What is operational prototyping

The interest in business models has increased significantly in recent years. Basically, however, it must be said that the concept of the business model is not new. Decades ago, a distinction was made between different types of business models - including strategic, operational, organizational or even technological business models. In recent years, however, the focus has now been on operational business models.

In our opinion, however, the question now arises as to whether there is not a similar meaningful distinction between business models and the distinction between strategic and operational management: Strategic management - doing the right things - provides the framework for operational management Management - doing things right - before.

Applied to business models, this would raise the question of whether there is a business model core that provides the framework for the other (more easily) changeable elements of a business model. In this context, we then speak of a business model prototype as such a business model core, which is decisive for the other elements of a business model. This idea is to be further processed in the following explanations.

The classic perspective - the operational business model

The majority of the current business model approaches can be assigned to the operational business model approaches. The business model approach of Osterwalder and Pigneur is one of the more well-known examples of an operational business model approach. The operational business model of Osterwalder and Pigneur (2011) consists of nine business model components:

  • Customer segments: Who do we create value for? Who are the main customers?

  • Value proposition: What value do we convey to the customer? Which of our customer's problems do we help solve? Which customer needs do we meet? Which product and service packages do we offer each customer segment?

  • channels: Through which channels do our customer segments want to be reached? How do we get there now? How are our channels integrated? Which ones work best? Which are the most cost effective? How do we integrate them into customer processes?

  • Customer relationships: What kind of relationship does each of our customer segments expect from us? Which ones have we set up? How expensive are they? How are they integrated into the rest of our business model?

  • Sources of income: What values ​​are our customers really willing to pay for? What are you paying for now? How do you pay now? How would you like to pay? How much does each source of income contribute to total sales?

  • Key resources: What key resources do our value propositions require? Our distribution channels? Customer relationships? Sources of income?

  • Key activities: What key activities do our value propositions require? Our distribution channels? Customer relationships? Sources of income?

  • Key partnerships: Who are our key partners? Who are our key suppliers? What key resources do we get from partners? What are the key activities of partners?

  • Cost structure: What are the most important costs associated with our business model? Which key resources are the most expensive? Which key activities are the most expensive?

In summary, from our point of view, one can say:

  1. The well-known operational business model approaches consider "business models" from a very detailed perspective. All internal and external value-added content, from activities and resources to partners and customers, is comprehensively addressed. On the one hand, this can be advantageous because all aspects of an (operational) business model come into focus at an early stage, but on the other hand, it increases the complexity in an early phase of business model development. However, this contradicts a principle that the two American management researchers Sull and Eisenhardt formulated in 2012 for (hyper) dynamic competition as follows: “The more complex the environment, the simpler the rules must be, according to which action is taken. "
  2. In addition, it should be noted that the operational business model approaches generally focus on customer benefit or the value proposition. It then comes down to the questions which problem solutions should be offered to the customers. In essence, however, this (tacitly) also often changes or enlarges the perspective. There is a transition from the company's value proposition to the value proposition of the product or service offered. In our considerations, however, the product and company levels should remain separate without neglecting the interactions between the product and company levels. There are certainly differences between the two levels, although the two levels are closely linked, as the example of brand image (e.g. product brand vs. corporate brand) shows.

This raises the question of whether a few core elements of a business model can be identified that are difficult to change and that set the framework - see the above-mentioned relationship between strategic and operational management - for the other elements of a business model.

The Business Model Prototype - the business model core

Our studies show that some core elements of a business model can be identified. We refer to these core elements of a business model as Business Model Prototype. The Business Model Prototype is the “competitive essence” of a company, which describes the essential details and the essential interrelationships.

The Business Model Prototype provides a focused view of the business model and combines the essential elements of a business model with special consideration of the "Value Creation Logic" and the "Meta Core Competencies". The Value Creation Logic describes the business logic of how the company wants to create value. The Meta Core Competencies describe the strategic capabilities of a company.

In our current studies, the Business Model Prototype is made up of five elements: the strategic competence of a company, the closely related strategic processes, the strategic resources, the (company) brand image and the business logic: The considerations on strategic competence follow on from a few selected decision-theoretical considerations. So in every company exists a strategic competencethat essentially determines and influences strategic thinking in the company.

Closely related to strategic competence the strategic processes, which together with the strategic competence die strategic capabilities of a company turn off. Strategic processes are the processes of a company that are necessary to implement the specific skills, the specific knowledge and the specific experience, which are bound in the strategic competence, concretely in the company. In order to be successful, companies have to achieve a high degree of maturity in their strategic processes.

In connection with the dynamic competition it can be stated that the importance of strategic processes is increasing significantly. The well-known US professor Kathleen M. Eisenhardt stated in this context that in turbulent markets, strategic positioning (in the sense of Porter) is less important. Rather, it is increasingly important that a company has to pay attention to its own strategic processes (cf. Eisenhardt and Brown 1999, p. 5.).

Under strategic resources is generally understood to mean the resources that a company is actively building up and using to implement strategic competence. Successful companies today are particularly characterized by the fact that they manage to set up IT platforms (e.g. Apple) and / or IT systems (e.g. Amazon). The business model prototype and thus the entire business model is secured and strengthened by strategic resources.

At the Brand image A distinction must be made between the product and the company brand, although both brands have similarities. In the general understanding, product brands are always related to the customer benefit or the benefit categories / the benefit innovations that a product offers the customer. Corporate brands on the other hand are always closely related to a company's business model. The connection between business model and brand image has a significant influence on how a company operates on the one hand and whether and how it reacts to new competitors on the other.

At the heart of the Business logic is the essential question in connection with a business model: "How do we make money in this business?" In our understanding, the business logic essentially corresponds to a so-called “causal loop diagram”.

In summary, it can be said that the Business Model Prototype describes the essential details and the essential interrelationships of a company. The advanced business model prototype building on this is comparable to a Template, which is derived from the Business Model Prototype and a detailed implementation plan supplies (see also the following figure).