200 business model environment: context, design drivers, and constraints Business models are designed and executed in specific environments. Developing a good understanding of your organization’s environment helps you conceive stronger, more competitive business models. Continuous environmental scanning is more important than ever because of the growing complexity of the economic landscape (e.g. net- worked business models), greater uncertainty (e.g. technology innovations) and severe market disruptions (e.g. economic turmoil, disruptive new Value Propositions). Understanding changes in the environment helps you adapt your model more effectively to shifting external forces. You may fi nd it helpful to conceive of the external environment as a sort of “design space.” By this we mean thinking of it as a context in which to conceive or adapt your business model, taking into account a number of design drivers (e.g. new customer needs, new technologies, etc.) and design constraints (e.g. regulatory trends, dominant competitors, etc.). This environment should in no way limit your creativity or predefi ne your business model. It should, however, infl uence your design choices and help you make more informed decisions. With a breakthrough business model, you may even become a shaper and transformer of this environment, and set new standards for your industry. To get a better grasp on your business model “design space,” we suggest roughly mapping four main areas of your environment. These are (1) market forces, (2) industry forces, (3) key trends, and (4) macroeconomic forces. If you’d like to deepen your analysis of the landscape beyond the simple mapping we propose, each of these four areas is backed by a large body of literature and specifi c analytical tools. In the following pages, we describe the key external forces that infl uence business models and categorize them using the four areas just mentioned. The pharmaceutical industry, introduced in the previous chapter, is used to illustrate each external force. The pharma sector is likely to undergo substan- tial transformation in coming years, though it is unclear how the changes will play out. Will biotechnology companies, which are currently copying the pharmaceutical sector’s blockbuster drug model, come up with new, disrup- tive business models? Will technological change lead to transformation? Will consumers and market demand force changes? We strongly advocate mapping your own business model environment and refl ecting on what trends mean for the future of your enterprise. A good understanding of the environment will allow you to better evaluate the differ- ent directions in which your business model might evolve. You may also want to consider creating scenarios of future business model environments (see p. 186). This can be a valuable tool for jumpstarting business model innovation work or simply preparing your organization for the future. bmgen_final.indd 200 6/15/10 5:44 PM