This is my favorite business book. Ever. But when I say BUSINESS book, it may be misleading, because it applies to so much more than business. It’s really about creating value, which reaches way beyond the business world.
Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers written by Alexander Osterwalder & Yves Pigneur
In order to explain something, we immediately set to writing words. And if the process is particularly complex, it requires lots of words. Lots and lots of them. Not very pleasant if you’re the one who has the responsibility of doing the explaining. Or for the audience who has to understand it, for that matter.
Entrepreneurs start writing a 30-page business plan. Teachers set to write out their course curriculum. Project managers begin writing their lengthy project plan. Nonprofit executive directors start composing their annual report. As an investor, administrator, CEO, or board member, wouldn’t you rather view a simple one-page drawing that describes the entire overall project, rather than a lengthy report?
Business Model Generation teaches you how to make this simple one-page drawing.
I read this book in 2010, right when it came out. I was actually waiting for the book to be published. Several months before, somehow I came across this Business Model Template on Slideshare, which then led me to this illustration.
Powerful, huh? In one drawing, you have an understanding of the entire business picture.
I printed that page out and started following Alex Osterwalder online. I couldn’t wait to get the book that would help me design a canvas like that.
Why did I want to make a canvas? I knew it would help me in my current job developing business process workflow, as well as clarifying the processes of a non-profit organization I volunteered for. But most powerful of all – I wanted to start something on my own (whatever it ended up being) and I knew this would be valuable tool.
Business Model Generation provides a powerful visual approach to understanding complex processes. To me, this is gold. After all, the Relator in me appreciates and values visual simplicity.
Here are the main areas of the book:
My favorite part of the book – the Business Model Canvas, a design tool. In a one-page drawing, it describes an entire business model. WAY more appealing than a 30-page business plan, huh? The canvas has 9 building blocks:
- Customer Segments – who you serve
- Value Propositions – the value you provide
- Channels – how the value is delivered to your customers
- Customer Relationships – the communication environment with your customers
- Revenue Streams – your revenue sources
- Key Resources – the items you need to create your value proposition
- Key Activities – the things you do with those resources
- Key Partnerships – third parties who also perform key activities in order to provide the value proposition
- Cost Structure – your costs
Those 9 items make the Business Model Canvas. And there it is, on page 44.
Plot it. Use it. Love it. Share it. And please give these author geniuses due credit at businessmodelgeneration.com.
Really, can’t you see yourself using this? For you bloggers out there developing your platform and your personal brand….this is a perfect tool for you!
Here the authors give actual examples of the various business model canvas patterns. Seeing the canvas in action through these examples was very helpful for me to more fully understand its use.
- Unbundling (mobile telecommunications)
- The Long Tail (Facebook, YouTube, Lego)
- Multi-Sided Platforms (Google, eBay)
- Freemium (Flickr, Skype)
- Open Business Models (P&G)
My second favorite part of the book. The tools in this section of the book are gems, I tell you, GEMS! The authors explain six design techniques to help you design your business model canvas. When I read this particular paragraph, I felt like the authors were writing directly to me:
Businesspeople unknowingly practice design every day. We design organizations, strategies, business models, processes, and projects. To do this, we must take into account a complex web of factors, such as competitors, technology, the legal environment, and more. Increasingly, we must do so in unfamiliar, uncharted territory. This is precisely what design is about. What businesspeople lack are design tools that complement their business skills.
- Customer Insights – The Empathy Map. First the canvas and now the empathy map? Wow. This map tool alone is worth getting the book, in my opinion.
- Ideation – creative ways to identify a large number of ideas and isolate the best ones
- Visual Thinking – post-it notes and drawings. Pictures deliver messages instantly.
- Prototyping – making its way from not just manufacturing prototypes, but to process as well
- Storytelling – think of an example customer for your business model, and tell a story, walking through each of the 9 canvas areas in whatever order that makes the most sense (aha! there’s your investor pitch, entreps!)
- Scenarios – create future contexts and create or transform your business model canvas
Once you have created your business model canvas, give it a good strategic review:
- Environment – identify your niche’s key trends, industry forces, market forces, and macroeconomic forces
- Evaluating Business Models – the authors give a detailed 7-page assessment tool, for you to check the health of your business model
- Blue Ocean Strategies – question your value proposition and explore new customer segments
- Manage Multiple Business Models
In this section, the authors give specific ways to implement the business model design initiative, identifying 5 phases:
My Key Takeaways
Whether you’re old school and use post-it notes on a poster or whiteboard, or you’re a techie that prefers the BMG iPad app (yes, I have it), the exercise of creating your own Business Model Canvas is definitely worthwhile. The complexities of starting a new endeavor, improving a process, or innovating your current way of doing things can be clarified with the canvas. It is the perfect mix of creativity and structure.
I’m applying the Business Model canvas to developing my personal brand, as I develop my blog as my platform. I have prepared a canvas for my blog, and it feels so good!
How would you use the Business Model Canvas?