Business Model Generation : New Book Review

Cover image of Business Model Generation book

Business Model Generation by Alexander Osterwalder and Yves Pigneur doesn’t look like your average business book. It’s published in landscape format, it’s packed with drawings and has lots of pictures, colour and white space. Yes, ‘the designers’ have got to it. But does it stand up as more than just a ‘beautiful thing’?

In short, yes. 

It’s described as a ‘handbook for visionaries, game changers and challengers’. Indeed, this book offers some good stuff to those who already inhabit Silicon Valley and also to those, who from a distance, consider that place to be their spiritual home.

However, it’s likely that this book could be useful to a much broader audience including managers in a wide range of organisations, at very different stages of organisational lifecycle.

At the heart of the book is a framework called the Business Model Canvas (BMC). This is the starting point for evaluating current business models and also for generating new ones. Behind the BMC is the assumption that any business model is built up from nine ‘building blocks’ which include things like customer segments, value proposition, key resources and cost structure.

The BMC is startlingly simple. However, as the authors suggest, it provides a framework and a lexicon with which executives, entrepreneurs and venture capitalists can discuss and innovate business models.

Five Main Sections.

Once the BMC has been introduced in the first section, we are then taken through four further main sections. Patterns:  where five different types of business models are discussed. Design : which outlines six different approaches to generating business models which include customer insight and scenario planning. Strategy : which links the BMC to the strategic context within which an organisation operates. The Process section outlines a five stage approach to designing a new business model.

The book feels contemporary – and that’s not just because of the design. It’s also due to the choice of companies and their business models that are used as case studies.

New technologies, and in particular web 2.0 have been pivotal in the growth of new business models in the last ten years. Therefore it’s important to see some of these new business models analysed. Good examples include Amazon’s move into Web Services, Skype, and Flickr. 

Another reason why the book feels modern is that the authors acknowledge that it is a co-creation  with 470 members of a community. Indeed, the text itself is the product of a new publishing business model. A platform was created to which parties interested in contributing to the project could subscribe. The authors then used these subscription revenues to fund the development of the book.

Practical Help.

Business Model Generation aims to offer practical help for anyone interested in ‘checking up’ on their current business models. This, the authors believe is something that organisations should undertake on a regular basis as part of their strategy and planning process.

The practical help includes the BMC framework and a detailed outline of what might be included in each of the nine building blocks. There is a strategic framework and checklist of questions to help teams populate it. There are also other frameworks/checklists to enable teams to undertake a SWOT analysis on a business model.

Group sessions are suggested for teams to work on business model innovation and for those who are unfamiliar with facilitation, there are facilitation tips and also guidance on the importance of creating the right climate for innovation for creative thinking sessions..

The comments in the Design Attitude sub-section draw attention to the importance of having the right innovation mindset. By this, the authors mean being willing to explore crude ideas, and to take time to examine many possibilities. It’s also about accepting the uncertainty and ambiguity of innovation until a ‘design direction’ matures. However, the authors’ suggestion that ‘these things don’t come naturally to business people’ is an unnecessary generalisation that risks alienating readers.

I have a few criticisms of the text.

My concern that in places, the point size of the font is far too small may seem prosaic. But it hints to me of the designers having had ‘the final say’. Form won out over function. Believe me guys – you may be drooling over all the white space that you retained – but is it worth it if the reader is squinting at the tiny text?

My other concern is does it work?

There is no doubt that the framework is a powerful tool to evaluate business models that already exist. And by evaluating current business models we can learn a lot about them, and improve them. However, can great business models be created with such a framework?

We are told that the concept has been tested and applied around the world and it is already in use in a large number of high profile global corporations. However, there is no example in the book of a business model that has actually been created with this framework and process, and then implemented and the business performance evaluated. Amazon’s business model is analysed effectively with the framework as are many others, but Jeff Bezos did not use the framework to create it.

Is it concerns over confidentiality that have driven this?

Clearly, the framework is a powerful tool for evaluating business models. I also have a fair amount of confidence that it could contribute strongly to business model creation. However, the inclusion of a good case study of using it for business model creation would have been a strong convincer.

At worst you could argue that visionaries, game changers and challengers don’t need a framework to create a business model. I mean, aren’t these people feted for doing this intuitively? Therefore their only need for the framework would be to help them communicate effectively their new business model to others.

However, many companies don’t have visionaries, game changers and challengers within them. So for the rest of us mere mortals, this handbook is likely to prove an excellent help for evaluating business models and also ‘the very best that’s available’ for helping generate a new business model.

AnatellÔ score as a tool to assist with innovation and growth 4/5.

Business Model Generation by Alexander Osterwalder & Yves Pigneur  279p is published by Wiley.

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