Initiative 3/3: Accelerate in-market innovation via live business prototyping.
One key to growth in 2023 is developing new offerings more quickly and effectively through business prototyping: the practice of testing and iterating proposed business models before bringing them to market. By collecting accurate behavioral data from actual users, business prototyping can transform challenger brands into leading companies, and position leading companies for outsized growth.
Every industry has been disrupted by better experiences, innovative technologies, and reimagined business models. Much of this disruption is driven by entrants with fresh perspectives and nimble operating models. At IA Collaborative, our clients are typically not the entrants, but the established industry leaders. These leading companies, though, are able to adopt a new-entrant mindset—rethinking orthodoxies and disrupting themselves before someone else does. They do this by observing new user behaviors and uncovering insights, then designing and prototyping differentiated new offerings.
These companies continue to lead because they’ve embraced the process of continuously considering and making the Four Decisions of Growth™: (1) Where to play, (2) How to win, (3) What to build, and (4) When to fund. The outcome is a portfolio of strategically selected innovation options, chosen for their growth potential, or as investments in the company’s innovation objectives.
In 2023, we see CEOs accelerating their in-market innovation by focusing on getting the right ideas across the threshold between “What to build” and “When to fund”. And the tool they most often employ to achieve this? Business prototyping.
Why Business Prototyping Is the Answer
Business prototypes are highly-realistic, end-to-end experiences and business models, that are also completely agile and pliable. In practice, they make an envisioned experience as real as possible, and position your design team to quickly capture deep insights around every element of the business.
This means entire prototypes are planned, executed and analyzed before investing to bring a venture to market.
Business prototyping demonstrates, through a real application, how your theorized business will play out in the marketplace. This helps direct how you optimize, refine or pivot your proposed offering, while providing “data from the future” — a reliable view into the expected performance of your idea once launched.
By leveraging business prototyping, you will:
- Reduce the risk of both action and inaction across your innovation portfolio.
- Simulate real-to-the-consumer experiences and business models, to gain essential data from interactions among customers, employees, and partners.
- Use your findings as proof points showing which ideas have the most merit, so you know where to fund and scale.
Ultimately, you then take these learnings and transform them into validated business growth strategies.
When You Know You’re Ready for a Business Prototype
Business prototypes serve a critical role in pushing a high-potential new offering across the final threshold from most-likely-to-succeed, to most-valuable-product.
By the time you reach the stage of business prototyping, you’ve already determined…
01 / Where to play: You’ve aligned on growth priorities and unmet needs in a space you want to pursue.
02 / How to win: You’ve developed a solid concept for a new offering and developed a business model that you believe in.
03 / What to build: You’ve designed a fairly detailed version of the product or service, identified the capabilities you need, and hypothesized a roadmap toward MVP and future releases.
… but you have critical questions that need to be answered, to make the final decision:
04 / When to fund: This requires validating three things.
- Business model: Customers’ likelihood to purchase and willingness to pay.
- Product concept: Satisfaction with the overall experience and specific features.
- Operating model: The ability of the organization and its partners to deliver.
A good business prototype will dig into what features are most desirable to customers, how users want them delivered, and how user needs and engagement play out. This is how you build buy-in and move closer to launch.
Innovating in Market: Carrier + The Future of Smart, Healthy Buildings
IA Collaborative’s client, Carrier, is the leading global provider of building and cold chain solutions across residential and commercial applications. Having already earned a placement on Time Magazine’s Best Inventions of 2020 for its mobile air purifier, Carrier sought to further expand its value proposition into the attractive $13 billion “healthy buildings market.”
Abound is a cloud-native platform that provides real-time insights into building health, performance, and reliability.
Time was of the essence for Carrier on this digital product. They had only six months to research, design, and co-create an MVP, which would then support immediate partnerships and integrate seamlessly with Amazon Web Services (AWS).
To do this, Carrier had to define the Abound offering, and develop both its digital capabilities and its recurring revenue model. More fundamentally, they had to create a product that would make buildings responsive, resilient, conscious environments that positively influence occupants’ wellbeing.
Prototyping would enable Carrier to pressure-test and iterate Abound’s proposed business model, and operating model, and validate the product concept with key vertical customers in the office building, education, and sports and entertainment sectors.
Specifically, Carrier’s prototype had to validate three things in order to justify the investment required to launch Abound.
Business model: A highly-realistic, yet not-fully-developed software prototype solution allows Carrier to determine how willing building owners, operators and tenants are to pay for the proposed subscription service. It also helps them differentiate features like real-time benchmarks, remote access, and virtual device service.
Product model: Prototyping across industry verticals allows Carrier to identify the four qualities that matter most to facilities managers: (1) Autonomy, (2) Predictive maintenance, (3) System control, and (4) Efficiency and cost savings. These insights directly inform Abound’s design and product roadmap, shaping everything from user interface to functionality.
Operating model: Business prototyping is an opportunity to pressure-test Abound’s open, cloud-native structure. This adaptive operating model enables Carrier to rapidly introduce new features that meet the unique needs of each class of user: owners, operators, and occupants.
The result is predictive, behavioral data that reduces risk, enables in-market innovation, and gives leadership the confidence to launch new, high-value businesses—in this case, the Abound SaaS platform.
The Insight: Business prototyping enables Carrier to collect accurate behavioral data about how users engage with the proposed product — before making that investment.
Abound means more direct data from a more diverse set of users, expanding Carrier’s user insights. It lets them leverage real-time user data to innovate more quickly in-market, and make a strategic play in the largely untapped $13 billion “healthy buildings” market.
Opportunities for insights-laden, quality-monitoring services — that tap the power of SaaS and deliver diversified recurring revenue — abound.
Leading companies adopt a new-entrant mindset by leveraging the Four Decisions of Growth™ to create a portfolio of innovation options.
Through live enactments, business prototyping demonstrates how theorized innovation options will play out in the marketplace.
Business prototyping validates business models, product concepts, and operating models.
How Leading Companies Accelerate In-Market Innovation
For this initiative, you will design and plan for the live-testing of a “Business Prototype,” an output within the “When to fund” growth decision. You will identify participants, select data collection methods, and create stimuli needed to run a realistic simulation of your proposed innovation. The goal is to collect behavioral data that accurately predicts demand.
Business prototyping is a proven way of bringing profitable innovations to market, faster. Incorporating it into the later-stages of your growth strategy and innovation process means:
- Identifying key users and questions that are critical to success.
- Prioritizing a mix of quantitative and qualitative research methods.
- Organizing the questions according to your proposed user experience.
- Hypothesizing answers to each question and developing the required stimuli.
Finally, you’ll need to design and test your prototype to validate how users will be attracted to and engage with the business model — and, critically, how you can extend their experience afterward. This “generative loop” of tailored experiences is what separates challenger brands from leading companies.
Successful Business Growth Strategies Need Design + Business Thinking
In this age of ongoing digital transformation, leading companies must combine best-in-class business thinking (already assumed at any high-performing organization) with a human-centered design approach. The two are natural complements.
Design acts as a force multiplier that amplifies an already successful business approach. It can be used to prioritize growth markets, define advantageous business models, build differentiating capabilities, and generate superior, long-term returns.
In effect, design + business thinking optimizes the Four Decisions of Growth™:
- Decision 1: Where to Play
- Decision 2: How to Win
- Decision 3: What to Build
- Decision 4: When to Fund
As a digital leader with a design mind, you become the crucial element that enables CEOs to achieve their goals.
By applying the Four Decisions of Growth™ to the initiatives outlined in the Pervasive CEO Agenda for 2023, you can confidently place strategic bets, maximize impact, and secure your business’s place at the forefront of your industry.