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.

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)?