Customer Development and Social Business

Great post on Business Model Alchemist on using Customer Development for social business. This is what we’re doing where I work at the Grameen Foundation’s Mifos Initiative, as I described in a post a few days ago.

Business Model Alchemist does an imaginary case study for the very real PeePoo company, makers of a biodegradable bag you can use as a portable toilet. PeePoo is trying to mitigate the problem of flying toilets that are found in slums worldwide – the practice of peeing or pooping in a plastic bag, and throwing it into the air away from your house. It’s a significant problem, because more than 2 billion people live without access to basic sanitation.

The BMA article covers a couple of important points:

  • You need to find a business model that makes money, but also one that will help significant numbers of people.
  • The business model you start with – that you think up in your offices – will probably be wrong. You need to go through several or many iterations that incorporate learning from the field.

Peepoople, for example, has a proven product/technology that works and was tested – the Peepoo bag. However, the company acknowledges that this is only a starting point. The management team knows that it has to think through several possible business models in order to find one that is sustainable AND has a substantial impact…

The Customer Development process assumes that many of the initial assumptions about your business model are probably wrong, which you will find out in the second step of the process, Customer Validation. It is only when you start testing a business model or aspects of it with customers that you will find if your hypothesis were right or wrong. Hence, the Customer Development Process builds in an iteration loop to fix the shortcomings of your business model. Eric Ries, who built on Steve’s work, coined this business model iteration loop the Pivot.

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