Validate the Business Model Before Building It
One of the best ways to learn is to make a prototype. Prototypes come in many shapes and sizes, but their defining element is the learning objective behind them. When you start with what you want to learn, the prototype is sure to satisfy the learning objective. But start with the prototype, and no one is quite sure what you’ll learn. When prototypes come before the learning objective, prototypes are inefficient and ineffective.
Before staffing a big project, prototypes can be used to determine viability of the project. And done right, viability prototypes can make for fast and effective learning. Usually, the team wants to build a functional prototype of the product or service, but that’s money poorly spent until the business model is validated. There’s nothing worse than building expensive prototypes and staffing a project, only to find the business model doesn’t hold water and no one buys the new thing you’re selling.
There’s no reason a business model can’t be validated with a simple prototype. (Think one-page sales tool.) And there’s no reason it can’t be done at the earliest stages. More strongly, the detailed work should be held hostage until the business model is validated. And when it’s validated, you can feel good about the pot of gold at the end of the rainbow. And if it’s invalidated, you saved a lot of time, money and embarrassment.
The best way to validate the business model is with a set of one-page documents that define for the customer what you will sell them, how you’ll sell it, how you’ll service it, how you’ll train them and how you’ll support them over the life of your offering. And, don’t forget to tell them how much it will cost.
The worst way to validate the business model is buy building it. All the learning happens after all the money has been spent.
For the business model prototypes there’s only one learning objective: We want to learn if the customer will buy what we’re selling. For the business model to be viable, the offering has to hang together within the context of installation, service, support, training and price. And the one-page prototype must call out specifics of each element. If you use generalities like “we provide good service” or “our training plans are the best”, you’re faking it.
Don’t let yourself off the hook. Use prototypes to determine the viability of the business model before spending the money to build it.
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