What's New in Business Model Generation?

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Implementing Lean Marketing Systems

What’s new in Business Model Generation? Customer Value Canvas and more

Copyright Business901

What’s new in Business Model Generation? Guest was Alex Osterwalder

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http://business901.com/blog1/whats-new-in-business-model-generation-customer-value-canvas-and-more/





Dr. Alexander Osterwalder is a sought-after author, speaker, workshop facilitator and adviser on the topic of business model design and innovation. He has established himself as a global thought leader in this area, based on a systematic and practical methodology to achieve business model innovation. Executives and entrepreneurs all over the world apply Dr. Osterwalder’s approach to strengthen their business model and achieve a competitive advantage through business model innovation. Organizations that use his approach include 3M, Ericsson, IBM, Telenor, Capgemini, Deloitte, Logica, Public Works and Government Services Canada, and many more.

Alex’s Websites: http://www.businessmodelalchemist.com http://businessmodelhub.com/

http://www.businessmodelgeneration.com/

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define Business Models in the Media Industry

Business Models at the Bottom of the Pyramid Social Entrepreneurship Business models

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http://www.businessmodelalchemist.com/

http://businessmodelhub.com/

http://www.businessmodelgeneration.com/





Joe Dager: Welcome everyone. This is Joe Dager, the host of the Business901 podcast. With me today is Dr. Alexander Osterwalder. Alex has worked in applying business models and is a true leader in thought leadership. He has replaced the poorly yet well discussed concept with a sharply defined framework and tools highlighted in his book "Business Model Generation." Alex, I would like to compliment you first starting out, I think I just read somewhere that your book has been on the top 200 in Amazon for two years now?

Alex Osterwalder: Yes, a little bit over two years. We have 220,000 copies in circulation in 23 languages. It's been a nice ride.

Joe: Yeah, it certainly has. I look at it a little different being from a Lean perspective. I look it as the A3 of customer value.

Alex: OK, great.

Joe: I've used it in that sense a little bit to work with clients in determining value. I saw some of the latest things you're doing is you're taking the Business Model Generation into a whole different area. You're taking a deeper dive with it into personal use and also customer value.

Alex: Yeah, absolutely. Jim Clark who was already editing the Business Model Generation book and who was in the core team, he launched a new initiative called "Business Model

You." He applied the Business Model Canvas to people and that's going in a totally new direction. So that was interesting to see because people started doing it, we were catching up. Tim wrote a great book around that in the same style as Business Model Generation, of course, with a lot of visuals, very accessible and extremely well designed by Trish Nalan.





Joe: In the Business Model Generation book, though, I think a lot of people attach it very quickly to the Lean start-up because of the craze there, but it really grew out of, I would say, design thinkers and design thinking concepts in Europe.

Alex: The approach is used everywhere. This was used first in large companies,

particularly telecom companies around the world in Columbia, Norway, some of the biggest players. Only later did it really come into the start-up field or the Lean start up field. So it was the other way around. Every community thinks that it happened there first, which is very nice because it means that we're getting some traction in all different kinds of communities, which was, to a certain extent, a surprise that this would have such a success in different places like social entrepreneurship start ups, large companies, even governments. So that was pretty interesting to see how it spread beyond what we originally intended with this framework.

Joe: What was the original intention then?

Alex: Well, we were just trying to figure out "how could you better describe business models? How could you have a better communication around business models?" The starting point was during the Internet boom years, and that was a little bit of the context. We always believed it would go beyond the Internet, but that it would go even into governments and NGOs. That was interesting to follow.

Joe: I think it even redefined the way a book was made a little bit. It's a completely different concept, and it's so much more visual. It's not quite a workbook, but it's not quite a book either. It's got its own place.





Alex: Yeah, there are 11,000 business books coming out every year on top of 200,000 business books that already exist. So you really want to find a way to stand out when you write a new book. Nobody is waiting for 11,001 or 200,0001. We tried to figure out what we should we do. We asked a lot of people, "What's wrong with business books? What don't they like?" We understood a couple of things. We started to design a book that would address that.

At the end of the day, I think, Yves Pigneur, my co-author, and myself, we created a book that we would want to buy. It was basically the book we would have wanted to buy on business models. We created it for ourselves, and that's part of the story.

Joe: So taking the deeper dive, what's different about the Customer-Value Canvas over the Business Model Generation?

Alex: The heart of The Business Model Generation book was the Business Model Canvas. It's really about figuring out how you create, deliver, and capture value. I think the core message there is that product innovation, technology innovation is great and important but it's just not enough anymore. With the Business Model Canvas, we created a way to help people map and discuss business models and have better conversations. Ultimately, just get it out of the heads of people and put it on a table in order to play with different alternatives. I still really strongly believe in that. I think that's the core thing a lot of larger

organizations are still struggling with.

What we also realized, and we knew this from the beginning but we never put a lot of effort into it, is that for every building block, the nine building blocks we have for the Business Model Canvas, you could think of plug-ins. Or around the Business Model Canvas,





you could think about plug-ins to sketch out certain things like a competitive environment, whatever you want to use as the concept.

The one thing I think that people understand really easily is customer problems and company solutions are value propositions, but they don't have a really good way to

describe that. Taking a part of the business model, customer, their problems, I call them jobs to be done, a concept that is fairly well established, and the value proposition.

We took that and we asked ourselves, "How could we turn this into a visual canvas just like the Business Model Canvas?" but just to visualize part of your business model. It does not replace the need to sketch out a powerful business model. It's a compliment that allows you to dig a bit deeper into one issue which is "What are the jobs the customer is trying to get done in each of your customer segments and what are you offering them?"

It's a topic that's not new. A lot of people are talking about it. In the Lean startup movement, it's called Problem Solution Fit or Market Product Fit. However, you want to call it. But there's no visual way of describing that, no canvas that would allow you to sketch this out easily.

One of the biggest things I've learned over the last couple of years is how powerful it is to visualize things that you discuss. So just talking about something is probably not good enough to get a clear understanding. It's not good enough to just think about ideas. You want to get them out of your head and make them tangible. So visualizing is one of the techniques that helps you a lot with that.





So the Business Model Canvas is the way to visualize your business model and make it tangible. The Customer-Value Canvas is a new approach that allows you to visualize customer jobs and the corresponding value propositions. That was the intent behind it, to give people a method, to make things clearer, to have better communications about their value propositions and how those value propositions address customer needs and customer jobs to be done.

And since, this is one of the big things in the whole Lean start up movement, this focus on products, I thought, "Hey, it would be nice to offer a way to visualize this theme."

Joe: It's taken each of the nine building blocks and adding, another layer to each of the blocks?

Alex: So there are different things you could do. You could have a plug-in for a specific building block. If you take channels, you could have a method that allows you to visualize your channel strategy. That would mean you go into one building block with a plug-in method. You go deeper into your channels and your strategy. You dig down. Now, the customer value is a little bit different, because it takes two building blocks and it visualizes those two building blocks and how they connect to each other. So, basically, the message here is Business Model Canvas is one method. What you really want to be able to do is weave together all the important and relevant methods that help you create better

businesses and integrate them. It could be one building block. It could include several building blocks, or it could include something else around visualizing the business model environment, managing your business model portfolio.





The main message here is that you find concepts that are useful, that are practical, intuitive, and that you weave them together so as a business person, executive and entrepreneur alike, you can work in better ways.

Joe: There are two different ways, when you look at something like this in a one page

document that you really can't get the depth that you need. The other way you can look at is that when you do put something on one page you provide a lot of clarity because you've got to get it on one page. What's the limitation of the canvas?

Alex: I think what you're saying is pretty important. This issue of granularity, we can go in a lot of depth and be very detailed. But I think that is not the problem. I think that people are pretty good at that, developing marketing strategies in very accurate detail. What a lot of people lack is this ability to see the big picture and how all the pieces fit together. This is the same for startup entrepreneurs or for large companies. What's going to be important in the future is how all the pieces of a business model story fit together. And we're not very good at mapping that out, just getting that big picture and how all these pieces fit together.

That was really the core idea behind the Business Model Canvas. That was what we're focusing on. A lot of people want to go into more granularities. I think that's fine, but it's when you address a different issue. When you're trying to figure out what is the right

business model, when you're trying to figure out what is the right strategy, you want something that gives you the big picture.

When you've found the right business model, when you've found the right strategy, then you want to become more granular because you're going towards implementation. So





depending on the goal you have, you will use different methods and different granularity in a method. It's essentially finding the right thing.

It's what my colleagues and I when we had a consulting company, it's what we called "Methodological Shopping." I like that term because it's about trying to find the right

method for the right problem you're addressing.

Joe: One of the things that the canvas provides, is it gets us away from that linear thought. That's what a lot of problem solving is, but it's different than that. It's more of an iterative type of problem solving where we're looking more in circular understanding. Do you believe that value canvas promotes that?

Alex: Absolutely. I think the biggest problem is thinking, in terms of problems, is saying, "This is a problem, we're trying to find the solution." It sounds like an equation. When we're talking about social systems and we're talking about organizations and we're talking about business, there is no solution to a specific problem. That's why I have a little bit of an issue with this idea of Problem Solution Fit. No. In social systems you have a specific context with specific variables. You're going to try to design something that makes sense for that. So let's say you have a customer with a specific job he wants to get done. There are probably 10, 20, 100 ways of getting that job done.

What you want to figure out is, what's the best way? If you're a business, what's the best and most profitable way to do that? So it's not about finding a solution, it's about finding a good design. And that's something that designers are good at. They have techniques to do that.





If you're an engineer, you have the problem solution approach. You'll try to find in a linear way, the solution to your problem. You'll look at it as an equation, and you'll use different methods. So I think the methods that we really want to look at are those by designers who look at 10, 20, 30 different alternatives and try to find the best design for a specific context.

Now if you take the Customer-Value Canvas, the context is you have a customer and he's trying to get a job done. Some jobs can't be done yet because no business has found a way to profitably get that job done for the customer.

But if you have a Customer-Value Canvas, you can start mapping out possible value propositions to get a job done. And then you'll use the Business Model Canvas to try to find profitable ways to make that value proposition possible.

It really comes back to designing a story that allows you to create, deliver, and capture value in different ways. That's about iterative design if we take the Lean start-up customer developer words but pivoting until you find the right business model.

It's something that Steve Blank, author of "Four Steps to the Epiphany" calls the search for the right business model. It's the same four value propositions, the search for a good value proposition. It's not about finding a solution. It's about finding one that makes sense. It's about finding the right business model that allows you to actually offer that.

I absolutely agree with you that it's about iterations, about pivoting. I don't agree with the statement of calling it a problem and finding the solution. That gives you more of the linear engineering feel. I think we need to work more like designers rather than engineers.





Joe: Lean has always been about problem solving and been on the supply side of the equation When you go to the demand side of the equation, I think if you start looking at Lean as far as creating value and more of an appreciative inquiry type situation where you just mentioned it and said "Lean tries to find possible solutions over on that supply side." On the demand side, appreciative inquiry tries to share value through dialog. I think that's what you're saying there, in summary, is that you're really looking at trying to share a value with the customer through the dialog. The canvas is a tool to use to get there.

Alex: Right. It's a search process to find a profitable way to get a customer job done.

Joe: The Customer-Value Canvas is pretty recent. You just started using that this year?

Alex: Well, I just wrote a blog post about it last week. So it's more than recent. It's something that started out with the idea... I was talking to Mark Johnson, the author of a great business model book called "Seizing the White Space." He's the co-founder of a consulting company called "Innosight" that he co-founded with Clayton Christensen. They use a concept a lot called "Jobs To Be Done." They really brought this concept to another level. The idea that came up during that conversation was, "Could we make a visual canvas for jobs to be done just like there is a visual canvas for business models?" which is the Business Model Canvas.

I started thinking about that a little bit, and I tried out certain things in my workshops and with students. I had a lot of conversations about what would be a good design for such a canvas with my co-author of Business Model Generation, Yves Pigneur. And then it resulted in a blog post just a week ago.





So it is very new. I call it a "Prototype Version 0.8" because it might not be finished. We're going to test it a bit more. We're going to talk to a lot of people. I want to test this also with Steve Blank who I enjoy working with a lot just to figure out "is this the right canvas for this specific situation?"

We want to design value propositions for customer jobs to be done. The Customer-Value Canvas is a mix of several different methods. It started out with the idea of making a jobs canvas and ended up being something that's a bit of a mash-up between different approaches.

Joe: I really enjoy the blog post and pictures of course that are on Flicker. If someone is trying to learn more about implementing Business Model Generation, where do they go past the book? Are there workshops available in the states? I know you're putting them on, of course, all over the place. But you're just one guy. You can only be so many places. Where do I dig deeper?

Alex: Yeah, so what we really want is that the method spreads more. We do our own workshops, and you can find them on Businessmodelgeneration.com. But, as you said, we're one small group. I'm not focusing on doing more workshops and more consulting. I enjoy doing some workshops and some talks, but I'm building a software company that builds tools to support this process. We really want the method to spread more so we can

help people with the software that we're developing.

What's happening is that a lot of consulting boutiques are opening up that focus on business models and business model design. Some of those people have been in my workshops, and they go out and do it themselves.





The best way to find workshops on this topic is if you go to businessmodelhub.com where we actually wrote the book in a co-creation fashion. We opened up the hub afterwards, and you have all the people who are interested in business models, some of them consultants who can teach this stuff, where you can find a community of business small practitioners.

That's probably the best place to find others who do similar workshops to myself. In the future we want to structure this a bit more and train people, train the trainer concept so people will use the method in the best way possible.

The canvas is a simple tool, but there are several ways of using it, and you can use them in more sophisticated ways and in less sophisticated ways. If you really want to get the maximum out of it, I think there are a couple of things to follow. Not all of the people who use the canvas realize that.

Joe: I think there's a lot of depth behind the canvas, and that's why I was asking that question. If you go back to how you designed the book itself and the people who participated in it, you built a community within structuring a book.

Alex: We had the idea of co-creating the book with people who were already using the method. I put my PhD dissertation online, and that was about business models. It was the basis for the canvas, practically the same model but described in a more academic way. So people were using it, and we thought, "Hey, let's get practitioners involved. Let's get them to give us feedback on every piece of content that we would write." So we would put book chunks out there on our platform. People are actually paid to join, and they would comment on every book chunk.





They would say, "Hey this is good." They would say, "This is bad." They would say, "This is my experience in doing this in a large company. This is my experience in doing it in a not for profit." We could then figure out if our content was good enough. Fair enough, people would push back if they wouldn't agree.

We really stress tested the whole book before putting it out on the market. That was a lot of fun, but as an author it makes you pretty vulnerable. At the end of the day it gives you a better product, so it was really worth it. I enjoyed the interaction with the 470 people a lot. I think all of those 470 people are proud to have their name in the book, to have been part of this.

Joe: I think you did an outstanding job. If you go to the hub, what site was that again? Thebusinessmodelhub.com?

Alex: Exactly. Yeah, it's a bit of a wild community at the moment. We might structure it a little bit more, but I think that's the main place where business model innovators come together. That's the place to learn about business model innovation.

Joe: You're coming out with an iPad, or you have come out with an iPad version of the canvas?

Alex: Yes, so we created an iPad App to help people design business models and also to

do some sanity checks. I think computer assisted design is very powerful. You can do a lot of great stuff with paper and post-it notes, but there are some things that are harder to do. One would just be working in a collaborative manner. When you have people in





Singapore and London and they want to work together, paper and post-in notes is probably not the easiest way forward. You have to send people traveling around the world.

There are also things that are just hard to do with paper and post-it notes. That's throwing in ballpark figures, doing a financial sanity test of your business model in five minutes

rather than trying to put together a spread sheet which is not complicated but time consuming, even for the simplest business model.

We created an iPad App that allows you really to get the best of a napkin sketch and of a spreadsheet in one, where you could rapidly sketch out business models and put in some ballpark figures and figure out "Could this be a profitable idea?" That was the goal of the iPad App, and that's out at the App store. It's called "Business Model Tool Box." You can find it on the App store.

What we're launching very soon is a web App that would start from the same starting point, allow you to create and quickly sketch out business models, and on the web App, we will even push the collaborative aspect more to get teams to be able to sketch out business models together.

Again, this is not about replacing the paper world. I think there are great things that you can do with post-it notes and paper, but there are some things you can't do. We're going to launch the web App pretty soon on a website called "Strategizer."

We hope to really support this process even more so more people around the world try to find new ways to create, deliver, and capture value. It would really be great to see this spread even more.





Joe: I think it's a great concept. We jump on our desktop and share our desktop so quickly now with people we're working with. To have a point like that to be able to pull that up and strategize and move stuff around, it's hard to duplicate pen and paper sometimes but most of us live in a virtual world.

Alex: I think that the goal is to combine the best of all worlds where you get the best of the paper based world and pens and post-it notes and where you get the best of computer assisted design. Our goal is really to use every medium in the best way. I don't think we want to replace paper, but we want to boost paper. We want to give it even more power, and that's with computer aided design.

Joe: Is there something you'd like to mention that maybe I didn't ask?

Alex: No, I think that was a great interview. This was a lot of fun. There was one thing that I was a bit afraid about when I launched the idea of the Customer-Value Canvas. It's about value propositions, and it's about customers. My fear is a little bit that people forget the business model. The real value comes when you focus on both, product services and customer jobs and powerful business models. It's never the powerful product alone anymore that gives you a competitive advantage.

That gives you maybe a short term competitive advantage, but the most powerful business models are those that combine great products and a great business model. I think you really need to focus on both and not fall into the product trap where you really just go for it and try to design the best product possible.





I think that's a limitation. I think you need it, but I think great products and amazing new technologies are becoming a commodity. What you really want to do is you want to go beyond that. You want to combine great products or great value propositions with a great business model. That's ultimately the trophy that we're looking for.

Joe: Well, I'd like to thank you very much for the time and the opportunity to do this. It was a pleasure for me. Again, thank you very much, Alex. This podcast will be available on the Business901 site on iTunes store and also the Business901 blog site. So thanks again.

Alex: Joe, It was my pleasure. It was fun.





Joseph T. Dager

Implementer of Lean Marketing Systems

Ph: 260-438-0411 Fax: 260-818-2022

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What others say: In the past 20 years, Joe and I have collaborated on many difficult issues. Joe's ability to combine his expertise with "out of the box"

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Joe Dager is President of Business901, a progressive company providing direction in areas such as Lean Marketing, Product Marketing, Product Launches and Re-Launches. As a Lean Six Sigma Black

Belt, Business901 provides and implements marketing, project and performance planning methodologies in small businesses. The simplicity of a single flexible model will create clarity for your staff and as a result

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What's New in Business Model Generation?

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