What is Practical Business Design?
It is a method of describing your business and helping you clarify:
- what it does and for whom
- how it works
- where you want to be in the future
- the challenges ahead
- how to achieve your goals
Practical Business Design takes the best elements of many business models, simplifying and linking them together giving you the traceability to see how the pieces of your business fit together.
The method looks at more than just the Business Model (what your business does) or the Operating Model (how your business works). It includes your business strategy and how you plan changing your business, ensuring you use your budget more efficiently.
What is the Canvas?
The Practical Business Design Canvas provides a simple structure for you to organise your thoughts about your business. It can be used in poster form or on a whiteboard for workshops, using sticky notes for your ideas.
The Strategy Model describes what your business is and what you want it to be. It is important to be able to write down what you want to achieve to ensure that what you do in your business will actually achieve those ambitions. Otherwise, you can never really know if you’ve succeeded or not.
This is a simple declaration about what your business is. It should describe what you do, who you do it for and where. For example, it might be:
- “We provide financial services to retail customers in the UK”
- “We sell premium coffee and other beverages to West London customers”
This is a forward-looking statement about what you want your business to be and the values it represents. It should be both aspirational and inspirational for your employees. It provides the focus to ensure all work is driven towards the Vision. Examples might be:
- “To turn our customers into friends”
- “To be the #1 wholesale food retailer in Europe by revenue”
Drivers are things that make you want or need to change your business. These can be factors such as new regulations or new competitors. They might be opportunities from new technologies. Drivers influence your goals. They describe why you want to change your business.
Goals are your high-level ambitions for the company. They describe what you want to achieve in the short, medium and long term. They are usually based around a few themes:
- Increasing growth in the business (usually revenue)
- Reducing costs
- Reducing risk and its impacts
Your goals could be described in a hierarchy. For example, a goal to “increase revenues” could mean “increase number of shops” and / or “increase number of customers”. The “increase number of shops” could be broken down into “increase number of shops in London” and “increase number of shops in Paris”.
Goals are fine to describe high-level aims, but how do you know when they are met? Is one additional shop enough or ten or fifty? If you want ten shops, is it good enough to open them in this year or in the next five years?
Objectives turn goals into specific, measurable targets that have a time period so it is clear whether they have been met or not. Objectives are made up of:
- what you want to achieve (“increase number of shops in London”)
- a measure of success (“add ten shops in London”)
- a time period (“add ten shops in London by the end of 2018”)
Each goal should be described by an objective. Like goals, objectives can be placed in a hierarchy also. For example, a cost reduction target for the whole company could be split across different business divisions. This way, there is accountability for what the business wants to achieve.
In an established business, Change describes how you plan to achieve your objectives in the Strategy Model. It includes one or more courses of action which are the ideas you come up with and programmes & projects which are how you will implement those ideas into your business.
For a start-up company, the courses of action might represent the ideas you want to kick-start your business.
Courses of action
For each objective, you might come up with one or more ideas or solutions. These ideas might support many objectives. Examples might be:
- Run a customer service training course for US employees
- Deploy a new customer helpdesk system
Programmes & projects
For each course of action that you want to implement, you normally require a project (small scale change) or a programme (collection of projects, implementing a large scale change). Programmes & projects should have a business sponsor; someone in the business who wants the change and is prepared to fund it.
Programmes & projects will have specific success criteria, aligned to the objectives they are supporting. By defining these up-front, it is clear how the change is meant to support the goals of the businesses. This gives you the traceability to track progress of your business goals as projects get delivered.
The Business Model describes what your business actually does, what it sells, who to and what that relationship with the customer is.
Customers are the lifeblood of your business. They are the reason you exist. Customers may be individuals, other companies, governments. They are the people that pay you for the products and services you offer.
Customers can be segmented, for example, geographically or by income or by size of business. You may want to offer these customer segments different levels of service or different types of products.
Products and services are what your customers will pay you for. The difference between the two is like this:
- Product = paying you for a hammer
- Service = paying you to hammer for them
Products and services make up your value proposition; what is distinctive about what you sell. Do you offer a better quality product? Is your service quicker than your competitors? Or are you simply cheaper for an equivalent product?
These describe the customer’s relationship with you. There are some typical phases in the customer journey:
- Awareness – potential customer becomes aware of your products through marketing or word-of-mouth
- Interest – potential customer is interested and contacts you for more information
- Proposal – potential customer receives a proposal with a price quote
- Purchase – customer accepts and pays for the product
- Delivery – customer receives the product or service that they bought
- Support – customer has queries or complaints and requires help
- Retention – customer wants to buy additional products from you
- Advocacy – customer actively promotes your business to others
- Leave – customer decides to end the relationship with you
These interactions are a key part of building a successful business and it is important to always be aware of the customer’s expectations, needs and feelings throughout.
Customers can interact with your business through a number of different channels. For example:
Business capabilities are what your business actually does. These include customer-facing capabilities like Sales, Marketing and Customer Support. Also, they include supporting capabilities like HR (Human Resources), IT (Information Technology), Legal, Risk and Compliance.
Note, it does not matter here who does these things or how they do them. That is covered in other sections of the Canvas.
Capabilities can be organised in a hierarchy and are usually depicted as sets of nested boxes. For example, a top-level Customer Support capability might contain:
- Customer channels – managing the methods through which the customer can interact with you
- Customer complaints – managing complaints, investigations, escalations and resolutions
- Customer helpdesk – managing post-sales customer support
The key for the capabilities is that they rarely change over time. Your business will always need to do sales or marketing. How your business actually does those things will change and that is reflected in the Processes in the Operating Model below. This consistent, stable view of your business through capabilities brings significant benefits:
- Ability to assign ownership and accountability for capabilities, providing clarity of responsibilities
- Ability to assess impact of change programmes to identify areas requiring extra focus early on
- Ability to show applications used by capabilities, showing areas of overlap
- Ability to link costs to capabilities (people and technology) to show heatmaps
- Provides a common language across the business to reduce misunderstandings
The Operating Model describes how the business actually works, by taking the lowest level of capabilities and drilling down into the detail of the business processes within them. The processes, which are a set of steps, link people, business data and applications together.
Whereas capabilities describe what the business does, processes describe how they are performed from start-to-finish. You may have a Customer complaints capability, but the process that is used could be different by location or business unit or customer type. Processes enable you to document these differences.
Capabilities should be decomposed (drilled-down into more detail) until you get to a point where you are describing a set of steps that occur one after the other. This is your top-level process.
A typical top-level Customer onboarding process might look like this:
- Receive customer onboarding request
- Verify customer details
- Collate customer documentats
- Perform KYC (Know Your Customer) checks
- Perform AML (Anti-Money Laundering) checks
- Update status of customer record
- Inform customer of relationship status
Now, it might be that in one country, there are some additional legal checks to be made after #5, so this would be documented as a regional variation for that country.
Processes can capture who does the task (this might be a department or team or individual role), what business data they are using and updating and what software applications they might use. Like capabilities, process steps can be drilled-down into more detail.
Your business will most likely have people working in the organisation. It could be only a few people to tens of thousands. These people will have some sort of organisation structure where they report to managers based on what they do.
The business will also work with external partners. These might be suppliers, agents, trainers, etc. These can all be involved in the processes.
The location of the people involved may be important, so it is useful to capture that detail in the Canvas. For example, you may have employees in data-sensitive countries, for example, Switzerland, that require additional training or certification.
Data here refers to business data only. These are things like:
We do not need to worry about the implementation of these in any detail. That is in the realm of IT architecture teams.
Each data object could be in one of many states. For example, the “Individual” might be a:
- Lead – someone that has provided you with some form of contact information
- Prospect – someone where you have done some initial due diligence to see if you can do business with them
- Customer – someone where you have completed all the regulatory checks and have agreed to be in a relationship together
The location of data is particularly important because of data confidentiality regulations and how they differ between countries. You should be aware of data protection regulations in the countries where you operate and potentially where your data is stored.
These are the software applications that you use. In this case, we do not normally include Microsoft applications like Word, Outlook or PowerPoint. Microsoft Excel is usually included where a specific application has been written in Excel VBA, for example.
Applications can be used by people or can be integrated with other applications.
You should be aware of security themes, such as encryption, hacking attacks and backup plans and treat these as risks requiring mitigation.
Applications can support one or more capabilities and these can be displayed on a capability model.
Metrics are how you can measure the performance of your business; how it is running and how change is progressing. If you think back to your objectives, these describe metrics you would be interested in. A metric might be:
- Time taken to answer a customer email
- Cost of offshore employees per month
- Level of customer satsifcation of product
It is important the metrics are able to be measured in a repeatable fashion to ensure continued monitoring.
KPIs (Key Performance Indicators)
KPIs are a specific type of metric; one that the business is particularly interested in. You can think of a KPI as a metric that the business would pay to double (or half). A business might be able to measure lots of different things, but the business should pick a top five to focus on.
Dashboards can be set up to track and report on these metrics and KPIs which can then feed into updates on the Strategy Model at regular intervals.
The aim of the Practical Business Design Canvas is to help you structure your thoughts about:
- what your business does
- how your business works
- how is change impacting the business
- why the business exists
It also lets you link these together, to start getting a view of the relationships between them and let you see your business in a new way.