Wednesday, December 16, 2009

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 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:
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.

If you find this book review helpful, please go to the Amazon book review page and rate my identical review "Helpful". Thanks!


  1. Very thorough review, thanks! I particularly appreciated how you compared this book to others. I hadn't known about Getting to Plan B and have just ordered it through your link. I also can't wait to for Osterwalder's book to be back in stock - it sold out so quickly! Congratulations on being one of the contributors (not surprising!).

  2. Thank you Andrea! I just posted a review on Getting to Plan B.