The external test is the tenth and final building block of the first and second stage of the Business Model Template (BMT). You will test the viability of the business model concept you have developed so far. You can test your business model idea against all kinds of criteria. If you do not have much time, perform your check on the basis of the very concise set of seven questions we provide. But we also provide many other tools in this chapter. Please bear in mind that you must be well-prepared when looking for feedback. Look for people you know or hope will respond critically and constructively. Going through the External Test steps may mean that you need to partially adjust some elements of your business model before you move on. So be it. Remember that every version of your business model in this stage is a beta version and that feedback will help to make it better.
- External test
- Applied research
- Getting feedback
The Cradle to Cradle Institute assesses products for material quality, material reuse, the use of renewable energy and CO2 management, water management, and social justice. To maintain the Cradle to Cradle certificate, we must continue to work on improving our products on these criteria. Brabantia, www.brabantia.com (Can we use this certificate? In other words, is it legal?).
Doubts arise. Do we actually know this specific market and target group well enough? How do potential customers experience our story and our products? Do we strike the right chord with our services or what we tell about them? What are the customer’s priorities? And also, which brand name should we carry? Not unimportant either! Klantkenners, http://klantkenners.nl/portfolio/de-nieuwe-business-propositie-toetsen (Looking for valuable feedback).
The proposition was not clear and stimulating enough, so together with the client, we had another go at it. We then asked decision-makers and potential customers in the industry to think along with us (critically). The research has led to a stronger proposition, concrete next steps, and new enthusiasm within the team. Klantkenners, http://klantkenners.nl/portfolio/de-nieuwe-business-propositie-toesten (Looking for valuable feedback).
When deciding on the ultimate value proposition, it is necessary to also compare your proposition with the propositions of your most important competitors. Of course, you want to be 100 per cent certain that you distinguish yourself sufficiently from the rest. Your distinctiveness is one of the most important elements in why a customer says yes to you and not to your competitor. RedFoxBlue, www.redfoxblue.nl/blog/waardepropositie-hoe-ontwikkel-je-ze (Does it already exist?).
Now you have a value proposition which you think could be promising. As a final step, you will test everything you have come up with. It is important to start this at an early stage so that you can also make adjustments earlier when your product or service is not appreciated by customers as much as you had expected. Rob Blaauboer, www.frankwatching.com (Looking for valuable feedback).
However, a proper test of the idea for all these aspects is quite a job, which will take up quite some time. Many people with an idea do not take this time to do it. They prefer starting with the development of the product or service right away. But that is not always the best thing to do. By investing in this stage, you save yourself … quite a lot of time and money. Furthermore, you save yourself much negative energy, because you will not be flogging a dead horse (for too long). Pedro Nijssen, www.pedronijsen.wordpress.com (Looking for valuable feedback).
1 Seek Confrontation
The external test is the final building block of the Design Stage of the BMT. Here you will test the viability of the new company, business activity, or intervention. That said, some of you might find it useful to take the external test immediately after formulating your proposition given that the steps in this building block enable you to interrogate your business model further. For some entrepreneurs and intrapreneurs it can be extremely beneficial to ask others for feedback on your idea at the very start or even before the Design Stage/Phase.
Talk (from the very beginning) about your ideas. Go outside! Tell your friends, explain your ideas to your neighbour—talking about your idea will help to make it more concrete and to clarify to yourself where you want to go with the idea.
Knowing that you have already gone through almost two stages of the BMT so far will hopefully give you direction and inspiration. The BMT, by providing a framework and guide for your business model development process, should add new meaning to situations, things, relationships, or organizations in your network. Often an idea is good or new because it combines two (or more) components in a smart, unusual, or new way, and characteristically you would not usually expect them together. Think of the combination of sweet and sour in cooking (chutney), using waste as payment (plastic, for example) to access WiFi, or tackling litter by putting it in RVMs that reward you with credits of some kind (telephone, food, transportation, etc.) for doing so. These novel combinations should make you raise your eyebrows (or maybe more) because you see that they offer new opportunities.
Good ideas can lead to a different opinion, a change in behaviour, a new or modified product, or a different working method, as long as the idea is recognized, intuitive, clearly articulated, and of its time. There is a certain logic underlying all good ideas, although it may not be entirely self-evident at first. Bringing it all together into an attractive and catchy whole with the right words and accompanying images is not always easy in practice. That is why right now, at the final step of the Design Stage/Phase, you consciously seek out scrutiny of your idea. See what it is worth. Let people shoot holes in it. Yes, it might be very painful when people step on your beautiful and cherished idea with their clumsy feet. See this as an important rite of passage you need to navigate which is necessary if you want to realize your business model. Take comfort in the fact that this process will ultimately strengthen your idea. Many good ideas fail at the Definition Stage/Phase, let alone implementation. External testing is essential to giving your idea and subsequently your new venture the best shot at navigating the so-called valley of death.
If you want to, you can test your business model idea against all kinds of criteria (DareToo, n.d.). Just to show you what is possible, we provide three sets of what could be called reflective questions. If you do not have much time, perform your check on the basis of the very concise set of seven questions below. If time allows, go to the expanded set of five questions in Sect. 10.3. And if that is still not enough we have added a checklist from a bank (see Fig. 10.1) to show what kind of questions they raise when you come in to ask for funding for your idea. So be aware that there is some redundancy in what we are doing.
Need in the market: Does your target group need your idea?
Financial feasibility: How much should be invested and what is the expected return?
Technical feasibility: What technology do you need? Is it feasible to get?
Legal feasibility: Does your idea conform to existing laws and regulations?
Ethics: Does your idea disadvantage groups of people? Or does it harm the environment?
Timeframe: How much time does it take to implement your idea, and do you have that time?
Relevance: Is your idea still relevant in the market at the time of its introduction?
The bottom line comes down to talking to as many people as possible about your business model idea now that it is sufficiently scoped/formulated. Find people who can comment critically but also constructively on your innovative way of working and who—if necessary—can put you in touch with the right people in their network to realize your plans. For a quick alternative with a fresh, open mind, you can also discuss the BMT with other critical practitioners and take it a step further. You then have a type of a peer-review technique called entrepreneur for entrepreneurs. Selecting the critical other needs to be done with great care. You do not necessarily look for those who agree with you: you are looking for fresh and honest feedback on your idea. Either way, leave your drawing board and head outside.
2 Testing Is Applied Research
Performing this step of external testing with a certain amount of objectivity is akin to a form of applied research. Research here means two things. You have an idea and you confront it with the other ideas and beliefs that society has. Or you attempt to create a concept from all kinds of insights, technological developments, trends, and observations, often mixed with a little gut feeling.
In both cases, it means looking for facts. These can be carefully collected and (critically) analysed statements, but also quantitative data (numbers) as long as it is all quality information. So steer clear of the science is just an opinion trap. Anecdotal makeshift evidence is not enough to express significance. Stick to the facts.
When you are looking for feedback (because that is what it is), prepare well. Think of the questions you want to ask (five to seven would be fine). Look for people you know or hope will respond critically and constructively. This often takes (a lot of) time. Be well aware of it and do not rush. Tell your respondents what you want and what you need. Record your conversations (ask for permission). Do not get angry when people say things you are not happy with. Listen carefully and be patient. If necessary, make a report per interview (one A4 page with the main points of each interview is often sufficient) and send it for validation to your respondents individually afterwards.
Preferably seek a minimum of ten interviews with a variety of people (e.g. different age groups, nationalities, job types, life experience) so you can get a diversity of perspectives on your business model. Listen back to all the interviews at home and organize them by topic. Take some distance and find the common thread. But also ask people you trust and who can work diligently to reflect on the feedback with you. It might be useful to work on an A0 sheet to write down your experiences/observations with Post-its® or stickers. Visualizing your analysis makes it easier to discover patterns: what are the main issues, what are the side issues, and how could you solve them or address them through modifications? If possible, suggest a follow-up conversation with each of the people you initially interviewed for feedback to reflect on your analysis of the collective feedback you’ve collated (without taking too much of their time).
3 Minimum of Five Checks in an External Test
Ready-made tests for business model ideas are hard to find. What you need to check will depend on the way you have put together your business model, and on what you specifically want to test. Here we recommend that you consider at least five aspects when you are in the testing step of the BMT.
Does it already exist? What is your USP? The first check to perform is to check whether your idea already exists. How unique is your idea, and how can you substantiate a claim regarding novelty? Check from the start of working with the BMT whether what you have come up with is not already out there, and if it exists elsewhere how can you differentiate yourself? Google or surf one of the many wikis. Go to forums or to the library (whether physical or digital). Spread an invitation to your networks. Clarify your USP (Unique Selling Point)—how does your activity differ from the others? Are there similar activities that you can learn from? What are the successful elements of similar activities that can help you optimize your intended business idea? The fact that the idea already exists, in part or as a whole, does not have to be a problem or an obstacle. If your idea has been successfully implemented elsewhere that can be an indication that it is viable. The question becomes how you can differentiate yourself or do it better.
Sustainable initiatives often focus on sharing knowledge and ideas to stimulate cooperation. Together, parties can achieve more than they can independently. The most pronounced form of knowledge sharing is open-source development.
An example is the electric car manufacturer Tesla. Its mission is to accelerate the development of sustainable transport. To this end, Tesla has made its patents available (Schmidt, 2019), which will also allow other car manufacturers to speed up the production of electric cars and help Tesla realize its dream.
You can also use the Rotterdam Method. This method consists of insistently asking the question Why? three times: Why, Why and Why? It is the simplest method of interrogating an idea.
Is it legal? The second check you perform is whether the activity conforms to existing laws and regulations. If you have an innovative business activity, it remains to be seen whether the existing legal framework provides for this. Laws and regulations are usually based on past insights and experiences; they represent the interests of the established order and thus of mainstream practice. If the regulation proves to be an obstacle, you have a range of options. One possibility is to look for a different interpretation of the legislation and explore the manoeuvring space. A second option is to look at rule-free areas or investigate how others have dealt with similar obstacles. A third option is not to wait for changes to the legal framework but to anticipate and start the activity while informing relevant local authorities as appropriate.
Struvite waste as a raw material?
For water companies, struvite, a residual substance that remains after filtering sewage water, is a large part of their waste stream. This material is rich in phosphate and would therefore be a good raw material for all kinds of phosphate-based applications. An important one is an application in fertilizers for agriculture. Various water companies are therefore contemplating disclosing struvite as a raw material. However, external testing has shown that Dutch law imposes restrictions here. Struvite is recognized as waste, and Dutch regulations do not allow the use of this residual flow as an input for manure that will be used in the production of food.
To which economy do you contribute? The third check is a difficult one, but one that matters a lot. You may have largely developed a smart, perhaps even brilliant idea, but in which economy does your business model fit? Or to put it even more clearly: to which economy does your idea contribute? Are you committed to recycling or circularity, or do you dare to take it a step further and focus on a regenerative or restorative economy (see Chapter 5 when discussing the developments around value creation)? Is it possible to further develop your current idea so that it fits into the new economy? In essence, this check requires you to ask yourself the question: how does your business model contribute to the transition? It is also worth asking your interviewees, because they may have reflected deeply on your idea.
Unintended consequences: The fourth check focuses on unforeseen effects (the unwanted impacts) which are referred to as unintended consequences in systems thinking. It may be that your initiative makes a significant contribution to the wellbeing of people, but that it simultaneously harms biodiversity. Not all impact is equal: one impact will be stronger than another. You will pay more attention to this in the Result Stage when you develop the impact analysis (Building Block #9). In this check, you are actively trying to seek out possible blind spots, things which unintentionally create negative impacts that you may have missed before.
Only if you regularly turn your focus off, can you turn it on again later. If you do not, you run out of fuel, and your brain is no longer able to distinguish between relevant and irrelevant stimuli. Mark Tigchelaar (24 May 2019)
Valuable feedback: During conversations about your BMT with third parties, you are likely to receive valuable feedback, which may be counter to what you would like to hear. Relax and really listen. Try not to be defensive when people say things you would rather not hear! Just let them bring it on. See this as an opportunity to perfect your proposition and business model idea. If you intentionally value all feedback—good, bad, or indifferent—this fifth check is more like a bonus and can lead to all sorts of positive side-effects. Perhaps through these conversations you will be referred to other people, which will help you to increase the number of partners in your network, or you are pointed to subsidy schemes that could support the initial stage of your business model. If someone is willing to invest their time in engaging with you and giving you feedback on your idea, take their feedback in good faith—treat them as critical friends, which all entrepreneurs need.
4 Case Studies: External Test
Case study: WashingGreen: Does it already exist?
The WashingGreen business model is a combination of two different and existing business activities. Firstly, washing with LCO2 is a concept that is still in its infancy. Several companies in Belgium and America already wash with LCO2 machines, but there are not yet any companies that do so in the Netherlands. LCO2 machines can already be bought from the www.alibaba.com website. Compared to conventional washing machines, they are still expensive and limited in size. Secondly, although LCO2 is not being used on a large scale in the hotel industry in the Netherlands, there are large laundry companies that offer a large-scale laundry service and linen lease for hotels throughout the country. By combining these two existing business activities, a new concept is created, which is a sustainable LCO2 laundry service with LCO2 for the hotel industry.
Case study: CO2 Trade: Is it legal?
In recent years, many types of online platforms have emerged to bring supply and demand together and connect people (CBS, 2018). In the Netherlands, there are the first community platforms for CO2, such as www.co2bank-utrecht.nl. These intend to match companies and/or individuals aiming to offset carbon emissions to companies that can store CO2 (e.g. agricultural entrepreneurs planting food forests and/or increasing humus content in the soil—which also has a positive impact on fertility, water retention capacity and biodiversity).
Case study: GreeNet: Which economy do you contribute to?
GreeNet seeks to encourage the recycling of waste, specifically plastic bottles, closing a loop. The collection of plastic bottles using an RVM will not be enough to solve the full extent of the plastic problem. That said, the major contribution that GreeNet will make to the economy is creating awareness among citizens who travel on Dutch Railways. Due to the enormous reach of Dutch Railways, GreeNet has the potential to engage with many people and make a difference in the Netherlands in terms of awareness-raising in relation to sustainability and viewing waste as a resource.
Case study: Waste app: Unintended consequences?
The aim is to extend the business model focusing on the collection and processing of waste plastics with an app. This extension will make people aware of what is happening with plastic waste and thus inspire them to separate plastic waste properly through a reward system. However, there are always unintended consequences which need to be actively sought out. For example, the app/system could be hacked, or people could start using more plastic to save points. This approach taps into app users, which excludes several groups of people. Younger children or older people may not have access to the app or understand how the app works. For an indication of the recyclability of the product, we also depend on information from the manufacturer. This is a bit like a butcher inspecting his meat: the manufacturer may be tempted to indicate a higher recyclability level because this is good for business. In reality, the recyclability can be lower. Recyclability is also not always easy to calculate, especially for packaging that consists of several parts. Therefore, to reduce the risk of this unintended consequence we need to consider how we can create an incentive for manufacturers to be honest about their data.
Case study: CO2FAB4U: Valuable Feedback
During the development of their business model, CO2FAB4U met with people with expertise in various fields. They were given plenty of feedback. This often meant that the components of the business model had to be reviewed. During the judging process of the evaluation of their business modelling course, they were asked several critical questions. The feedback from experts and questions from the jury ultimately helped in putting together a business model that was as realistic as possible. Also, due to the help of the specialists, but also through their own assessment, they sometimes had to adjust their plan. For example, they discovered that PET and PEF are very similar, but that they cannot be recycled together. There must be a PEF mono-stream in order to be able to recycle it. One of the specialists suggested that it might be an option to provide PEF for closed events, which is an idea that they have included in their final plan.
5 Has Your Business Model Survived the Test?
Going through the External Test steps may mean that you need to partially adjust some elements of your business model before you move on to the Result Stage of the BMT. If necessary, go back to previous stages and review and work through the building blocks again. So be it. The difficult (but also the great) thing about feedback is that you don’t know what you don’t know in advance. One thing is clear though, once you do know—take advantage of it! There is no point in developing something that no one is waiting for or no one will use.
Another thing to remember is that every version of your business model in this stage is a permanent beta. See this stage as the car wash (see Jonker, 2014), in which you adjust and refine the BMT several times. That said, it is really important that you do not wait to start your new business model until you have had all the interviews, and you have a perfectly filled out BMT. Your new company, business activity, or intervention is always evolving.
DareToo. (n.d.). Retrieved on 26.12.2019 from: www.daretoo.nl.
European Commission. (2019). Report on climate-related disclosures. Retrieved on 24.9.2020: https://ec.europa.eu/info/sites/info/files/business_economy_euro/banking_and_finance/documents/190110-sustainable-finance-teg-report-climate-related-disclosures_en.pdf.
Jonker, J. (2014). New business models; Working together towards value creation. Academic Service.
Schmidt. (2019). Tesla’s free-to-use patents are all about sustainability—And strength. The Driven. Retrieved on 24.09.2020 from: https://thedriven.io/2019/02/04/tesla-patents-free-to-use-sustainable-strength/.
Tigchelaar, M. (2019). We maken onszelf letterlijk dom door telkens onze aandacht te verplaatsen. NRC Handelsblad. Retrieved on 25.5.2019 from: www.nrc.nl/nieuws/2019/05/24/we-maken-onszelf-letterlijk-dom-door-onze-aandacht-telkens-te-verplaatsen-a3961499?fbclid=IwAR1c6-5bg4Zv_ayQ3Ur-S75_jtn1IiY3jgL-lHhq8kZIFsfUftVOD-7h2F4.
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Jonker, J., Faber, N. (2021). External Test. In: Organizing for Sustainability. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-78157-6_10
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