Business model canvas notes

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A 5 page background for the Business Model Canvas framework

Business model canvas notes

  1. 1. Business Model Canvas Notes by Alexander Osterwalder - Available at Amazon Definition - A business model describes the rationale of how an organization creates, delivers, and captures valueOverviewThe book has 5 major chapters – Canvas, Patterns, Design, Strategy, and ProcessEach section within a chapter has some brief notes to provide an overviewCanvasTwo views of the canvas – The top is a typical example, the bottom a framework explanationIt is helpful to view from right to left - start with the customer and move backwards throughout the company
  2. 2. Customer Segments - for whom are we creating values?E.g. mass market, niche market, segmented, diversified, multi-sided platformsChannels - How do we deliver our value?5 phases of channels: 1) Awareness 2) Evaluation 3) Purchase 4) Delivery 5) After SalesCustomer Relationships - Types of relationships a company establishes within segmentsSelf-Service, Personal Assitance, co-creation, communities, automated servicesValue Proposition - what value do we deliver to the customer segment?Newness, performance, customization, getting the job done, design, brand/status, price, costreduction, risk reduction, accessibility, convenience, usabilityRevenue Streams - $ a company generates from each customer segmentSubscription, sale, Leasing, usage fee, advertising,Key Resources -what an organization needsPhysical, Intellectual, Human, FinancialKey Activities - what an organization doesProduction, Problem Solving, Platform/NetworkKey Partnerships - Network of suppliers and partnersOptimization and economy of scale, reduction of risk and uncertainty, Acquisition of particularresources and activitiesCost Structure - all costs incurredFixed, Variable, value driven, cost driven, Example: Apple iTunes
  3. 3. PatternsUnbundling Business ModelsThere are three core business types or "canvases" that can be examined separately orin correlation with one another: 1. Product Innovation - develop new and attractive products 2. Customer Relationship Management - finding and acquiring customers and building relationships with them 3. Infrastructure Management - build and manage platforms for high volume, repetitive tasksSeparate these businesses and focus on only one of the three internally (Mobile Telco, privatebanking industry).The Long TailSelling lose more: offer a large number of niche products (Netflix, eBay, YouTube, Facebook)Multi-Sided PlatformsTwo or more distinct but interdepent groups of customers (Google, ebay, Microsoft)Free as a Business ModelAdvertising - Free offer based on multi-sided platform (Google)Freemium - Free basic services with optional premium services (Flickr, Evernote, Spotify)Bait and Hook - inexpensive initial offer lures customers into repeat purchases (Gillete, Free Mobile Phones)Open Business ModelCreate value by collaborating with outside partners (P&G, GlaxoSmithKilne)DesignCustomer InsightsInclude the way you View your business model through the customers eyeDevelop a deep understanding of customers rather than just asking them what they want "If I had asked my customers what they wanted, they would have told me a faster horse" - FordKnow which customers to listen to and which to ignore.IdeationThe creative process needed to design a number of new and innovative business model.Business Model Innovation is about challenging orthodoxies to design original models that meet unsatisfied, new or hidden customer needs2 Phases: Idea Generation - Quantity Matters Synthesis - ideas are discussed, combined, and narrowed down to a small number of viable optionsEpicenters of Business Model Innovation Resource Driven - Existing infrastructure - Amazon Web Services Offer Driven - Create New Value - Netflix
  4. 4. Customer Driven - Customer needs, access, or convenience 23andMe brought personalized DNA testing to individuals rather than just professionals/researchers Finance Driven - Revenue Streams, pricing mechanisms, or reduced costs - Xerox and leasing copiers MultiEpicenter Driven - Hilti moved from selling tools outright toward renting sets of tools to customersWhat If questions are starting points?Process: Team Composition - Diverse enough to generate fresh business model ideas? Immersion - General research, studying customers/prospects, assessing existing business models Expanding - What innovations can we imagine Criteria Selection - What are the most important criteria for prioritizing our business model ideas? Prototyping - What does the complete business model for each idea look like? 3-5 Business Model InnovationsVisual thinkingVisual Techniques (such as sketches, diagrams, post it notes to construct and discuss meaning) give life to a business model and facilitate co-creationDiagrams and charts clarify messages within reports and plansPost-its: People Frequently do not immediately agree on which elements should appear in a Business Model Canvas or where they should be placed - Post-its allow for easy exploratory discussion 1) Use Thick Pens 2) Only one element per note 3) Only a few words per note - capture the essentialDrawings - even simple stick sketches can better convey emotions and deliver longer lasting impressionsPrototypingThinking tool that helps us explore different directions in which we could take our business modelPrototypes represent potential future business models. Can be a sketch, Canvas, or spreadsheet"New Thinking" There are multiple business models in and across industries Inside-out: business models transform industries Opportunistic thinking Exploratory search for business models Design focused Value and efficiency focusedStorytellingStorytelling helps you effectively communicate a new business model. Good stories engage listeners.Reasons to do so: Introducing the new - makes story tangible
  5. 5. Clarification - illustrates how your business model solves a customer problem in a clear way. Gives you buy-in Engaging People - People are moved more by stories than by logicKeep the story simple. Use either the customer perspective or the company perspective.Stories can justify changes and challenges to the status quoScenariosScenarios render the abstract tangible. Their primary function is to inform the business model development process by making the design context specific and detailed2 types of scenarios: 1. Customer settings (how product/servicdes are used, what kinds of customers use them, objectives etc) 2. Future environments in which a business model might compete - image possible futures in concrete detail.StrategyBusiness Model EnvironmentMapping four main areas of your environment: 1. Market Forces - market segments, needs and demands, market issues, switching costs, revenue attractiveness 2. Industry Forces - Supplies and other value chain actors, stakeholders, competitors, new entrants, substitutes 3. Key Trends - Technology Trends, Regulatory Trends, Societal and Cultural trends, Socioeconomic Trends 4. Macroeconomic Forces - Global Market Conditions, Capital Markets, Commodities, Economic infrastructureEvaluating Business ModelsUse SWOT in conjunction with CanvasBusiness Model Perspective on Blue Ocean StrategyManaging Multiple Business ModelsProcessMobilize - prepare for a successful business model design projectUnderstand - research and analyze elements needed for the business model design effortDesign - Generate and test viable business model options, and select the bestImplement - Implement the business model prototype in the fieldManage - Adapt and modify the business model in response to market reaction

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