Strategic Thinking, Decision Making, And Innovation-2

You’re holding a handbook for visionaries, game changers, and challengers striving to defy outmoded business models and design tomorrow’s enterprises. It’s a book for the . . .

written by Alexander Osterwalder & Yves Pigneur

co-created by An amazing crowd of 470 practitioners from 45 countries

designed by Alan Smith, The Movement

Disruptive new business models are emblematic of our generation. Yet they remain poorly understood, even as they transform competitive landscapes across industries. Business Model Generation offers you powerful, simple, tested tools for understanding, designing, reworking, and implementing business models.

Business Model Generation is a practical, inspiring handbook for anyone striving to improve a business model — or craft a new one.

change the way you think about business models

Business Model Generation will teach you powerful and practical innovation techniques used today by leading companies worldwide. You will learn how to systematically understand, design, and implement a new business model — or analyze and renovate an old one.

co-created by 470 strategy practitioners

Business Model Generation practices what it preaches. Coauthored by 470 Business Model Canvas practitioners from forty-five countries, the book was financed and produced independently of the traditional publishing industry. It features a tightly integrated, visual, lie-flat design that enables immediate hands-on use.

designed for doers

Business Model Generation is for those ready to abandon outmoded thinking and embrace new, innovative models of value creation: executives, consultants, entrepreneurs — and leaders of all organizations.

$34.95 USA/$41.95 CAN

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Business Model Generation

bmgen_final.indd 3 6/15/10 5:31 PM

 

 

This book is printed on acid-free paper. o

Copyright © 2010 by Alexander Osterwalder. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical,

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ISBN: 978-0470-87641-1

Printed in the United States of America

10 9 8 7 6 5 4 3 2 1

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Written by Alexander Osterwalder and Yves Pigneur

Design Alan Smith, The Movement

Editor and Contributing Co-Author Tim Clark

Production Patrick van der Pijl

Co-created by an amazing crowd of 470 practitioners from 45 countries

Business Model Generation A Handbook for Visionaries, Game Changers, and Challengers

John Wiley & Sons, Inc.

bmgen_final.indd 5 6/23/10 12:56 AM

 

 

Ellen Di Resta

Michael Anton Dila

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Fanco Ivan Santos Negrelli

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Design for Innovation

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Karen Davis

Tim Turmelle

Anders Sundelin

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Martin Kaczynski

Frank

Ricardo Dorado

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Rod

Eddie

Jeffrey Huang

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nse_55

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Gabi

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Skotterud

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chokethawee

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Ravi Sodhi

Dick Rempt

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Luis Stabile

Enterprise Consulting

Aline Frankfort

Alexander Korbee

J Bartels

Steven Ritchey

Clark Golestani

Leslie Cohen

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Andre Macieira

Wiebe de Jager

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Are you an entrepreneurial spirit? yes _______ no _______

Are you constantly thinking about how to create value and build new businesses, or how to improve or transform your organization? yes _______ no _______

Are you trying to find innovative ways of doing business to replace old, outdated ones? yes _______ no _______

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If you’ve answered “yes” to any of these questions, welcome to our group! You’re holding a handbook for visionaries, game changers, and challengers striving to defy outmoded business models and design tomorrow’s enterprises. It’s a book for the business model generation.

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Today countless innovative business models are emerging. Entirely new industries are forming as old ones crumble. Upstarts are challenging the old guard, some of whom are struggling feverishly to reinvent themselves.

How do you imagine your organization’s business model might look two, five, or ten years from now? Will you be among the dominant players? Will you face competitors brandishing formidable new business models?

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This book will give you deep insight into the nature of business models.

It describes traditional and bleeding-edge models and their dynamics,

innovation techniques, how to position your model within an intensely

competitive landscape, and how to lead the redesign of your own organi-

zation’s business model.

Certainly you’ve noticed that this is not the typical strategy or man-

agement book. We designed it to convey the essentials of what you need

to know, quickly, simply, and in a visual format. Examples are presented

pictorially and the content is complemented with exercises and workshop

scenarios you can use immediately. Rather than writing a conventional

book about business model innovation, we’ve tried to design a practical

guide for visionaries, game changers, and challengers eager to design or

reinvent business models. We’ve also worked hard to create a beautiful

book to enhance the pleasure of your “consumption.” We hope you enjoy

using it as much as we’ve enjoyed creating it.

An online community complements this book (and was integral to

its creation, as you will discover later). Since business model innovation

is a rapidly evolving field, you may want to go beyond the essentials in

Business Model Generation and discover new tools online. Please consider

joining our worldwide community of business practitioners and research-

ers who have co-created this book. On the Hub you can participate in

discussions about business models, learn from others’ insights, and try

out new tools provided by the authors. Visit the Business Model Hub at

www.BusinessModelGeneration.com/hub.

Business model innovation is hardly new. When the founders of Diners

Club introduced the credit card in 1950, they were practicing business

model innovation. The same goes for Xerox, when it introduced photo-

copier leasing and the per-copy payment system in 1959. In fact, we might

trace business model innovation all the way back to the fifteenth century,

when Johannes Gutenberg sought applications for the mechanical printing

device he had invented.

But the scale and speed at which innovative business models are

transforming industry landscapes today is unprecedented. For entre-

preneurs, executives, consultants, and academics, it is high time to

understand the impact of this extraordinary evolution. Now is the time

to understand and to methodically address the challenge of business

model innovation.

Ultimately, business model innovation is about creating value, for

companies, customers, and society. It is about replacing outdated models.

With its iPod digital media player and iTunes.com online store, Apple

created an innovative new business model that transformed the company

into the dominant force in online music. Skype brought us dirt-cheap

global calling rates and free Skype-to-Skype calls with an innovative

business model built on so-called peer-to-peer technology. It is now the

world’s largest carrier of international voice traffic. Zipcar frees city dwell-

ers from automobile ownership by offering hourly or daily on-demand

car rentals under a fee-based membership system. It’s a business model

response to emerging user needs and pressing environmental concerns.

Grameen Bank is helping alleviate poverty through an innovative business

model that popularized microlending to the poor.

But how can we systematically invent, design, and implement

these powerful new business models? How can we question, challenge,

and transform old, outmoded ones? How can we turn visionary ideas

into game-changing business models that challenge the establishment—or

rejuvenate it if we ourselves are the incumbents? Business Model Generation

aims to give you the answers.

Since practicing is better than preaching, we adopted a new model

for writing this book. Four hundred and seventy members of the Business

Model Innovation Hub contributed cases, examples, and critical com-

ments to the manuscript—and we took their feedback to heart. Read more

about our experience in the final chapter of Business Model Generation.

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Seven Faces of Business Model Innovation

The Senior Executive

Jean-Pierre Cuoni,

Chairman / EFG International

Focus: Establish a new business model

in an old industry

Jean-Pierre Cuoni is chairman of

EFG International, a private bank

with what may be the industry’s most

innovative business model. With

EFG he is profoundly transforming

the traditional relationships between

bank, clients, and client relationship

managers. Envisioning, crafting, and

executing an innovative business

model in a conservative industry with

established players is an art, and

one that has placed EFG International

among the fastest growing banks

in its sector.

The Intrapreneur

Dagfi nn Myhre,

Head of R&I Business Models / Telenor

Focus: Help exploit the latest techno-

logical developments with the right

business models

Dagfi nn leads a business model unit

at Telenor, one of the world’s ten larg-

est mobile telephone operators. The

telecom sector demands continuous

innovation, and Dagfi nn’s initiatives

help Telenor identify and understand

sustainable models that exploit the

potential of the latest technological

developments. Through deep analysis

of key industry trends, and by develop-

ing and using leading-edge analytical

tools, Dagfi nn’s team explores new

business concepts and opportunities.

The Entrepreneur

Mariëlle Sijgers,

Entrepreneur / CDEF Holding BV

Focus: Address unsatisfi ed customer

needs and build new business models

around them

Marielle Sijgers is a full-fl edged

entrepreneur. Together with her

business partner, Ronald van den

Hoff, she’s shaking up the meeting,

congress, and hospitality industry

with innovative business models.

Led by unsatisfi ed customer needs,

the pair has invented new concepts

such as Seats2meet.com, which allows

on-the-fl y booking of meetings in

untraditional locations. Together,

Sijgers and van den Hoff constantly

play with new business model ideas

and launch the most promising

concepts as new ventures.

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The Investor

Gert Steens, President & Investment

Analyst / Oblonski BV

Focus: Invest in companies with the

most competitive business models

Gert makes a living by identifying the

best business models. Investing in the

wrong company with the wrong model

could cost his clients millions of euros

and him his reputation. Understanding

new and innovative business models

has become a crucial part of his work.

He goes far beyond the usual fi nancial

analytics and compares business

models to spot strategic differences

that may impart a competitive edge.

Gert is constantly seeking business

model innovations.

The Consultant

Bas van Oosterhout, Senior

Consultant / Capgemini Consulting

Focus: Help clients question their

business models, and envision and

build new ones

Bas is part of Capgemini’s Business

Innovation Team. Together with

his clients, he is passionate about

boosting performance and renewing

competitiveness through innovation.

Business Model Innovation is now a

core component of his work because

of its high relevance to client projects.

His aim is to inspire and assist clients

with new business models, from

ideation to implementation. To achieve

this, Bas draws on his understanding

of the most powerful business models,

regardless of industry.

The Designer

Trish Papadakos,

Sole Proprietor / The Institute of You

Focus: Find the right business model

to launch an innovative product

Trish is a talented young designer

who is particularly skilled at grasp-

ing an idea’s essence and weaving it

into client communications. Currently

she’s working on one of her own ideas,

a service that helps people who are

transitioning between careers. After

weeks of in-depth research, she’s now

tackling the design. Trish knows she’ll

have to fi gure out the right business

model to bring her service to market.

She understands the client-facing

part—that’s what she works on daily

as a designer. But, since she lacks for-

mal business education, she needs the

vocabulary and tools to take on the

big picture.

The Conscientious Entrepreneur

Iqbal Quadir, Social Entrepreneur /

Founder of Grameen Phone

Focus: Bring about positive social and

economic change through innovative

business models

Iqbal is constantly on the lookout

for innovative business models with

the potential for profound social

impact. His transformative model

brought telephone service to over

100 million Bangladeshis, utilizing

Grameen Bank’s microcredit network.

He is now searching for a new model

for bringing affordable electricity to the

poor. As the head of MIT’s Legatum

Center, he promotes technological

empowerment through innovative

businesses as a path to economic and

social development.

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Table of Contents

Canvas

Outlook

Afterword

Process

Design

Patterns

Strategy

The book is divided into five sections: 1 The Busi-

ness Model Canvas, a tool for describing, analyzing,

and designing business models, 2 Business Model

Patterns, based on concepts from leading business

thinkers, 3 Techniques to help you design business

models, 4 Re-interpreting strategy through the

business model lens, and 5 A generic process to

help you design innovative business models, tying

together all the concepts, techniques, and tools in

Business Model Generation. }The last section offers

an outlook on five business model topics for future

exploration. Finally, the afterword provides a peek

into “the making of” Business Model Generation.

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1 Canvas

14 Definition of a Business Model

16 The 9 Building Blocks

44 The Business Model Canvas

2 Patterns

56 Unbundling Business Models

66 The Long Tail

76 Multi-Sided Platforms

88 FREE as a Business Model

108 Open Business Models

3 Design

126 Customer Insights

134 Ideation

146 Visual Thinking

160 Prototyping

170 Storytelling

180 Scenarios

4 Strategy

200 Business Model Environment

212 Evaluating Business Models

226 Business Model Perspective on Blue Ocean Strategy

232 Managing Multiple Business Models

5 Process

244 Business Model Design Process

} Outlook

262 Outlook

Afterword

274 Where did this book come from?

276 References

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Canvas bmgen_final.indd 10 6/15/10 5:31 PM

 

 

Canvas bmgen_final.indd 11 6/15/10 5:31 PM

 

 

A shared language for describing, visualizing, assessing, and changing business models

The Business Model Canvas

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14 Definition of a Business Model

16 The 9 Building Blocks

44 The Business Model Canvas Template

 

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14

A business model describes the rationale of how an organization creates, delivers, and captures value

Def_Business Model

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15

The starting point for any good discussion, meeting,

or workshop on business model innovation should

be a shared understanding of what a business model

actually is. We need a business model concept that

everybody understands: one that facilitates descrip-

tion and discussion. We need to start from the same

point and talk about the same thing. The challenge is

that the concept must be simple, relevant, and intui-

tively understandable, while not oversimplifying the

complexities of how enterprises function.

In the following pages we oΩer a concept that allows

you to describe and think through the business model

of your organization, your competitors, or any other

enterprise. This concept has been applied and tested

around the world and is already used in organizations

such as IBM, Ericsson, Deloitte, the Public Works and

Government Services of Canada, and many more.

This concept can become a shared language that

allows you to easily describe and manipulate business

models to create new strategic alternatives. Without

such a shared language it is diΩicult to systematically

challenge assumptions about one’s business model

and innovate successfully.

We believe a business model can best be described

through nine basic building blocks that show the

logic of how a company intends to make money. The

nine blocks cover the four main areas of a business:

customers, oΩer, infrastructure, and financial viability.

The business model is like a blueprint for a strategy

to be implemented through organizational structures,

processes, and systems.