How to choose a winning business model for your new digital product?
13.06.2022 - Read in 8 min.
Are you planning to launch a new digital product? Choosing the right business model during the design phase will influence the overall success of the solution. Take a look at some of the tools we use to help businesses set the right course for their product development journey.
Defining the business model for your new digital solution goes hand in hand with the UX design process. Users will connect with your business through the digital product, and a powerful UX that engages them deeply can eventually make them loyal customers. Exceptional UX can, in fact, be the basis of your unique value proposition, making your business more competitive.
Beginning the product development journey with a UX workshop is crucial for the ultimate success of your new solution. At RST Software, the UX workshop focuses on delivering five outcomes that companies can use to build a new software product that responds to both the needs of their customers and helps the business outsmart the competition. These outcomes are:
- Business model,
- Elevator pitch,
- User stories, scenarios and flows
- Customer Journey Model.
All combined, these elements will make a vital contribution to the overall UX and UI design strategy.
In this article, we present a tried-and-tested method for picking the best business model for a new digital product. The process helps to set the right course for your business and to clarify the goals and expectations towards your digital tool. Above all, It also allows you to gather and organize the key information necessary to create a beautiful, usable and effective software product that will help you achieve your business objectives.
Picking the best business model for a digital product
Defining the business model is vital to ensuring the product and its design fulfill both the needs of the business and the users. During the UX/UI workshops, we take advantage of two tried-and-tested tools: Business Model Canvas and Value Proposition Canvas. A combination of these two elements gives every stakeholder an even better understanding of the business approach. Each tool can be used separately, but the VPC is a useful addition to the BMC.
Why is it important to define the business model?
- It helps designers and developers understand the product and its context.
- It clarifies the business mechanism behind the client’s tools and sets clear goals, putting all the stakeholders on the same page.
- It allows participants to evaluate specific project assumptions.
- It’s an occasion to brainstorm new ideas and solutions to potential problems.
- It helps to set more accurate cost estimates.
- It reveals the project risks and weak areas, allowing you to prepare a risk management strategy.
- It pushes stakeholders to identify the key functionalities required to achieve the goals.
- It helps to define the target group that would use the tool.
Business Model Canvas
The business model canvas helps to organize and understand project stakeholders, and determine what the customer’s environment looks like from the business perspective. This stage of the UX process focuses on the identification of the following, business-critical elements:
- Key partners
- Key activities
- Key resources
- Value proposition(s)
- Distribution channels
- Customer relationships
- Customer segments
The Business Model Canvas is a well established strategic management tool that allows businesses to clearly define the components of their business model. It focuses on nine elements. Let’s take a look at them one by one and review the questions they aim to answer.
Key Partners – every external person or organization the business requires to run smoothly.
Who are our main partners?
Who are our main suppliers?
What resources are we obtaining from our partners?
What key activities do these partners perform?
Key Activities – those that the business must perform in order to continue to operate.
What key activities does our value proposition require?
Our distribution channels?
Relationship with customers?
Source of revenue?
Key Resources – the resources that the company needs in order to offer what it promises in the value proposition. These can be physical (factories, machines), intellectual (domain knowledge, patents), human (reputable experts or staff), or financial (money, shares).
What major features does our value proposition require?
What are the distribution channels?
What is required to establish relations with customers?
What are the sources of revenue?
Value propositions – the reason(s) why customers should choose your business or product over other competing products.
What value do you deliver to customers?
What problem are you helping solve?
What needs are you satisfying?
What set of products and services are you offering to each customer segment?
Customer relations – acquisition, retention and expansion.
What kind of relationship do each of your customer segments expect us to establish with them?
Will they be automated or human-induced?
Which ones have we established?
What is the cost of each?
Do they fit in our business model?
Channels – the way the company communicates with its customers from the moment they purchase the product to the support they receive after the purchase.
By what channels do our customer segments want to be contacted?
How do we reach them now?
How do our channels integrate?
Which works best?
Which are most cost-effective?
How are they integrated into the customer routine?
Customer segments – the target group we would like to buy the product from us.
Who are we creating value for?
Who are our most important consumers?
Cost structure – both fixed and variable.
What are the most important costs in our Business Model?
What major features are more expensive?
Which key activities are more expensive?
Revenue Streams – these should take into consideration every customer segment.
What value are your customers really willing to pay?
What do they currently pay for?
How do they pay?
Would there be a better payment system?
How much does each revenue source contribute to total revenue?
Value Proposition Canvas
The Value Proposition Canvas takes a closer look at the two components of the Business Model Canvas: Value Propositions and Customer Segments. A single canvas sheet will correspond to one customer segment. We list some questions that will help you fill out each element of the Canvas.
This part of the exercise focuses on listing customer pains and gains while they try to perform specific activities.
Customer Jobs – include all the tasks that customers are trying to complete, e.g. solving a problem, fulfilling a specific action, satisfying a need.
What functions does your customer try to perform?
What social goals does your customer try to accomplish?
What are your client’s emotional goals?
What jobs make them feel satisfied?
How do your customers want to be perceived by others? What can they do to achieve this?
How does your customer want to feel? What do they need to do to get this?
Track the interaction of the customer with your product throughout the cycle of consumption. What work should the customer do for this time?
Pains – factors that prevent a customer from completing a job. It can be something that a customer has to deal with, or negative outcomes that they would prefer to avoid. Pains could be severe or minor – it helps to evaluate them from the customer’s perspective.
What does your customer find too costly in terms of money, time and/or effort?
What makes them feel bad?
Are there other solutions that your customer finds unacceptable?
What challenges and problems do your customers face? Perhaps they are unaware, don’t understand or cannot implement something?
Are your customers anxious about anything in their financial, social or technical spheres of life?
Gains – include the positive experiences and desires that the customers are looking to fulfill. Gains are the incentives that push the customer to adopt a product or service.
What makes your customer happy in terms of time, money and effort?
What results does your customer expect?
Can you exceed these expectations?
What would make the work or life easier for your customers? New features, new payment plans, etc.
What positive outcomes do your customers want in their social relations?
What perks are they looking for?
The map focuses on mapping out the product features, functionalities and benefits that attract customers and fulfill their needs, as listed in the corresponding Customer Profile circle.
Products and Services – the set of features, products and services offered. If you’re producing different versions of the tool, you can also list the version of the product you will offer, e.g. freemium or trial. Focus on how the features and products will help customers get their job done.
Pain relievers – here the focus is on how your product will ease the customers’ pain. These relievers should be relevant to the pains mentioned in the customer profile. Different sorts of pain relievers are made for different kinds of pain. However, it isn’t necessary to discuss the whole pain in detail here. Just a simple statement will do the task.
Can you make any savings with your product? Time, money, or maybe effort?
Can it improve your customer’s emotions? Can it fix what normally gives them a headache?
Does it fix the defects of existing solutions? Or, offer what they lack?
Will it allow the customers to achieve what they are going for ?
Does it remove the difficulties or problems that your customer faces?
Does your product/ service exclude the negative social consequences that are encountered or which are afraid of your customers?
Does it reduce the risks that your clients are afraid of?
Does it help your customers sleep better at night?
Does it limit or eradicate common mistakes that customers allow?
Does it eliminate barriers that keep your customers from implementing the specific solution?
Gain creators – this is where you show how your product adds value to customers. How does your product help customers achieve their goals? List everything that offers something new or improves their user experience.
Does your product provide savings that make your client happy?
Does it ensure the results that the customer expects?
Does it simplify the work or life of the customer?
Does it give something that your customer wants to get?
Does your product/ service reflect some of the dreams of your customer?
Does it give positive results that meet the criteria for success and failure of the customer?
Picking the best business model for a digital product
Defining the right business model for any digital tool requires answering a number of questions to help shape the overall product strategy and fuel the design process. With the help of Business Model Canvas and Value Proposition Canvas, startups and new businesses can approach this process in a systematic and organized way.
I hope you found this article useful and feel prepared to define the business model for your new digital solution. If you have doubts about the process, contact us directly and we will be happy to answer your questions or see how we can help you on the product development journey.