Developing a new business model with the Experiment Tracker - explained for product managers

What exactly can you use the Experiment Tracker for?

The Experiment Tracker offers organizations a structure to systematically test and successfully release their ideas for new business models, products or features. Digitalization plays a crucial role in the development of new business models by enabling innovative strategies and efficiency gains. By using the tool, you and your team can focus on the most important next steps and thus develop a new business model or product more quickly. In doing so, you systematically identify risks and conduct experiments.

How does the Experiment Tracker work?

The Experiment Tracker is based on a simple 4-step process. We will now take a closer look at these steps.

The Experiment Tracker uses a systematic method to efficiently plan, conduct and evaluate experiments.

Step 1: Collect and prioritize risks

Before you start experimenting, you should identify and prioritize the biggest risks. Typically, we start with the Value Proposition Canvas or the Business Model Canvas to visualize our idea.

We then look at the assumptions we have made about whether the idea, business model or product will ultimately be successful. If you are currently developing a product or business model, ask yourself the following questions to identify these assumptions or risks:

• Customer assumptions: Do the customers exist? What is the customer need? Why do customers want it? What existing solutions fulfill similar needs? What is the task that customers want to fulfill and need help with? What are the problems with the current solutions? How satisfied or dissatisfied are customers today? Why are they dissatisfied? Are the current solutions too complicated, too expensive, hard to find, etc. Assumptions about the value proposition: What would be the most compelling value proposition? What makes your value proposition unique? How would it gain acceptance? Why does it excite your customers? Assumptions about willingness to pay: How much are your customers willing to pay for the solution? Which price points are typical? What is the price sensitivity like? How can you use anchor prices to increase the price? How high would the average price be?

The central role of customers in the development of business models cannot be emphasized enough. Customer needs and wishes are crucial to the success of any business model.

Instead of using complicated matrix representations, we recommend a simple heuristic. In most cases, it will reliably help you to take the right steps. Just ask yourself these three basic questions:

1. Customers + problem: Is there any demand at all for our product or idea?
2. Value proposition: Does our solution work in our customer segment?
3. Channel: Do we have a suitable sales channel for our solution?

The logic is very simple: without customers who have a problem (or a need), you won't be able to sell anything or build a business model. If you have customers with a need, you need an offer that appeals to this target group. All other aspects of a successful business model, product or feature are dependent on these factors. Therefore, these are at the center of the validation. Then you look at the channel and the willingness to pay. As these are the most important points in the business model, we typically take them as the biggest risks.

Step 2: Design experiment and develop business model

Once you have prioritized your risks, focus on the biggest risk. Based on this, you define the experiment. By specifically addressing the risk and finding solutions, you can overcome or measurably minimize it.

Ask yourself what measures you need to take to test the risk. What data and metrics are relevant to measure success? By clearly defining the experiment, you lay the foundation for an effective evaluation based on meaningful data.

The aim of this step is to determine whether the assumptions made are correct. Check these aspects WITHOUT building the product, as you may need to revise it again.

Various experiments and tools can help you here, which we will not go into in detail in this article. However, you can find a good overview via this link to Validation Patterns

Step 3: Evaluate data and results - Pivot or Persevere

Once you have implemented the experiment, it's time to analyze the results. Observe customer behavior, evaluate the collected data and make an informed decision. Ask yourself:

"Should we stick to our business model (persevere) or is an adjustment or change necessary (pivot)?" Business model innovations play a crucial role here, as they are promoted by digitalization and digital transformation and even small changes can have far-reaching positive effects.

It is important that you don't just bluntly evaluate the results of the experiment, but that you search astutely for solutions and make decisions for a new experiment. Make this an iterative process and follow it routinely. In this way, you can continuously improve a product or business model and be successful in your target market.

Step 4: Implement findings and start the next iteration

After you have made the decision whether to leave the idea as originally planned or to readjust it (pivot), go back to step 1. Implement the findings and observations from the experiment and analyze whether and what has changed in terms of the risks. What is the biggest risk now?

Repeat the process to mitigate further risks and validate the idea dynamically and effectively. Various methods such as the business model canvas, design thinking and agile methods can help to validate and optimize business models. This cycle of experimenting, evaluating and optimizing is crucial in order to adapt a product or business model to the actual needs of the market as quickly, cheaply and successfully as possible.

Our practical experience is that many new business models need 2 to 3 iterations to identify the right target segment with a problem. However, the experiments can also help you to make changes to the product, the value proposition or the sales channel.

What added value does the Experiment Tracker for business model innovation offer you?

Our Experiment Tracker is more than just a tool for testing and optimizing business models. It offers you significant added value in the following 3 key areas:

• Speed: By focusing on the most important risks, the tracker enables you to prioritize efficiently. This leads to faster development and improvement of products and business models. The tracker also supports the continuous adaptation and development of business models in companies.
• Early detection of errors: The tracker's experiment-driven approach promotes a culture of learning and continuous improvement. You recognize errors and misconceptions early on and can correct them, which minimizes the risk of bad investments.
• Structure and clarity: The heuristics for business model validation integrated in the Experiment Tracker provide you and your team with a clear and structured approach. It helps you to maintain an overview and measure your progress. This leads to greater efficiency and productivity. In addition, the tracker plays a central role in the strategic development of business models in companies.

The Experiment Tracker is therefore an indispensable tool that brings speed, error minimization and structure to your business model development and optimization process.

Our Experiment Tracker is the ultimate tool for systematically reviewing and optimizing business models. It helps you:

• Identify risks
• Conduct experiments
• evaluate the results
• and make adjustments where necessary

This gives you a solid foundation for the success of your idea. Whether it's developing new products, improving existing functions or designing a convincing business model - the Experiment Tracker is your key to creating innovative solutions.