Put Your New Business Model to the Test

When a consumer product company wants to know how a new product or new marketing campaign will perform, it doesn’t rely solely on traditional market research surveys. It goes to test markets. It’s the right way to discover how the innovation will go over in real market conditions. So why don’t more firms do this with new business models, asks Saul Kaplan?

Anyone can map out new business model ideas on paper. It’s easy to do pro-forma analyses of how a new business model might work. And it’s not much more work to write up a fancy report embellishing on the potential of a hypothetical new business model. But until a business model idea sees the light of day in the real world, it is impossible to know if it will really work.

Just talk to any successful serial entrepreneur about their experiences in starting new businesses. They almost never get the model right on the first try. It takes several iterations to find a business model that works on the ground and has the potential to scale. The better approach is to sketch out a business model concept on the back of a napkin, build a prototype, and then move as quickly as possible into the market to see whether it holds water.

The idea is to move as quickly as possible from concept to prototype to test, and then iterate until you land on a business model configuration that works and is ready to scale. Along the way there will be many failures. The trick of course is to fail fast and to capture learning that can be applied in the next round.

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