I recently attended a training session about identifying the pattern of business models that completely changed the way that I look at my own business and every other business that I come into contact with.
Let me introduce you to the Business Model Generation.
This is not some [yawn] boring old business planning book. It’s creative, heaps of fun and strongly encourages the use of colours, drawings, radical ideas and sticky notes!
The concept and tools in the Business Model Generation were developed by Alex Osterwalder and Yves Pigneur – plus 470 practitioners from 45 countries.
Best of all, the Business Model Generation provides common language for everyone, is incredibly simple to use and will be easy to facilitate team participation.
The process and tools apply to designing a company as well as designing a business unit.
Business Model Design Process
This is one of the last sections in the book, however I suggest that you take a quick look at the 5 Phases first, which is the process for applying the various tools in the book.
It also provides a great checklist of the resources that you will need for each stage of reviewing and possibly redesigning your exiting model. Then, go back to the start and familiarise yourself with each of the tools on offer.
The foundation of the Business Model Generation is the Canvas. Open it here so that you can refer to it during this article.
Canvas is a template that is made up of the nine key building blocks of any business model. Watch this two minute video to see what I mean.
The first great thing about Canvas is that it creates shared meaning for all participants working with this tool. Work through each building block in this order:
- Customer Segments
- Value Propositions
- Customer Relationships
- Revenue Streams
- Key Resources
- Key Activities
- Key Partnerships
- Cost Structure
This makes sense: you need to understand your customers first before you can understand their value proposition. That is, the problem they have that they want your product or service to solve.
Structuring your business or department
Once Customer Segments and Value Proposition have been determined, you can then easily determine everything else that you need to then organise your business or department to deliver the value proposition to each of your customer segments.
When you’ve mapped each building block, you will also identify any activities or relationships that do not add value – as well as any customer segments or value propositions not being adequately resourced.
How many times have you known a business to start with a restructure and then think about how to deliver products and services to the customer with remaining resources?
Recognising multiple business models
A significant realisation that I had is that businesses and their departments likely have more than one business model. That is, they deliver different value propositions to different customer segments.
The Business Model Generation allows you to show each model on one Canvas by using different coloured sticky notes where the building blocks are used in different ways. This allows you to identify synergies and differences in what your business does.
Different business model patterns
The Canvas tool can be used to identify the business model ‘patterns’ for other companies as well. Many examples are included in the Business Model Generation book itself, including: Lego, Google, Apple, Skype, Gillette and many other well-known companies and brands.
These stated patterns are excellent for challenging your own current and future business models, as well as showing you how they could work for you. They can also allow you to identify how your competition operates.
Designing business models
This section walks you through easy to use tools that allow you to empathise with your customers, generate new business model ideas and prototype. These are essential steps in reviewing your current business model, reconfirming or redesigning it.
The environment that business units and companies are operating in today is changing dramatically with new technology, consumer behaviour and consumer expectations.
The Business Model Generation provides easy to use process and tools to help managers and company owners review existing models and design new ones to meet these ever-changing needs.
I recommended taking half an hour to watch the full video about the Business Model Generation and buying the book. http://www.youtube.com/watch?v=RzkdJiax6Tw
By Angela Shaw, CCiNZ
Business Model Generation
Alexander Osterwalder and Yves Pigneur, 2010