Business Model Generation (2009)

The book, written by Alexander Osterwalder and Yves Pigneur, co-created by 470 practioners, is a fascinating book for several reasons and I highly recommend people interested in learning about business models to buy it. It is a compilation of 10 years of work on a simple idea; on how to capture the essence of how an organization creates and captures value. It is a book that I believe many will read and keep handy for reference.

The book in three bullet points:

• It presents a business model framework, based on nine building blocks, that is widely used by practioners today and it summarizes many popular management theories using the same framework.
• It uses visual thinking and design in a way that is novel in business literature, and provides several workshop ideas for companies that want to get their hands dirty applying the tools presented
• It provides many interesting examples of companies that have successfully innovated their business model

The business model canvas

At the core of the book is the business model canvas, developed by Alex during his PhD work, and it's included in one form or another, on almost every page of the book. It is a graphical representation of the 9 business model components that Alex argues describe the rationale of how an organization creates, delivers, and captures value. It has created a shared language for describing, visualizing, assessing, and changing business models, and is widely used by business model innovation practioners.

The structure of the book

The book is divided into five main sections that can be read on their own:

1. The business model canvas including definition and the nine building blocks: Customer Segments, Value Propositions, Channels, Customers Relationships, Revenue Streams, Key Resources, Key Activities, Key Partnerships and Cost Structure.
2. Popular business model patterns including concepts from popular management literature such as Unbundling Business Models, The Long Tail, Multi-Sided Platforms, FREE as a Business Model and Open Business Models.
3. Business model design, using concepts such as customer insights, ideation, visual thinking, prototyping, storytelling and scenarios.
4. Strategy, including the business model environment, evaluating business models, business model perspective on blue ocean strategy and managing multiple business models.
5. Business model design process, including a 5 step process: mobilize, understand, design, implement and manage.

One book to rule them all

Alex and Yves covers a lot of management concepts in the book and use the business model canvas to illustrate key ideas from publications such as Unbundling the Corporation by John Hagel and Marc Singer (1999), The Long Tail by Chris Anderson (2006), Free: The Future of a Radical Price by Chris Anderson (2008), Co-Opetition by Adam Brandenburger and Barry Nalebuff (1996), Blue Ocean Strategy by Cahn Kim and Mauborgne, and Open Business Models by Henry Chesbrough (2006). The focus is very much to make complex things simple and understandable which is great for most readers!

Visual thinking

Another strong focus of the book is the visual thinking, the analogies to architecture and design, using concepts such as ideation, prototyping and storytelling. The best way, according to the writers, is to print out the canvas on a large surface, put it on a wall and let people jointly sketch or use post-it notes to discuss and analyze business models. Alex has for several years worked together with designers and the design of the book is very different from traditional management literature and share more similarities with books such as The Back of the Napkin: Solving Problems and Selling Ideas with Pictures by Dan Roam. Alan Smith of The Movement, has really done a wonderful job designing the book.

Many interesting examples

The book contains many interesting examples from companies such as Lulu.com Lego, Google, Nintendo Wii, Apple, Metro, Flickr, Red Hat, Skype, Rega, Gillette, Procter & Gamble, GSK and Innocentive. It uses the business model canvas to explain the rationale of each company's business model and sometimes including the differences with traditional companies within the same industry.

Hands-on tools

Besides the business model canvas the book comprises several hands-on tools such as The Empathy Map developed by XPLANE, "What If" questions, The Silly Cow Exercise, Techniques to develop stories, and questions to perform a detailed SWOT analysis of each business model component. It has a very practical focus and it is easy for companies to pick up the book and do some workshops on their own.

In relation to other books

The Business Model Generation gives a fresh perspective on business models and it provides an introduction to many concepts, of which the reader can dig further into in other books. A quick comparison with some other popular books on business models:

• Getting to Plan B: Breaking Through to a Better Business Model by John Mullins and Randy Komisar, focus more on entrepreneurship and start-ups and on learning from experimentation and adjusting the business model, also with more focus on financials. A good complementary book to Business Model Generation. See my review/summary here

• The Design of Business: Why Design Thinking is the Next Competitive Advantage by Roger Martin, explores design thinking, and advocates using intuition combined with analytical thinking to innovate business models. It is a great complementary to Business Model Generation. See my review/summary here
  

• The Ultimate Competitive Advantage: Secrets of Continually Developing a More Profitable Business Model by Mitchel, Coles, Golisano and Knutson, has a heavier focus on marketing with some ideas and questions relating to one-sided business models, so if you are looking to "sell more" perhaps you like this book. See my review here

• The Profit Zone: How Strategic Business Design Will Lead You to Tomorrow's Profits by Slywotzky, Morrison and Andelman, has a heavier focus on profitability and the changing areas in which high profit is possible to keep, it is a quick read and perhaps complementary to The Business Model Generation that focus less on profitability. See my review here

• Open Business Models: How to Thrive in the New Innovation Landscape by Henry Chesbrough has a heavier focus on technological innovation in the context of business models and also covers the important area of Intellectual Property in relation to open business models.

All in all, The Business Model Generation is a great book and everyone interested in the subject should have a copy of it. Download the preview and buy it.

Full disclosure: I was one of the 470 practitioners contributing to the book.

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