In addition to describing the structure of the realm-perspective-model (3-4-model), there is also the question of how it is used in practice. How does one go about analyzing a business concept? This analytical process is cyclical and in all likelihood you will run more than one cycle before you have achieved an detailed understanding of your business concept. However, there is a clear starting point for this process. So let us start at that beginning.
The development of a business concept always starts with the question of which (functional) task the business is supposed to solve for the customer. What function does the product fulfill for the customer and possibly for other involved third parties (What?). While doing so, it has to be taken into account that every real existing product usually fulfills several functions at the same time and that these can even differ depending on the situation. Linked to the question of the function or task fulfilled is the additional question of to whom this service is primarily provided (directly or indirectly) and what is actually the primary claim, the most important statement to this customer about the desired service (value proposition, or the desired evaluation from the customer's point of view). This value from the point of view of the customer must be so strong, that the customer takes action as intended for the business.
On this basis, alternatives can then be developed as to how this service (the task fulfillment and value proposition) should be provided to the customer in practice. Start with two options: How is the functional task provided today and how do you envision the fullfillment in the future by employing your business? The question to be answered is which (functional) elements are required for each of the two solutions and to which realm does each of these functional elements belong to?
Which time path do the individual elements follow in order to actually be created? Some elements may be available immediately and other elements are going to be new and need a lengthy development and investment process. The latter are the ones you need to be concerned about, because you need the time and funding to create them. Moreover, these new elements need to be build from other elements, and the question is, whether all these elements are actually available to you. Let's take a look at an example for this problem. A typical business idea might involve AI as new functional elements. However, where does the AI come from. It will require training and sufficient data to be developed. So, where do the data come from and who has the knowledge to create the training algorithms? Purely from the varying timing of elements further variations of your solution arise and the selection begins. Following the example: Does your new solution also work without AI? What functionality do you actually provide without it? If there is no AI, what value proposition can you provide? Is it still attractive enough to entice potential customers? And with these questions you have already entered the second round of your refinement process.
Once you have thorough understanding of the elements involved in your business concept, you start with the second perspective. Which connections and links do the elements have with each other? How do the elements in the structure interact so that your desired solution is actually created. In particular, this includes the question of which links exist between which actors for the required elements in the second and third realms. Overall, this defines a structure and its development path.
Once there is a basic understanding of the structure, the question of alternatives and their evaluation at the interfaces that occur within the structure need to be considered again. The focus here is initially on the interfaces that occur between the different actors. In principle, each of these interfaces offers the actors the possibility of choosing an alternative to perform the same or a simmilar function. At these interfaces, the question arises as to how the actors value the exchange at the interface. It is important to consider all three realms. This begins with the question of which elements are used or consumed (wear and tear) or transferred at the interface. This can be material, any combination thereof (= physical products), or energy, data, money, or allocations from the virtual realm, or time in the actor realm. In addition, the associative value for the participants must be taken into account - both in relation to the persons under consideration and their position in the group(s) relevant to them. Associative contexts as well as emotions must be taken into account.
Finally, there is the question of the viability of the preferred structure. In particular, the time perspective raises the question of when the elements, interfaces, and evaluations required for the desired value proposition will actually be available and how stable they will be over time. In addition, the dynamics between the elements and any existing or ongoing processes in the business concept must be considered.
In the vast majority of cases, it will be found that important building blocks for the implementation of the initial idea are missing, are created later, or, at the other extreme, are initially present but not stable over time and then disappear. In addition, individual processes in the business concept may have completely different dynamics and speeds. This can lead to significant imbalances and subsequent problems.
This is the moment when the cycle starts all over again and you have to go through the cycle for another time. The same questions arise again: What task can be fulfilled if a building block is initially missing? What value proposition is actually available without this building block? What replacement can be created for the start? What alternatives are there? How are these alternatives evaluated by the elements involved? How can you deal with completely different development speeds in parts of the business concept? Is your own position in the business stable over time or do others involved have an incentive and the capability to cut you out? ...
You will often find yourself in a situation where you don't know the answer to all of these individual questions. This is also not necessary if you are at the beginning of the journey. Compared to an unstructured approach, however, you already have a decisive advantage: you have identified the questions in the first place. Some could have been overlooked. You may even have recognized that these are critical questions. You can recognize whether something is critical by various factors:
- The function intended in the business concept is not fulfilled for the customer without the existence of a certain element or due to a missing interface. From the example above: If I want to develop an AI, but I cannot train it due to a lack of data, then it is precisely this non-existent data, as an element at the virtual level, for example, that constitutes such a gap.
- It may also be that a particular element is not available in sufficient quantity or will not be available in sufficient quantity in the future as the business concept grows. This puts a limitation to your market potential and therefore to the value of your business. The question then is, can you change something to address additional potential and is your business still the same after that change? What do you have to forfeit to address this new potential and how does that change your business concept and your customer's or stakeholder's evaluation of your business? But remain realistic: Just how immportant is this question now? Will it happen before you will have stabilized your business or is it a problem sometime in the future and you will be happy to have it, because it only shows up after you have been hugely successful?
- Another point at which an issue becomes critical can also result from different development speeds in the business concept. If some parts of the business develop much faster than others, this can lead to significant imbalances. This in turn can endanger the business concept as a whole. It is not necessary to determine the exact point at which an imbalance occurs or reaches a level that threatens the business concept. In many cases, it is possible to roughly estimate when an identified open issue will become critical and what the consequences will be if it is initially ignored. In this case, it is sufficient to have identified the problem in time to prevent it from occurring.
In any case, this analytical approach using the 3-4-model provides the basis for planning and prioritizing the next steps. The question of critical elements, interfaces, evaluations and dynamics also helps you to focus on the essentials and not to get lost in the variety of possible connections.
You have moved on from “I know that I don't know” to “I know what I don't know”. You have even developed a feeling for what is particularly important or, in the words chosen previously, particularly critical. That is a very significant difference!
And now? What happens next? And what follows? You can find out more in the Outlook beyond the basic 3-4-Modell.
Comments powered by CComment