What are the Benefits of Business Design?
The word ‘design’ gets used in numerous contexts, but you don’t hear it much in the context of creating a business. We design buildings, software and even toothbrushes. But who designs a business?
To address that question, we need to look at the reasons why businesses get started in the first place. My experience has been that it is often down to one of the following reasons.
You have a burning desire to do something important
You feel that there’s nothing you’d rather do
You want to recreate something you experienced elsewhere
For myself, the reason was mostly point 2. Frankly speaking, I got bored of working for other people and doing what they wanted to do. I had some ideas, but setting up a business was really just a necessary consequence of there being nobody else’s business to do it in.
But I think I’m in the minority there, along with those in point 3. By far the most people I’ve met who start a business seem to be motivated by point 1. There was something important to them, driving them to make a change, a mission or calling that they could not ignore.
The common denominator among all of these reasons is ‘doing something’ but not necessarily ‘starting a business’. Starting a business is a ‘necessary evil’ that allows you to do what you want to do.
THE ORGANIC BUSINESS
A common story I’ve seen play out is that if you are good at something and doing good work, you pick up more and more jobs until the day arrives where you can’t service them all yourself. Some people start turning work down but, for many, the instinct is to hire some help, and then some more help. Pretty soon you have a business that is looking to you to lead it, but you never set out asking for this.
Maybe your story is a little like this?
The consequence of this kind of ‘organic’ growth approach is that the business may not have been set up to achieve a specific outcome. There’s no real sense of what ‘success’ means for the business, which may leave it adrift as it scales up and becomes more complex. Now that’s all well and good while things are working out but, sooner or later, every business grows out of the context in which it was thriving and into a new context where challenges may start coming from all sides.
For example, a business that starts as a sole-founder and grows to 20-30 people may end up with monthly staff wage bill of £100,000 per month or more. That means bringing in over £1m of business per year just to keep everyone fed. Imagine the pressure on you to keep that going when all you really wanted to do was design beautiful web pages?
Another problem is when the owner of the business finds they rarely get to do the things they are passionate about and which gave them pleasure in the first place. For example, a past client loved to write client copy but with so many others things to do as MD, felt guilty about spending time on it!
An organic business can be fine but we should recognise that it is likely that problems will be discovered as time goes on.
So, what can we do about that?
THE DESIGNED BUSINESS
The alternative to an organic business is a designed business.
We don’t find much discussion of ‘business design’ and I’ve often found that strange, when design is so much of a facet of most things in our lives; our cities are designed, the cars we drive, the trains we use, buildings, computers. Design is all around us.
Someone poured over how these things will be used - the objective, the constraints, risk and safety, fitness for purpose and so on - to produce a designed object that has a good chance of working and standing the test of time. Yet, by contrast, most businesses are rather slapdash affairs - glued together as they go - responding to events as they happen, and everyone wondering, “Why doesn’t this work better?”
Don’t you think it’s strange too?
What I mean by ‘business design’ is to set an intent for what the business is meant to do and how it will do that, taking into account all the many twists and turns that you are likely to experience along the way.
Business design encompasses the ideation, design and execution of a strategy and business model, this means digging deeply into value proposition design. In a business with significant financial goals it also involves designing very carefully how it’s going to make money, how it’s going to be profitable.
This last point is an important one, often missed. There are a lot of ways of making money (and even more of not making it) and there is often a focus on only one that is either familiar or current.
WHAT ARE THE COMPONENTS OF BUSINESS DESIGN?
Mission - that is a short, pithy, statement that describes the positive impact the business intends to have on the world. But remember that ‘impact’ and ‘world’ can have different meanings to different people. Your world could be your family, your town, or just ‘people like you’. Impact can have many forms. You don’t have to be putting a man on the moon…
Values - the sine non qua of behaviour. These define a cultural norm about what is absolutely not acceptable. A good set of values help to ensure that everyone is aligned to deliver on the mission and to avoid the risk of saboteurs.
Horizon goals - the 2-4 numbers that describe the winning condition outlined in the Mission. Typically this can be formed into the vision or kept separately. If these measures are met, we won, congratulations!
Strategy kernel - borrowing the idea from Richard Rumelt this is the high-level strategy that identifies the challenge inherent in delivering the business mission and horizon goals, as well as the critical factors for success, and choices of gameplay - the tactics that we expect to succeed with.
Value proposition and business model - the understanding of the customer, their needs, and how the business will generate value for them that is commensurate with the value it wants to generate for itself.
Operating plan - the plan that defines how all these things will actually be achieved over time by measuring key outputs. The plan outlines how assumptions will be identified and tested, how tactics that don’t work will be identified and replaced with others that do. How the business will iterate to deliver on the mission.
A business that has all of these things can truly be said to be designed. It’s not that an organic approach can’t work but if you approach it systematically, if you design it, you give yourself the best chance of overcoming the challenges that stand between you and the mission, the best chance of success.
Where do you stand on business design?