Mini case study: Democratic Design at IKEA
IKEA is one of the leading companies in the field of home and furniture product design industry. IKEA’s Democratic design strategy integrates different principles into the product development process in order to achieve “good design.” Their policy ensures that each of IKEA’s products should achieve the following five principles:
Form: the look and the feel of the product should be desirable and beautiful
Function: the product should be usable and solve one of the consumer problems efficiently. The product should consider all the human-factors related to how the consumers use the product.
Quality: the quality of the product includes choosing the proper materials in designing its products.
Sustainability: products should be eco-friendly by reducing the waste, carbon emissions, and the consumption of the Earth’s resources.
Low price: the product should be available at an affordable price for as many people as possible.

The above case study provides a successful example of having a clear understanding of the design process. For many companies, design has a very narrow definition that minimizes the value expected in the final product or service.

Why do we Need to Apply Design Thinking?

In the last few years, an increasing understanding of the design thinking process can be observed. Last year, McKinsey&Company, one of the world’s leading product development advisory firms, published a report about the importance of building a design-driven culture inside companies. The mini case studies highlighted in this article provide successful examples of applying the design thinking process. So, what are the values that can be achieved through applying the design thinking inside the company? Below is a list of the prospective benefits that can be achieved through applying design thinking:

Focus on the User Experience

As highlighted above, the design thinking process is having one ultimate goal which is the address the people’s need and problems in order to achieve a user-centered product design. However, this approach takes into consideration the emotional experience in addition to the other user experience factors. In his article for the Harvard Business Review, Jon Kolko provides a clear example of the emotional experience and its relation to the product value proposition: “If you buy a Lexus, the automaker promises that you will receive safe and comfortable transportation in a well-designed high-performance vehicle. An emotional value proposition is a promise of feeling: If you buy a Lexus, the automaker promises that you will feel pampered, luxurious, and affluent.”

This emotional value proposition can be only achieved through adopting the design thinking to create the so-called empathic design. The empathic design aims to put the designers in the shoe of the end user by giving them the chance to see how they feel and respond to the product. In an interview on Dezeen, Marcus Engman highlighted that the design process in IKEA starts at people’s homes in order to find out what they really need. This step is part of the emphasize phase in the design thinking process.

Microsoft Windows has dramatically changed to focus on user rather than tehcnology (source: Microsoft)

Mini Case Study: Design Thinking at Microsoft

Microsoft, the world’s leading supplier of systems software, has been a technology-driven organization for a long time. Currently, Microsoft is using design thinking to focus on the user needs and user experience. In order to achieve this, Microsoft adopted a strategy to focus on user experience, integrate designers with the product development teams, deliver practice methods to designers, apply design principles across the business, and extend the usage of user research methods to improve the user experience.

In order to achieve this strategy, Microsoft adopted a user-centric design process of five stages: Understand, Envision, Specify, Implement, and Maintain. These stages are very similar to the design processes highlighted earlier. In addition to the design process, Microsoft involved the design on different levels, such as the following:

Project management periodic meetings to follow-up with the progress and ensure that the target goals are met
Using evaluation methods to learn more about the users’ satisfaction and learn about their experience
Testing the prototypes through adopting a user testing and evaluation methods.

Design Thinking Fuels Innovation

In his article in the Stanford Social Innovation Review, Tim Brown highlighted that “Design thinking is scalable and can be applied incrementally to improve existing ideas (such as how a service is delivered or how a product performs for the user) or it can be applied radically to create disruptive solutions that meet the needs of people in entirely new ways.” These characteristics of design thinking promote contribution in different types of innovation, including disruptive, sustaining, and breakthrough innovation.

The design thinking fuels innovation (source: modified based on the IDEO)

The nature of the design thinking process contribute fueling the innovation inside the company as achieving innovation requires the consideration of three main factors: technology, business, and human values. Those three factors can be achieved from within the design thinking process when targeting the below three goals while performing the process:

User desirability: the product should stratify the consumer’s needs through solving their everyday problems using a user-centric approach.

Business viability: an integrated business strategy should be considered in order to ensure the product success in the market.

Technology possibility: technology should be considered an essential part of the new product development process (NPD) as it is considered a powerful tool for designers to achieve innovation.

Mini Case Study: Design Thinking at Apple

In my article, Design Thinking Case Study: Innovation at Apple, I investigated the footprints of the dramatic shift of Apple products and how it related to design thinking. After Steve Job’s return to Apple in 1997, he initiated a new design thinking process in order to help the company pass its hard time during the period 1985-1997 and achieve market success. His strategy, which was given the slogan “Think Different!”, was based on applying the design thinking goals above the product process. So, he focused on the following:

Focus on the user needs rather than the business needs
Build an empathic relation between the users and their Apple products
Focus on the design rather than the engineering as designers are able to consider both the form and the function in the product design
Create simple products that target user needs rather than complex and hard-to-use products

Steve Job’s focus on the design process has dramatic impact on the development of iMac (source: Wikipedia)

Find Solutions for Complex Problems

In addition to the nature of the design thinking process, its different stages can help the design team to brainstorm solutions for complex problems that were not solved previously. During each stage, creative tools can be used to find uncommon solutions or address the problem differently. In the Define stage, tools such as affinity diagram can be used to organize collected data and the cause and effect diagram can be used to investigate the causes behind a specific problem.

Design thinking can also integrate with tools such as the SWOT analysis, TRIZ problem solving to improve the efficiency of the final product. For example, the TRIZ method is a common tool to address complex problems and achieve innovation. This tool can be used in the Define and Prototype stages to reach an innovative solution for problems.

In addition to the above benefits of applying the design thinking process, other advantages can be highlighted such as increasing the company profits and market competitiveness. There is a positive correlation between design thinking and achieving innovation which has been proven as a successful factor to achieve profit and improve the market competitiveness. In the Profitable Innovation book by Dr. Georg Tacke, David Vidal, and Jan Haemer, five options have been highlighted to improve the market position of the product or the company, at the top of the list comes the introduction of new, innovation, differentiated products with 77% percent which can be considered an additional advantage of applying the design thinking process.

How to Apply Design Thinking models

Different models have been introduced to define the design thinking process. While these models vary based on their approach, number of stages, the relation between stages, and naming of each stage, most of the models follow a similar process flow that includes finding the problems that need to be solved, defining the problem and the design scope, creating the prototype, designing the final product, and gathering feedback. Below is an overview of the common design thinking models and the differences between them:

Stanford D.School Design Thinking

One of the common design thinking models is the D.School design thinking, which can be considered a straightforward process consisting of five stages described below:

Empathy: this stage aims to find the problem that needs to solved through the product or the service. The problem usually presents a gap between what consumers need and what they already have. This is where the user experience research is applied to collect information about the users’ demographic information, behavior, environment, and needs.

Define: at this stage, the collected data is analyzed and organized in order to have a clear picture of the problem and user needs.

Ideate: the designers come to a solution for the problem in a form of a product or a service to be delivered to the end user. At this stage, the solution is defined in written format to be followed in the following prototyping stage.

Prototype: prototyping is considered the core of the design thinking process as it presents a transformation of the idea into a prototype for the suggested solution. This visual prototype allows them to evaluate the idea and determine whether it meets the target.

Test: this can be considered the first iteration stage in this model where the prototype is tested and feedback is given until it reaches the final product.

Stanford D.School design thinking model (source: Stanford D.School and Hasso Plattner Institute)

This model, shown in the figure below, does not clearly describe one of the essential elements of the design thinking process which is the iteration. A related version developed by the Hasso Plattner Institute in Germany introduced a continuous iteration between all the stages. After finalizing each stage, the iteration process ensures the initial design strategy is still valid and the requirements are met. If there is a problem or specific failure, the iteration process defines the stage where the failure occurred before returning to this point in order to fix the failure.

The simplicity of this model is considered both an advantage and disadvantage; while the simple, clear stages make it easy for designers to understand the different stages of the design thinking process, it does not define some essential stages such as the delivery of the product and the feedback that should be collected from the user and used to improve the future versions of the designed product or service.

ZURB Design Thinking

The ZURB Design Thinking Model is one of the interesting models that share the D.School’s simplicity, yet it tends to consider important stages such as building the final product and getting feedback. The ZURB model includes five stages; Define, Ideas, Prototype, Build and Analyze. The last two stages represent the build of the final product and analysis of the market impact and user feedback.

Zurb design thinking model(source: Zurb University)

This model presents two types of the iteration cycles; the design treats ion, and the product reset (pivot). The first type includes the iteration between the stages; ideate, prototype, build and analyze. If there is something wrong happens, the team can iterative between the four stages above to file problems and improve the product. The second iteration process is a hard reset. If there is a major failure or the product does not meet the requirements, the product resets and returns directly to the ideate stage to repeat the process from scratch and define the problem again.

Double-Diamond Design Thinking

The Double Diamond Diagram was developed by the British Design Council in 2005 as part of their in-house research to identify how leading companies manage the design process. The Design Council process include four main stages; Discover, Define, Develop, and Deliver. The first two stages define the project strategy, while the third and fourth represents the executive solution.

The Double Diamond Diagram by the Design Council (source: Design Council)

The process starts with a trigger point which can be an idea or a problem that influence the team to “understand” it and research the available knowledge about the targeted problem. This is a research stage where research activities can be conducted such as marketing research, user research, managing information, and design research groups. Following the “Understand” stage, the “Define” stage represents defining the project objectives and goals. Activities that can be achieved during the “Define” stage includes project development, project management, and project sign-off.

The second part of the Double Diamond Diagram includes the “Develop” stage which includes developing the prototype, iterate and tests it in order to ensure it meets the project goals. This stage involves multidisciplinary work: visual management, development methods, and testing. The last stage is “Deliver” where the final product is finalized and delivered to the market. The activities in this stage involved final testing, product approval, evaluation, and feedback.

The Double Diamond Diagram was part of the Design Council research which included eleven case studies of leading companies such as LEGO, Alessi, Microsoft, Sony, Starbucks, and others. Therefore, the presented model has been developed based on different types of companies, which has resulted in it being adopted by a wide range of companies.

IBM Design Thinking Process

One of the recently published design thinking models is the IBM design thinking. In 2013, IBM started a project to build a design-driven culture. The project took around three years, involved more than 750 designers and affected over 10,000 employees in the company. The project aims to build a design process that ensures a clear understanding of the consumer needs and build empathy. Additionally, the new model was placed to be remarked with the speed and scalability to meet the demand of modern companies. While the previous models were more biased towards small and medium enterprises (SMEs), IBM’s model targets a larger scale of companies including large enterprises such as IBM (which has more than 385,000 employees).

The IBM Design Thinking model (source: IBM)

The IBM design thinking model consists of three stages: Observe, Reflect, Make. Those stages form the so-called “Loop.” The first stage, “Observe”, focuses on observing and building a better understanding of the problem. The second stage, “Reflect”, allows the design team to analyze the knowledge in order to adopt it into the project plan. The last stage, “Make”, reflects creating the product prototype and delivering it to the end user. In this model, IBM assumes that there is no final product; all the so-called final products are prototypes that can be improved in accordance with the eternal flow of the loop.

The IBM model is based on three main principles represented in the figure below; focus on the user outcome, multidisciplinary teams, and restless reinvention is maintained. The consumer is represented by the yellow dot in the loop diagram as a user-centered process. The green dots refer to the multidisciplinary teams from different departments involved in the design process, and the restless reinvention refers to the iteration nature of the process. The process assumes that nothing is perfect and every product is a case for iteration and development.

In order to ensure the scalability of the design process, the IBM model organizes how the process is run among complex teams through three main keys: Hills, Playbacks, and Sponsor Users. The “Hills” refers to the project goals, the “Playback” refers to putting the stakeholders on the same page and ensuring the different teams are updated with the project progress through manful meetings, and the “sponsored User” ensures to involve the end user in the heart of the process through testing and feedback process.

The IBM design thinking model was designed to be scalable to fit in different companies’ sizes including very larger enterprises such as IBM itself, this is considered a unique advantage comparing with the above-mentioned design thinking models. However, the model is still new and we have not yet had enough feedback from companies who adopted it in their processes.

The above models highlight the different design thinking methods approaches how these models can be chosen based on the different factors including the size of the company, the project complexity, and the team understanding the design thinking model. However, all the models share the same strategy to build a user-centered process.

Design is now taking a leading position. It is no longer should be limited to its role as a tool, but also it should extend this role to contribute in drawing the company strategy and should be considered in every development process. Design is a process rather than a tool, and the design thinking process is a user-driven method that ensures that the final product is desirable and solves user problems. Many design thinking models were introduced to build a user-centered design. Selecting the proper model to follow depends on the complexity of the model and the size of the company. Successful companies such as Lego, IKEA, Apple, and Microsoft have applied different design thinking models to build user-centered products. Additionally, applying design thinking can help companies to improve its innovation capabilities, address complex problems, increase profit, and improve its competitiveness capabilities.