Notes and Quotes from Alex Osterwalder’s Business Model Generation

from Business Model Generation — Notes and Quotes

On Applying Design Skills to Business Model Generation

What businesspeople lack is design tools that complement their business tools.

We are convinced that the tools and attitude of the design profession are prerequisites for success in business model generation.

(Osterwalder identifies six design skills or areas: customer insights, ideation, visual thinking, prototyping, storytelling, and scenarios.)

Business model innovation is not about looking back…[but] creating new mechanisms to create value and derive revenue.

On Play and Artistry

When an artist starts painting he often has a vague idea–not an exact image–in mind.  Rather than starting in one corner of a canvas and executing sequentially, he starts wherever his muse dictates and build the painting organically.  As Pablo Picasso said, “I being with an idea and then it becomes something else.”  Picasso saw ideas as nothing more than points of departure.  He knew they would evolve into something new during their explication.

On Customer Insights

Osterwalder recommends the use of an Empathy Map to gain a deeper understanding of customers.

  • What does he see in his enviroment?
  • What does he hear?
  • What does he feel?
  • What does he say and do?
  • What is his pain?
  • What does he want to gain?

On Ideation

To come up with new or better options, you must dream up a grab bag of ideas before narrowing them down to a short list of conceivable options.  Thus, ideation has two main phases, idea generation where QUANTITY MATTERS and synthesis, in which ideas are discussed, combined, and narrowed down to a small number of viable options.  (Add testing and experimentation a la “lean startup”.

Managing an existing business model is one thing; designing a new and innovartive business model is another.  What’s needed is a creative process for generating a large number of business model ideas and successfully isolating the best ones.

Business model innovators need to think like artists

On Applying Ideation to a Business Model

It’s important to apply ideation to all components of a business model because innovation can come from anywhere.

There are four epicenters of business model innovation: resources, value proposition, customer, and finance.   A key change in one can trigger changes in other that can lead to a profitable model.

  • Resource-driven.  Amazon Web Services was built on top of their retail infrastructure.
  • Value proposition-driven.  A cement maker delivers cement to job-sites in 3 hours vs. the typical 24 hours.
  • Customer segment -driven.  Deliver an existing solution to a new customer segment.  Inevitably, this changes other parts of the business model (variation on value proposition and costs and revenues)
  • Cost and revenue-driven.  Xerox couldn’t sell copiers because they were too expensive.  They switched to a leasing as their pricing mechanism and the copiers were affordable to lots of businesses. 

On Prototyping

We see prototypes representing potential future business models:  as tools that serve the puprose of discussion, inquiry, or proof of concept.

A business model prototype can be…described with the Business Model Canvas.

It is important to understand that a business model prototype is not necessarily a rough picture of what the actual business model will actually look like.  Rather a prototype is a thinking tool that helps us explore different directions in which we could take our business model.

Making and manipulating a business model prototype forces us to address issues of structure, relationship, and logic in ways unavailable through mere thought and discussion.

We need to construct multiple versions of our prototype at different levels of refinement.

Interaction with prototypes produces ideas more readily than discussion.

On The Design Attitude

As businesspeople, when we see a prototype we tend to focus on its physical form or its representation, viewing it as something that models, or encapsulates the essence of, what we eventually intend to do.  We perceive a prototype as something that simply needs to be refoned.  In the design profession, prototypes do palay a role in pre-implementation visualization and testing.  But they also play another very important role: that of a tool of inquiry.

We believe it is important to think through a number of basic business model possibilities before developing a business case for a specific model.  This spirit of inquiry is called design attitude, because it is so central to the design professions…

The attributes of design attitude include a willingness to explore crude ideas, rapidly discard them, then take the time to examine multiple possibilities before choosing to refine a few–and accepting uncertainty until a design direction matures.

Napkin sketch.  Very rough idea
Elaborate.  More details, research market potential, some fact checking
Business case. More data, spreadsheets, financial scenarios
Field test.  You’ve decided on a potential model and want to test with customers.

One Reply to “Notes and Quotes from Alex Osterwalder’s Business Model Generation”

  1. As I know leading global companies like GE, P&G, and Nestle use the canvas to manage strategy or create new growth engines, while start-ups use it in their search for the right business model.

Comments are closed.