Friday, November 12, 2010

Testing Business Model Hypotheses: The BM/H Matrix

As Osterwalder and Blank argue, we have to understand that a business model is often just a set of hypotheses and we have to consider alternative business models. However, how to deal with multiple hypotheses and models? This is where a Business Model/Hypotheses Matrix (see figure below) comes in handy as addition to the inspiring and colourful Business Model Canvasses.

The BM/H Matrix is relatively straight forward and provides a good overview of the relations between the business models and hypotheses. One of the main insights is to make explicit whether the same hypothesis comes back in multiple business models, something that is not that easy with just a set of canvasses.

The BM/H Matrix allows also for more advanced use, most importantly help prioritizing hypotheses for testing. It supports understanding what the most critical hypotheses are in terms of the number of business models that include them. There can even be more sophisticated ways of prioritization possible if we weigh the business models (e.g. the profitability of each model).

See also an earlier post on testing business model hypotheses.


Johnni said...

Not only does such matrix highlight key hypotheses. If one can understand the drivers behind each uncertainty, we can "Hedge" them. Build KPIs around them. Further by defining a probability distribution for each uncertainty, we can through simulation find a path of least resistance.

The New Economics for Humanity said...

Blank says that every building block of the canvass is a hypothesis to be tested...or that is what I understood, how would you expand your matrix to also show the building blocks' hypothesis of each business model?