What is Business Design and How it Drives Innovation
We live in a period of heightened optimization. Optimize for the fastest route. Optimize for the most credit card points. Optimize for the most social media likes.
But not every situation is made better by optimizing a singular facet. Many organizations operate with the mindset of optimizing business outputs. This thinking commonly takes place deep in spreadsheets where the needs, wants, and goals of the humans connected to the organization are abstracted away. These humans consist of customers, employees, vendors, partners, and other stakeholders who are all vital to an organization.
Business design takes a different approach, one that centers on humans to best serve them.
Business Design is the creation and development of human-centered business models, cases, strategies, and operations that directly enable products or services.
In application, business designers use holistic insights from social scientists, experience designers, and other experts in human behavior to inform their work. Business design occurs during the early stages of an organization’s strategic management process and product development process.
Business designers often work on business models or blueprints for how organizations drive value for the humans they impact and themselves. An example of business model innovation is Adobe’s launch of its Creative Cloud subscription service in 2012. This was considered a significant change for Adobe’s main business and flagship product. It was also a huge shift in user experience: No longer a one-time purchase, users would now access continuous upgrades through a monthly subscription. Since this launch, Adobe’s annual sales have more than tripled. Behind the scenes, Adobe’s effective execution of business and experience design led to its successful business model shift. Business designers gathered insights from experience designers to understand the impact this shift would have on customer behaviors. They also conducted financial modeling to assess the economic impact of the change.
The partnership between business and experience designers is also key to developing business cases or business justifications for product and service innovation. For example, an experience designer may first conduct research and lead ideation to find ten new product ideas that appear desirable to customers. From this, a business designer may build ten associated market size estimates to identify the idea that is most viable in the long run. This cross-functional process helps an organization guard against poor investments and provides an internal rationale for new initiatives. At Method, we partnered with a national pet care retailer to identify, size, and plan the idealized future experience of a new pet parent. Our business designers assessed the market potential of several opportunities and prioritized them based on strategic fit and financial viability. This diligent effort led to the development of a digital transformation roadmap and requirements for an MVP build.
The third and perhaps broadest activity business designers are responsible for is the creation and development of business strategies and operations that directly enable products or services. ”Business strategies” may include a company’s overarching plan to pursue new market opportunities with an existing product while “business operations” is this plan’s execution on a tactical level. Business designers often use market trends research and competitive analyses to inform the direction of these products and services. In addition to supporting new initiatives, business designers also consider what strategies and operations not to pursue. For example, Costco, the second largest retailer in the US, has historically made a higher margin with its private label brand, Kirkland Signature, compared to the other brands it stocks. Imagine if Costco were to replace all other brands with Kirkland Signature products. Would reducing optionality for customers and alienating existing vendors be worth it? So far, Costco has not committed to this all-in strategy, although they have likely explored this very question.
Effective business design transforms organizations while balancing the needs of human stakeholders. From scrappy scaling startups to established companies looking to increase market share, understanding business design’s key activities is necessary to create better products, services, and organizations.