Rather than writing a conventional book about business model innovation, we’ve tried to design a practical guide for visionaries, game changers, and challengers eager to design or re-invent business models. We’ve also worked hard to create a beautiful book …
Osterwalder & Pigneur, 2010: 15
What’s it all about?
Business Model Generation[1] is an approach that has been widely adopted across a range of sectors. The intention of the approach is to help businesses create value and replace outmoded models of working. It is based on the belief that all business models can be described through nine building blocks, which show how a business either makes money or delivers its mission and generates income. The nine blocks have arisen out of the four basic areas of a business: customers, offer, infrastructure and financial viability.
What’s it for?
The purpose of the model is to create a shared language for describing, visualising, assessing and changing business models. It is intended to be a practical guide, which will give you a deep insight into your business model and a shared understanding of the value your business creates. The building blocks proposed by the Business Model Generation approach are:
- Customer segments: a breakdown of the customers being served
- Channels: how your offer is delivered
- Customer relationships: how relationships are established and maintained
- Key resources: the assets needed to develop and offer the value proposition
- Key activities: performing what is needed to deliver
- Key partnerships: those people and businesses you work with outside of your business
- Value or offer propositions: which seek to solve customer problems and satisfy customer needs or wants
- Revenue streams: where the money comes from
- Cost structure: the costs that result from your business activities
Using the tool
The tool uses the business model canvas to encourage you to take an overview of your business model (you can either download a copy or create a large canvas with flip chart paper). Use the prompt questions included in this tool to look at the nine building blocks of your business. This is an activity that you could do relatively quickly but you may then want to do further research to really get the detail you need. You can do it on your own if you are a sole trader (or with some of your peers and partners) or you can do it with your team if you have one.
[1] Business Model Generation is included in the toolkit with the kind permission of Alexander Osterwalder and under Creative Commons Licence.