Business Model Generation

Year of publication: 2010

Author: Alexander Osterwalder and Yves Pigneur
278 pages
Link for purchase: https://amzn.to/2J4N0Wn

Originally distributed under the name of Business Model Generation,

the work has an incredible joint effort of co-authors, with 470
employees from more than 45 different countries.
Osterwalder and Pigneur brought together and modeled the various
ideas and concepts for creating this flexible and easy-to-understand
guide to creating innovative business models!
This book has a lively and colorful format, full of figures, drawings,
graphs and pictures that help you better understand its content full of
deeply researched information, based on real experiences.

Main ideias of the book

Score
● The nine main elements of a business model Canvas;

9
● Know what the business model standards are;
9 Aplicability
● The Canvas to create and reinvent companies,
7 Inspiration
strengthening and improving their performance;
7 Innovation
9 Impact on results
9 Structure

For whom is this book suitable?

This book is recommended for all entrepreneurs, business man and marketers looking for an introduction to
effective business models.
In addition, the book can be enjoyed by readers, regardless of profession, who seek and want to better
understand the key elements of business and market.

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 Overview of the book

Make the plan for the companies of the future

According to the authors, the new technologies and their rapid

implementation in organizations allow the emergence of the most
diverse business models that are drastically changing the routine of
industries and, consequently, of commerce.
A well-known example is Apple with iTunes. The company was able
to revolutionize the music industry with its innovative application.

Definition of Business Model Companies should focus on

According to the book: "A business model describes the logic of one of three value
creating, delivering, and capturing value by an organization". disciplines: operational
In this way, business models are a good way to create or improve the excellence, product
products or services of an enterprise, strategically defining the key
elements involved in aggregating value for specific customer service. leadership, or customer
intimacy

Building a Business Model

The strategic planning of an innovative business model is a very complicated process and, as Alexander and Yves
describe it, can resemble structuring "chaos", requiring a good deal of creativity.
The Canvas business model is an excellent framework to aid brainstorming, instigating critical thinking,
inventiveness, and the ingenuity of the employees involved, overcoming the previous difficulty.
The Canvas methodology is applied in several large companies. The book features three memorable examples: IBM,
Ericsson and Apple.

The Business Model Canvas

The Canvas template is a flexible and dynamic framework that presents itself as a great way to describe the nine
essential components of a business model in graphic form.
Unlike the linear model, the Canvas frame is usually made on a sheet of paper that is divided into nine subframes or
blocks, each representing the components of the business model.
In this way, it is possible to identify in a quick and quite visual way the main points of an enterprise, the complex
relation between them and, according to the authors, it is possible to raise the logics that the companies intend to
use to make money.

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 The participants of the methodology describe, in Post-its, their proposals and ideas in the format of short texts
related to each of the blocks.
Thus, it is possible to raise the primary elements for the business plan in a systematic and simplified way. There is
no set order to start filling of the frame, that is, it can be started by any segment of the frame.
The advantage of using the Post-its is its easy handling. Since Canvas is a dynamic framework, each of the
individual ideas can impact the process as a whole, so they can be constantly altered.

Changing aspects of the model in development is also facilitated due to the visual characteristic of Canvas and its
separation by blocks. However, the method encourages thinking in the organization as a whole and not in a
timely manner.

The nine building blocks

The key elements of a business model provide a quick way to share and describe how a company works for all
employees.
These elements are arranged in nine blocks, covering: customers, offers, infrastructure and financial viability in an
innovative way; check out the next sections!

Customer Segments

The mass market and the niche market present a very different approach. While the mass market works with
general products called head tail, segmented markets (niche) focus on variety or long tail.
The authors portray that to work with Canvas you must select the types of clients that will be targets of your
business model and whom your company wants to serve. Generally, some companies select more than one base
or group of customers.
As a general way to choose your share of customers from the market, you must identify to what types of people
your company generates the most value and together which are your most important customers - that justify the
existence of your company.

Customer Relationships

The authors point out that a company establishes ways of relating to the markets of distinct segments in three
different ways:

Warm-Up: The Silly Cow Exercise To get your team’s creative

juices flowing, it can be helpful to start an ideation session with
a warm-up such as the Silly Cow exercise

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 ● Personal Assistance: human interaction between clients and consumers;
● Self-service System: you give your client the ability to serve himself with his own effort.
● Automated Systems: the customer does not spend any energy, just wait while the product reaches him.

The type of relationship your company will choose depends on the branch of operation. But keep in mind that
this impacts directly on the user experience, whether it is positive or negative, so the decision to relate is
extremely important.

Value Proposition

Also called Bundle of Benefits, the value proposition, or added value of the product or service is precisely what
makes customers prefer to do business with you rather than with your competitor.
Pigneur and Osterwalder point out that for this it is very important that you be able to satisfy the needs of your
customers!
The generation of value happens through new products with differential points and innovative features.
Improving product performance is also a great way to do it.

Channels

The channels of a company are its portal of communication and interaction with customers. It is through them
that the enterprise can achieve the desired market share, and show the value of its goods to consumers.
Seek to select the best ways to connect, distribute and sell your products and services. Nowadays, the internet
is the main communication channel.
However, the book also provides information on retail and wholesale stores: they enable, in addition to the
display of products to customers, testing, evaluation and even direct purchase.

Cost Structure

Covers all costs the company has related to key activities and resources (which will be described in the next
sessions), used to keep the business model running.
Companies can be classified for their costs in two different ways:

● Cost-Oriented: Optimization and cost reduction;

● Value Oriented: Focuses on the value added to the product (cost in the background);

Regardless of your business rating, the authors recommend that you offer discounts and promotions to attract
customers, offsetting the cost with profit.

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 Key Partners

The book highlights that strategically joining with other companies can help you expand and protect your market
share, since there is a high competitiveness in the contemporary market.
In this way, it is possible, through the tactics of partnership and alliance with market rivals, or "coopetition"
(cooperation + competition), reduce risks and reduce costs through outsourcing, for example.

Revenue Streams

Revenue streams are the so-called arteries of a model, or, more intuitively, all money generated. Cash flow
generated from product sales to segmented customers or periodic payments such as licenses and signatures are
examples.
Each type of revenue source requires different pricing mechanisms; according to the authors, they can be fixed
price or dynamic price (negotiable or variable). The price of hotels, for example, may vary depending on the time
of the year.

Key resources

Key resources are one of the most important factors for a company because, according to Alexander and Yves, it is
through them that the organization manages to keep its business plan in place.
They can be of several types: physical, financial, intellectual, depending on the area of activity of your company.
An example of a physical resource may be raw materials or production equipment, such as Lathes and Millers.

Key activities

Key activities comprise all necessary and routine actions, fundamental for engaging clients and generating profits;
as well as key resources, they help keep your business plan operating.
An example of key activity may be the use of knowledge management or consulting services for troubleshooting.

There’s not a single business model . . . There are really a lot of

opportunities and a lot of options and we just have to discover
all of them.” Tim O’Reilly, CEO, O’Reilly

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 Standard Business

Business models have a tendency to follow certain patterns or

similarities, as Alexander and Pigneur point out. They highlight in the
book some types, such as Disaggregated Business Models, Long Tail,
Free Model and Open Models.

Disaggregated Business Models

A level 5 leader is an
This type of model presents three basic types of business: Product
Innovation; Customer Relationship Management and Infrastructure individual who combines
Management. But because of their different economic, cultural and extreme personal humility
competitive aspects, they are separated or disaggregated.
with an intense
In this way there is no intersection or junction of each one of the
businesses, that is, there is no common relation between the three professional will
elements. An example presented in the book is that of a private bank,
which can directly serve key customers and outsource other services.

The Long Tail Business Model

The Long Tail concentrates on the sale of a wide variety of custom and small niche products to the various
segmented markets.
Alexander and Yves explain that this type of sale can be as lucrative as the traditional, mass-market model that has
unique products of little variety. The authors also highlight the low cost of stocks of the Long Tail.

The Free Model

Free business model generally revolve around offering products or services for free to certain types of customers
targeting others.
The authors highlight a specific variation of this model called the "freemium" system. It basically consists of the
provision of basic and incomplete services in which users must pay for the full version.

Open Business Models

According to Alexander and Yves, in this type of model a company aims to collaborate with another external
organization in order to add value to its business and also increase its productivity.
The book is an example of the P & G conglomerate that has increased the internal productivity of its research by
collaborating with universities and other companies in their research.

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 Reviewing and Remodeling Business Models

A company needs to make a diagnosis on a regular basis, seeking to assess the feasibility of its used business
model and its suitability for future use.
The book recommends using SWOT analysis to check the condition of Strengths, Weaknesses, Opportunities, and
Threats of your company with respect to each of the nine business elements.
This analysis makes it possible to raise the current condition of the current business model, reflecting its strengths
and weaknesses. In addition, it allows predicting possible future changes through achievable opportunities along
with associated threat escalation.

Importance of Change

The authors reveal that it is not good practice to stick to business models, because with constant evolution
combined with time, eventually they will become obsolete, requiring changes, search for improvements or even
new models.

A verdadeira pergunta não é: qual é o papel da tecnologia? Em

vez disso, a grande dúvida é: de que forma as empresas que
trilharam o caminho da excelência pensam diferente sobre
tecnologia?

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 Okay, but how can I apply this in my life?

The book presents us with ways to guide our business through simple models, raising the nine main and vital
aspects for its construction, each one with its particularity and importance.
The book also brings the whole step by step to apply the Canvas methodology, not exhausting the subject, but
rather seeking to instil readers into an innovative, creative capacity, aiming at continuous improvement.

If you liked this book, visit our complete collection with hundreds of Pocketbooks
of the greatest successes in the areas of management, marketing and sales,
leadership, strategy, personal development and entrepreneurship!

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