Business Model Generation
The canvas: the common vocabulary for describing any business model.
Summary
Osterwalder and Pigneur, with contributions from a large group of practitioners, produced a visual handbook built around the Business Model Canvas, a nine-block template for describing how an organisation creates, delivers and captures value.
The nine blocks are customer segments, value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partnerships and cost structure. The right side covers value and the customer, the left side covers infrastructure and cost, and the two meet at the value proposition. The point of the template is that it makes a business model explicit and comparable, so that a team can discuss it, alter one element and see the consequences elsewhere, and compare alternatives.
The book then covers five business model patterns: unbundling the three types of business inside most firms, the long tail, multi-sided platforms, free and freemium models, and open business models. It also covers design techniques including customer insight, ideation, visual thinking, prototyping, scenarios and storytelling, and connects the canvas to strategy through environment scanning, blue ocean analysis and portfolio management.
The book's design is unusual, with heavy use of visuals and layout, which is deliberate and which some readers find effective and others distracting.
The canvas has become standard in startup and corporate innovation practice. Its limitation is that it describes a business model without testing whether it works, which is why it is usually paired with a validation method. It is a communication and structuring tool rather than an analytical one.
Key takeaways 7
- A business model can be described completely in nine blocks covering customers, value, channels, relationships, revenue, resources, activities, partners and costs.
- Making a business model explicit lets a team change one element and trace the consequences through the others, which conversation alone does not achieve.
- Most firms contain three distinct businesses with incompatible economics, being customer relationship, product innovation and infrastructure, and unbundling them improves all three.
- Multi-sided platform models require pricing decisions across sides that make no sense within any single side's economics.
- Free and freemium models are business models rather than pricing tactics, since they determine the resources, activities and cost structure required.
- Prototyping business models, meaning building several alternatives and comparing them, produces better results than refining a single one.
- The canvas describes a business model without testing whether it works, so it must be paired with a validation method.
Who should read it
Founders and corporate teams who need a shared structure for describing, comparing and altering business models.
Where it sits in the reference 2
Who recommended it 1
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