How can the Overton Window help you choose the best business model?

 

For the past two decades, I've been a professor in the Strategy and Marketing research line of the Postgraduate Administration Program at ICEG Business School at PUC Minas. In addition to my academic work, I've also dabbled in ventures that have enriched my professional and personal journey.

On both fronts—academic and entrepreneurial—I have come across a concept that has increasingly caught my attention: the "Overton Window." It's not a mere curiosity, the kind that, once satiated, is stored away in some forgotten part of our memory. The "Overton Window" has given me fascinating insights into how entrepreneurs and businesspeople can better choose the strategies that underpin their business models.

To better understand these relationships, let's define the terms that interest us.

What is the Overton Window?

The "Overton window," which originated in political science, refers to the ideas considered "acceptable" by society at a given time. These ideas, or "windows," shift over time, an effect caused by social, political, and economic changes. Understanding how these windows work allows entrepreneurs and businesspeople to adopt strategies to introduce gradual changes that transform ideas considered unviable at a given time, maximizing acceptance and receptivity.

Applying the Overton Window to Business Models

Applying Overton's window to the choice of business model can be a fascinating approach to solving practical problems entrepreneurs and businesspeople face. To better understand this argument, think of the customer journey as a series of stages in which you, as an entrepreneur or business owner, seek to create value, capture value, and build a lasting relationship.

These phases can be explored in terms of a "window of acceptance" of the value proposition offered to the customer. This is where we have the Overton window, which helps us identify the most appropriate business model for our objectives. Let's see how this works in practice.

1. Creating Value: Positioning the Customer at the Center of the Window

The first step in applying the Overton window to your business model is to align value creation with what customers see as acceptable and relevant to their reality. Ask yourself: "What problem are we solving, and how does this align with what is perceived as necessary or interesting today?"

A practical example is the approach of disruptive businesses, such as fintech, which has identified an open window for the need for agile, transparent, and accessible financial services. By initially focusing on groups of customers who saw value in alternative solutions, these companies were able to gradually transform the model into a new normal and expand their base. Another example could be the evolution of Apple's business model, which initially focused on high-end products but gradually expanded its customer base by introducing more affordable options. Similarly, companies like Amazon and Uber successfully leveraged the Overton Window to introduce new services and products that were initially considered unviable but gradually became widely accepted.

2. Capturing Value: Leveraging Window Receptivity for Monetization

After demonstrating value, you need to capture it, which is where many entrepreneurs encounter difficulties. The Overton window can help you adapt and align your monetization strategies with what customers are willing to accept.

For example, an innovative product may initially be free to attract "early adopters." Over time, as more customers see value in the solution and accept it, the company can gradually introduce paid plans, expanding monetization according to how receptive the market is. It is essential to identify value points that customers would be willing to pay for and make the monetization move at the speed of expanding the acceptance window.

3. Building Relationships: Expanding the Window for Loyalty

Once the customer sees the value and is willing to pay, the next challenge is to build a lasting relationship. Overton's window can guide your strategy for keeping up with changing customer expectations while maintaining the acceptance and relevance of your business model.

Companies like Netflix and Spotify, which constantly adjust their offers and experiences based on user behavior and feedback, know that to stay relevant, they need to expand the "window" of acceptance of the value delivered. These companies use data and feedback to continually renew the value proposition, which helps keep customers engaged and prevents relationship erosion.

Conclusion

While adopting Overton's window concept can be beneficial, it's important to note that it's not without challenges. Companies at any stage - whether startups, large corporations, or individual entrepreneurs - can align their business model with customer perception and acceptance changes. However, the key is gradually expanding this acceptance, converting perceived value into a loyalty factor. When applied strategically, the Overton window not only helps to avoid the risk of rejection but also provides a sustainable form of innovation, making the business model always relevant and attractive to the customer, regardless of the market or industry. However, it's crucial to be mindful of the potential pitfalls, such as misjudging the timing of introducing new elements to the business model or failing to gauge the market's acceptance of these changes accurately.

Whatever your market, remember that a business model's success often depends on understanding what is accepted now and what may become indispensable in the future.

Did you find this concept of the Overton Window attractive, or have you applied it to your own business model? I'd love to hear about your experiences or answer any questions you might have. Feel free to share this article with your network and start a conversation. If you want to interact with me, I'm also on X/Twitter (@humb_lopes), Instagram (@humbertoeliaslopes), and Linkedin.