"Business Model Generation" is a book by Alexander Osterwalder and Yves Pigneur which introduces the Business Model Canvas, a visual tool for creating and analysing business models.
The book is divided into five parts:
- Canvas: section introduces the Business Model Canvas and explains how to use it to design, test, and iterate on business models.
- Patterns: section describes business models with similar characteristics, similar arrangements of business model building blocks or similar behaviours. Theses similarities are referred to as Business model patterns.
- Design: section delves into various design techniques which one can use to better create a value added business model
- Strategy: section deals with reinterpreting business strategy through the lens of the business model canvas, it helps constructively question established business practices while examining the environment in search of new opportunities.
- Processes: section proposes a generic business model design process, which is adaptable to to an organisations specific needs.
Overall, "Business Model Generation" is a practical guide for entrepreneurs, innovators, and business leaders who want to design and optimise their business models to create value for customers and achieve sustainable growth.
Design
The design section of the book focuses is on the practical aspects of designing and implementing effective business models. It provides a number of techniques and tools to help design better and more innovative business models
Customer Insights
The Customer Insights section emphasizes the importance of understanding your target customer segments in order to create a business model that addresses their specific needs and preferences. The section provides guidance on how to gather and analyze customer insights, and how to use this information to refine your business model.
Some key steps in the Customer Insights section include:
- Identifying your target customer segments: This involves defining the specific groups of customers that your business is targeting, based on factors such as demographics, behaviors, needs, and preferences.
- Gathering customer data: This can be done through various methods, including surveys, focus groups, interviews, observation, and social media monitoring. The goal is to gather information about customer needs, pain points, preferences, and behaviors.
- Analyzing customer data: Once you have gathered customer data, the next step is to analyze it to identify key insights and patterns. This can involve categorizing data, creating customer personas, and identifying common themes and trends.
Using customer insights to refine your business model: Based on your customer insights, you can make adjustments to your value proposition, channels, customer relationships, revenue streams, and other aspects of your business model to better meet the needs and preferences of your target customers.
Overall, the Customer Insights section of the "Design" chapter emphasizes the importance of gathering and analyzing customer insights in order to create a business model that is well-aligned with your target customer segments. By understanding your customers' needs and preferences, you can create a more compelling value proposition, more effective distribution channels, and more valuable customer relationships, ultimately leading to greater success and profitability for your business.
Talking about customer insights is one thing but actually mapping them is a different story
A common technique to gain customer insights is an empathy map, which is a tool used in design thinking as well as OCM to help understand the needs, desires, and pain points of a particular user or customer group. It's a visual framework that helps teams gain a deeper understanding of their target audience's perspectives and experiences, which can then inform the development of more effective products, services, or communication strategies.
An empathy map typically consists of a simple diagram with four main quadrants and two sub suctions:
- See: This quadrant captures what the user sees or observes. This includes their physical surroundings, the people they interact with, and any other contextual information that may be relevant.
- Think and Feel: This quadrant captures what the user is thinking and feeling about their experiences. This includes their beliefs, attitudes, and emotions, as well as any biases or assumptions they may hold.
- Say and Do: This quadrant captures what the user says and does in response to their experiences. This includes their verbal and nonverbal communication, as well as any actions they take in response to different situations.
- Hear: This quadrant captures what the user hears from others, such as feedback, opinions, or advice.
- Pain: what are the users biggest frustrations, what obstacles stand between them and what they want or need to achieve, and finally which risks might she fear taking?
By filling in each quadrant of the empathy map with relevant information, design teams can gain a more holistic view of their target audience, and identify opportunities to improve their experiences and meet their needs more effectively.
Ideation
Ideation is the process of generating and refining ideas for new business models. It provides guidance on how to use creativity and innovation to develop unique and compelling business models that can drive growth and profitability.
Some key elements of the Ideation section include:
- Understanding the market and industry: This involves conducting research on market trends, customer needs, and industry dynamics to identify potential opportunities for innovation and disruption.
- Brainstorming and ideation: This involves generating a large number of ideas for new business models, without judgment or evaluation. The goal is to encourage creativity and generate a wide range of possibilities.
- Idea selection and evaluation: Once a large number of ideas have been generated, the next step is to evaluate them based on criteria such as feasibility, scalability, profitability, and alignment with the organization's mission and values.
- Prototyping and testing: This involves creating a prototype or minimum viable product (MVP) to test and validate the business model in the market. This can involve testing assumptions, gathering feedback, and refining the model based on customer insights.
Overall, the Ideation emphasizes the importance of creativity, innovation, and experimentation in developing new business models. By generating a wide range of ideas, evaluating them systematically, and testing and refining the most promising ones, organizations can create business models that are well-aligned with market needs and trends, and that have the potential to drive growth and profitability over the long term.
The process of ideation can be viewed as a process of both divergent and convergent thinking.
Divergent thinking is the process of generating a wide range of ideas or possibilities. In ideation, this phase involves using various techniques such as brainstorming or mind-mapping to explore as many potential ideas as possible. The goal is to generate a high quantity of ideas without evaluating them or worrying about their feasibility. This approach encourages creativity, curiosity, and openness to new perspectives and possibilities.
Convergent thinking, on the other hand, is the process of evaluating and selecting the most promising ideas. In ideation, this phase involves reviewing and analyzing the ideas generated in the divergent thinking phase to assess their feasibility, impact, and value. This approach encourages critical thinking, analysis, and synthesis to arrive at a workable solution or idea.
The ideation process typically involves alternating between these two modes of thinking, starting with divergent thinking to generate a large quantity of ideas, and then moving to convergent thinking to evaluate, select, and refine the most promising ideas. This iterative process allows teams to continually build on and refine their ideas until they arrive at a viable and effective solution.
Overall, the divergent and convergent thinking approaches used in ideation complement each other to create a well-rounded and robust ideation process.
In the context of business model design, the divergent process encompasses many different techniques to help us create new models which challenge the status quo and suspend concerns of operational challenges, the main focus is to dream during the divergent phase.
when rethinking business models we can focus on four primary sources of innovation, and of course there is always the exception:
Resource driven: innovations originate from an organisation's existing infrastructure or partnerships to expand or transform the business model.
Offer-driven: Innovations create new value propositions that affect other business model building blocks.
Customer-driven: innovations are based on customer needs, facilitated access or increased convenience. Like all innovations emerging from a single epicentre, they affect other business Model building blocks.
Finance-Driven: Innovations driven by new revenue streams, pricing mechanisms, or reduced cost structure that affect other business model building blocks.
The Ideation process:
Leveraging design thinking to solve a problem is best described as structured chaos, it is important to start from a seemingly chaotic place, cast a wide net and then wrangle the chaos to something cohesive. Design thinking can be thought of as a controlled brainstorming session:
In short:
- Team composition: Have a diverse team, different ages, genders, career levels, left and right brained people, the more opinions the better.
- Immersion: live and breath the model, do the research, speak with customers, try the product or service, feel what works and what doesn't, understand the pain and pleaser points, empathize with the customer segments.
- Diverge: iterate through each of the 9 business model building blocks, grow them, push them to their limits and beyond, go for quantity, do not limit yourself with feasibility.
- Converage: go through all of the ideas, the team came up with during the divergent phase and begin to focus to the most impactful and feasible ones (3 to 5), one caveat is to not discount crazy ideas, but instead refine them into feasible ones, use them as a starting point; try to redefine each solution to an actionable one before discounting it.
- Prototype: After the converegent phase is complete aim to prototype the new business models.
During the design thinking process keep the following in mind:
- Stay focused: Have a strongly defined problem statement around a specific customer need.
- Prepare: Get the group into the right headspace, immerse the team in the problem, interview customers, go to the physical location, use the product or service, experience it from the perspective of the user.
- Wild ideas welcome: Don't worry about feasibility, think crazy and wild, be divergent.
- Quantity over Quality: During the divergent phase aim for as many ideas as possible as long as they meet the problem statement.
- Defer judgement: During ideation do not discourage or discount any ideas, have an open mind.
- Respect the speaker: One conversation at a time, one of the strongest ways to develop an idea is with the 'yes and' paradigm, for this to work, everyone must hear the idea.
- Sell your idea: sketch the idea out, define the process with stickies, draw it out on a storyboard, act it out in a one (wo)man play, whatever it takes to convey your idea.
- Think visually: Once your idea is understood define it as a sticky, don't lose it once the group understands, document it onto a board, move it around, combine it with other ideas, often times crazy ideas lead to solutions.
In short:
- Start by defining a problem statement
- Think of dozens of solutions, crazy, wild ideas,
- Converge on a 3 to 5 feasible solutions.
- Prioritise them, by some rubric that makes sense, then for each viable idea
- Design it
- prototype it
- test it
- if the test fails, learn from your mistakes and prototype again.
- if the test succeeds, validate it on a larger scale
Rinse and repeat till you are satisfied with a solution.
