When it comes to understanding and creating effective business models, sometimes it’s just a matter of mapping the basics—and remembering that nothing is permanent.
There are a million business model tools (by our scientific estimate). The point isn’t which is best, but which are useful for you—either as built or as customized by you and your organization.
Alexander Osterwalder (Click Image To Enlarge)
Here, from business model design guru Alex Osterwalder, is another. The key is to create “a shared visual language” for your executive team.
“What is a business model?”
Osterwalder, an author and workshop leader in the field of business model design and innovation, asks this question wherever he gives talks. And he receives as many answers as there are people in the room. The differences of opinion drove him to create “a shared visual language to talk about business models.”
His creation, what he calls the Business Model Canvas, outlines nine building blocks essential to designing a proper model. The Canvas’s building blocks—foundational topics such as distribution channels, value propositions, and key partnerships—are hardly novel. But with each parameter arrayed on a single page, it’s easier to diagram and envision how a change to, say, your key resources might lead to a corresponding alteration in your cost structure. So when a patent expires, for instance, you can literally remove it from the key resources box and map out the ripple effect on the other eight building blocks.
Before you pull out your pen and get cracking, consider one final tip:
“You never write on the canvas.”
Osterwalder, in a video on his site, says.
“For every building block, you want to use Post-It notes.”
The reasoning: No business model is perfect—or permanent. They are ever evolving. You need the flexibility of removable reminders, not the stubborn residue of ink.
In the following YouTube video, entrepreneur and business model innovator Alexander Osterwalder discusses dynamic, yet simple-to-use tools for visualizing, challenging and re-inventing business models. Osterwalder articulates how to use the visual language of his business model canvas framework, and shares stories of how this approach helps organizations of all sizes to better create, deliver and capture value.
COMMENTARY: In a blog post dated February 6. 2012, Floodgate Fund co-founder Ann Muira-Ko says,
"Its the business model that matters the most, rather than the business plan."
According to Miura-Ko, business models do a better job of unearthing assumptions about a company's users, customers, pricing, demand creation, sales channels, supply chain, and overall logistics - all critical components to building a successful business.
A business model answers all the 4 W's (Who, What, Where and Why) and the all important How you are going to do it as it relates to the following:
- Core marketing message.
- Components of your brand identity.
- Customer value proposition (CVP).
- Industry or market.
- Target customers.
- Competitive landscape.
- Industry life cycles.
- Pricing model.
- Value chain.
- Operations.
According to Peter Drucker, the late Harvard management guru said.
"A business model is nothing else than a representation of how an organization makes (or intends to make) money."
But, a business model is far more than this. Mark W. Johnson, the Harvard professor and author of "Seizing The White Space," says that a business model consists of three components:
- It identifies an important job a customer needs to get done and then proposes anoffering that fulfills that job better than any alternative the customer can turn to--in short, the customer value proposition (CVP).
- A pricing model and profit formula that shows quantitatively that you can make a profit delivering on the CVP.
- identifying which company resources and which processes are essential to delivering the CVP.
Use the Business Model Canvas (see below) to guide you in the preparation of your business model provides the answers to the four W's and the How. The business model canvas is divided into nine grids:
- Strategic partners.
- Key activities.
- Value proposition.
- Customer relationship.
- Customer segment.
- Key resources.
- Distribution channels.
- Costs.
- Revenues.
The Business Model Canvas (Click Image To Enlarge)
In summary, think of a businesss model as the DNA code for your business. Every business has a different business model. Like the DNA strand that makes up a human being, there are countless business model combinations. Understanding the inter-relationships of the nine components of the business model canvas for your business startup or company are paramount to developing a successful business model that won't become obsolete quickly or end in business failure. Remember, you may have the greatest product idea in the world, but a poorly developed business model can never the less lead to failure.
To develop your business model I highly recommend that you read my previous blog posts dated November 5, 2011, January 26, 2012, and February 26, 2012.
Courtesy of an article dated March 25, 2012 appearing in The Build Network
very good video. This is from e-corner Stanford university.
Posted by: business model canvas | 12/10/2012 at 01:19 PM
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It should of taken a bit in the manner thought provoking it truly is.
I shared it on my facebook.
Posted by: Melody | 10/20/2012 at 09:47 AM