Business Model Generation

A Handbook for Visionaries Game Changers and Challengers

Authors: Alexander Osterwalder & Yves Pigneur

Want to start, grow or optimize a business? Start a new venture? There are some key things to keep in mind as you set out on your journey.

Who are your customers? What is your Market Space, What are your Activities? Who will be your key partners? Where will you operate? How will you create and deliver value to your customers? These are all amongst the questions a successful business owner or startup founder must be ready to answer. To assist you in your quest, the authors have provided some information to help you cover all the bases.

The Market

The Group of customers who are at the heart of the BM.

Mass market – large market with similar needs

Niche Market – smaller group with specific interests

The Value Proposition

The problem your product solves.

Demonstrate why choose yours over others?

Design and Aesthetics (eg. Apple)

Risk reduction

Performance – faster, more powerful

The Sales Channels

Methods of reaching your customers

Your own

Storefront, website or sales team

Via Partners

Other shops, wholesalers

Customer relationships

A crucial aspect because this is where the value comes from

Self-service (Ikea)

Co-Creation Model (eg. Amazon reviews)

Revenue Streams

Transactional

Buy a product, get a product.

Recurring revenues

Mostly subscriptions

Spotify

Netflix

Usage Fees

Depends on usage

Data on your phone

Resources

Physical

Brick and Mortar Locations

Materials of Production

Factories and Supply Chain

Human

Staff

Investors

Customers

Intellectual

Copyright

Patents

Trademarks

Key activities, Partnerships and a Cost Structure

Key activities

Production – manufacturing

Problem solving – Consultancy

Network and Platform – Internet companies

Partnerships

Team up with others and other businesses

Essential for success (eg. apple & fox con)

Reduces risk when many parties are vested in

Cost Structure

A Cost Driven BM

Based on the principle that costs should be keptt as low as possible e.g. easy Jet.

A Value Driven BM

Offering a high value product which justifies the higher price.

Empathize with customers to find out what they need

Your job is to dream up something which doesn’t exist, but is still a really good possibility to succeed.

Customer Insights

Use Customer insights to find untapped potential

EasyJet creates offers for low income travellers,

ZipCar helsp urban drivers with limited needs and desire for BS.

Put yourself in your customer’s shoes. Fulfill their wishlist and address their paypoints

Customer Insights Tool: Empathy Map

Draw an X on a flip chart and label each section as shown:

product design customer empathy map

Top – Think & Feel: Write what the customer thinks and feels, thoughts and emotions.

Right – Write things that the customer “Sees” – environment, people.

Left – “Hear” – Write the things that the customer hears – interactions, what do other people say to them, the language.

Bottom – Say & Do – Write the things that the customer says and does.

Combine the Empathy Map with Customer Personas

Personas – age, marital status, employment etc

Write Business Scenarios with your Persona as the protagonist

Keep them straight forward

Include details about the needs, aspirations, goals, worries. Stick to 300 wds each.

Write several of these forward-looking business scenarios as they would be 5-10 years in the future.

Imagine scenarios about the future including your product/service in the future for your persona

Business Model Types

Look at other successful business models for inspiration

Freemium Model

Use basic version for free, option to pay for advanced features/options/services

Eg. Skype

Works well for web companies, but could be used on others

Determine the cost of a free user

Find out the rate at which Free users convert to paid users and the revenue they generate

See at which point it flips to being profitable.

Open-Source Model

Eg. Red Hat

Offers customer support and Malware testing for FREE/OPEN-SOURCe Software

Get the software for free…with the option for their support/maint/upgrades.

Long Tail Model

Use a strong platform of community members who double as content creators

Lulu

printing niche books on demand. A tight knit community for people to distribute and also consume niche books

Lego

Customers can design their own products/kits etc. They can also submit orders and feedback

Conclusion

Successful companies are built on well-though out business models

Stepping into your customer’s shoes helps you create a no-brainer value proposition for your customers

Evaluating the options for different business models can help determine the best way to proceed to success.