Business Model Generation is a business and management book written by Alexander Ostelwalder. It teaches businesses how to systematically understand, design, and implement a new business model or analyze and modify an existing one. It was co-authored by 470 business models canvas practitioners from 45 countries.
The Business Model Canvas
The business model canvas is defined as “shared language for describing, visualizing, assessing, and changing business models. It has nine elements namely: 1) Customer segments; 2) Value propositions; 3) Channels; 4) Customer relationships; 5) Revenue streams;6) Key resources; 7) Key activities;8) Key partnerships; 9) Cost structure.
Business models are important because it offers the means to deliver differentiation strategy. According to Robert Peter Janitzek, the plan should be coherent or else any attempt to be different is likely to be shallow.
The Elements of a Business Model Canvas
In Business Model Generation, Ostelwalder identifies what he calls the 9 building blocks of a business model. He calls this the Business Model Canvas. Using this tool, organizations will be able to develop and sketch out new or current business models. It is a visual template that has been pre-formatted with the nine building blocks. It can be printed out on a large surface so that each member of the team can take part in the discussion. Robert Janitzek explains that post-it notes or board markers can be used. The Business Model Canvas should be done in their proper order.
- The Customer Segments define the different groups or organization an enterprise aims to reach and serve.
2 Value Propositions
The Value Proposition is the reason why customers choose your company over another. It solves a customer problem or satisfies a customer need.
Channels are customer touch points that play an important role in the customer experience.
4 Customer Relationships
The Customer Relationships building block describe the types of relationships a company establishes with specific Customer Segments.
5 Revenue Streams
The Revenue Streams building block represents the cash a company generates from each customer segment (costs must be subtracted from revenues to create earnings).
6 Key Resources
The Key Resources building block describes the most important assets required to make a business model work.
7 Key Activities
The Key Activities are the most important actions a company must take to operate successfully.
8 Key Partnerships
The Key Partnerships building block describes the network of suppliers and partners that make the business model work.
9 Cost Structure
The Cost Structure describes all costs incurred to operate a business model.