Testing Business Model Hypotheses: Going beyond Customer Development

In an interesting post of Steve Blank, where he relates Customer Development to the Business Model Canvas, he states that ‘Customer Development is the standard for testing business model hypotheses.’ While I understand the central role of being customer-driven, as a business model’s primary focus is on creating customer value, this seems to address only one side of the coin.

While the customer-facing part of the business model is of extreme importance, the other parts should not be neglected. It is the whole system that enables the creation of customer value and creates an incentive to do so. This is also why business models are multi-disciplinary bringing together marketing, operations, finance, etc. So in addition to testing the customer hypotheses, we also need to test, for example, the operational hypotheses related to can we produce the kind of offering required at the expected quality and for the targeted costs?

In addition, in my view a business model has the power of being an integrative conceptualization of value where value creation and capture are linked and where the customer and provider perspectives are merged. This means that the most important hypotheses are the once that say something about the relations in the business model. For example, how can the Value Proposition be turned into a Revenue Stream? How can the Key Activities, Key Resources and Key Partners deliver a compelling and unique VP? How can we make sure that we it is all worthwhile (Revenue Streams >> Cost Structure)?