Introduction: Business Model Generation
Are you seriously thinking about starting a business? Has the environment in which you are operating your business changed significantly? If you answered yes to any of the two questions, read Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers by Alexander Osterwalder & Yves Pigneur.
I first learned about Business Model Generation about three years ago from a friend, Carol Roberts. I do not read a lot of business books so I wasn’t overly keen on reading it. A few months ago I was reading an article, and in it, a young woman mentioned that How to Build a Startup was the best MOOC she ever took, so I decided to check out the course on Udacity. Well, How to Build a Start-up uses the Business Model Generation Canvas so I decided to purchase the book and read it.
UPDATE: First published May 2014
Content: Business Model Generation
Business Model Generation by Alexander Osterwalder & Yves Pigneur is not the type of book that you read and put away, but one that you reference all the time. It is loaded with tools to help you understand, design, rework and implement business models.
Although I am changing the direction of my business and not starting a new one, I had some reservation around whether the book would be useful to me, and after reading it through the first time, I found great value. Business Generation Model is based on nine building blocks that you have to master before moving forward:
9 Building Blocks of the Business Generation Model Canvas
- Customer Segments (CS): Who are your customers and why will they buy from you? What are your customer archetype. Know and understand your customers in detail.
- Value Proposition (VP): What product/service are you creating and for whom? What need are you filling? What problem are you solving? What pain, are you addressing?
- Channels (CH): How will your product/service get from you to your customers? Is your distribution channel virtual or physical?
- Customer Relationships (CR): How do you plan to acquire and retain customers? How will you get traffic to a website or to a physical location? How do you plan to grow your customer base?
- Revenue Streams (RS): How do you plan to make money? What value are customers buying?
- Key Resources (KR): What do you need to make the business work? What key assets do you need? People? Financing? Warehousing? Customer list?
- Key Activities (KA): What actions will you have to take to operate the business? What are the most important things to do to make the business work?
- Key Partnerships (KP): What activities will partners be performing? What are you acquiring from partners?
- Cost Structure (CS): What are the fixed and variable costs to operate the business? What are the most expensive activities? Are there economies of scales?
Once you understand the nine building blocks, it’s time to answer the questions on Post-it notes and pin them to an enlarged Business Generation Model Canvas. If you are starting a new business, chances are that you will have to use a best guesstimate when answering each of the questions.
The book is divided into several sections to systematically allow you to develop a business model. There are three different types of businesses: Customer Relationship businesses, product innovation businesses and infrastructure businesses, and a corporation can have more than one of those businesses. Business Model Generation walks you through different business models, which include Free as a Business Model, Open Business Model, the Long Tail, Multi-Sided platforms, and it presents companies that are using each business model. It does such a good job of describing the models along with the case studies that the reader is able to choose which is the right one for his/her business.
The book is loaded with a lot of information that could potentially overwhelm the reader, but that is not the case because the authors use many case studies to demonstrate concepts throughout the book. The information is presented in chunks and there are lots of images to help you to digest the information. Business Generation Model also explains how to design your model and develop the strategy for your business. One of the things I appreciated while reading the book is using the business generation model with SWOT Analysis to create a better business.
There is a lot of information and tested tools in Business Model Generation by Alexander Osterwalder & Yves Pigneur, and I think the best way to use the book is to read it through once, then reread section by section, and after each section you answer the questions and follow the process so that at the end of the second pass through the book, you have your new business model.
Additionally, I loved the eight business model prototypes, which outlines possible ways for publishing a book, and I know that other authors will appreciate this section. The prototypes for publishing a book include: old style publishing, free for marketing, co-created, publish on-demand, do-it-yourself, customized, book with sponsored content, and online book.
Conclusion: Why Read Business Model Generation
After reading through the book, I noted that in the new direction of my business, developing The Invisible Mentor Model and introducing a membership site, I need components of the Long Tail and Freemium models. Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers is a handbook so it is more expensive than other books, but it is worth it, especially if you are starting a new business or changing the model for an existing business.
It’s not the kind of book you read simply for information, it’s for taking action. It streamlines your thinking and gives you a place to dump information while you are working through the process of developing a business model.
Business Model Generation: A Handbook for Visionaries, Game Changers, and ChallengersValue Proposition Design: How to Create Products and Services Customers Want (Strategyzer)Business Model You: A One-Page Method For Reinventing Your CareerThe Big Pad of 50 Blank, Extra-Large Business Model Canvases and 50 Blank, Extra-Large Value Proposition Canvases