Business Model Generation - Alexander Osterwalder, Yves Pigneur

Business Model Generation - Alexander Osterwalder, Yves Pigneur

Learn everything you need to know about the most revolutionary and innovative business models on the market today.

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Alexander Osterwalder and Yves Pigneur show in the book “Business Model Generation” that nowadays, in order to reach their goals and overcome challenges, industries need solid models in an efficient and dynamic way!

To improve existing processes and also develop and apply new ideas, aimed at the success of a business and the adequacy of its products or services to customers, is nothing better than an optimized business model, isn’t it?

An effective business model is vital!

It allows you to: identify who your customers are; what is your market; which companies can cooperate with your enterprise; total associated costs; from where his capital will come; and, above all, how to add value to your customers!

So, come with us in this PocketBook and let’s see what they have prepared for us.

About the book “Business Model Generation”

Written by Alexander Osterwalder and Yves Pigneur, the work has an incredible joint effort of co-authors, with 470 employees from more than 45 different countries.

The authors 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.

Who are the authors Alexander Osterwalder and Yves Pigneur?

Alexander Osterwalder is author, speaker and business model consultant. He is also the co-founder of Strategyzer, a service software platform specialized in the Canvas model.

Yves Pigneur is graduated in computer science and he is professor of information systems management at the University of Lausanne, Switzerland.He is considered a great mentor when it comes to business strategies.

Both were co-authors in the books: “Value Proposition Design: How to Build Value Proposition” and “Business Model You: The Personal Business Model”.

To whom is this book indicated?

“Business Model Generation” is recommended for all entrepreneurs, businessmen and marketing professionals 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.

Main teachings of the book “Business Model Generation”

  • The nine main elements of a business model Canvas;
  • Know what the business model standards are;
  • The Canvas to create and reinvent companies, strengthening and improving their performance;
  • The patterns of business models are: Disaggregated Business Models, The Long Tail, Free Model and Open Models;
  • More important than having a business model is to review and remodel it frequently.

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[Book Summary] Business Model Generation - Alexander Osterwalder, Yves Pigneur

How to make the plan for the companies of the future?

According to the authors Alexander Osterwalder and Yves Pigneur, the new technologies and their fast 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 app.

Definition of Business Model

According to the book: "Business Model Generation”, business models are a good way to create or improve the products or services of an enterprise, strategically defining the key elements involved in aggregating value for specific customer service.

Building a Business Model

The strategic planning of an innovative business model is a very complicated process and Alexander and Yves describe it as resembling 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 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 Alexander Osterwalder and Yves Pigneur, it is possible to raise the logics that the companies intend to use to make money.

What are the nine development 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!

1. 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.

This way, you must identify 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.

2. Customer Relationships

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

  • 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 range 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.

3. Value Proposition

Also called the 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!

4. 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.

5. Cost Structure

Covers all costs the company has related to key activities and resources, 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.

6. Key Partners

“Business Model Generation” 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.

7. 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.

8. 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 and intellectual. An example of a physical resource may be raw materials or production equipment, such as Lathes and Millers.

9. 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 running.

An example of key activity may be the use of knowledge management or consulting services for troubleshooting.

What are the main Standard Business?

Business models have a tendency to follow certain patterns or similarities, as Alexander Osterwalder and Yves Pigneurin their book “Business Model Generation” point out. They highlight in the book some types, such as Disaggregated Business Models, Long Tail, Free Model and Open Models.

Disaggregated Business Models

This type of model presents three basic types of business: Product Innovation; Customer Relationship Management and Infrastructure Management. Because of their different economic, cultural and competitive aspects, they are separated or disaggregated.

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 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 offering basic and incomplete services in which users must pay for the full version.

Open Business Models

According to Alexander Osterwalder and Yves Pigneur, 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.

“Business Model Generation” 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.

Why Review and Remodel 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.

Alexander Osterwalder and Yves Pigneur recommend in “Business Model Generation” to use 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.

Other books on business model improvements

Chris Anderson explores the Free Model completely in his book “The Long Tail”, because for him “free” is an important marketing strategy and also a great business model for generating profits.

In “The Goal”, Eliyahu M. Goldratt and Jeff Cox use a fictional story of a manager who has a challenge to make his factory more productive. For this, the story of this protagonist will give you lessons on productivity, building a process of continuous improvement.

In the work “The 7 Pillars of Successful Sales”, Rejiano Vedovatto and César Frazão make it clear that a successful salesperson not only knows that the customer buys a product, but also what value that product adds to the customer. And yet, the concept of value can be perfectly explained with the presentation of the product's characteristics, benefits and advantages.

Right, but how to apply the ideal business models?

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.

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