How To Generate A Business Model From Alexander Ostelwalder

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.

    1 Customer Segments

    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.

    3 Channels

    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.

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