Keep Ideas Moving #1 : Business Model Generation
This would be my first contribution on StartupLokal. Nuniek and the team have been really open to my proposed little bit of contribution to the community.
I will share you some of my thoughts and knowledge pertaining to enterpreneurship and its development–in Indonesia, Asia, and in the world. Who am I to give you all this information? I am no expert, and I usually don’t make ideas–I am just a keen observer who likes to ‘share ideas’. That’s why I hope my little notes can ignite a spark for rolling discussion, for you to mingle, sharing each other’s knowledge.
Nobody is perfect, but hey, 2+2=5 (!)
You might be enterpreneurs, business incubator managers, business association, joint venture specialists, investors, policy makers in the government board, employees, or students. Or at least, that’s what I hope StartUplokal community is comprised of—afterall, enterprise development is not just work of the enterpreneurs. My future notes will also try to bridge the sometimes found network gap–allowing and inviting each users to ‘inspire’, ‘open opportunities’, and to ‘make links’ between one and another.
This first edition is about how to ‘play’ with your business plan. It’s a key step prior to making the business plan itself. A month ago, I got a chance to sit in Alexander Osterwalder’s workshop on Business Model Innovation. Who is he? Shortly speaking, he’s an author, speaker and advisor on Business Model Innovation. Well..I just had a sneak peek of his rate, it’s USD 1500 per sitting in his workshop (I was quite lucky that I got to hear him speak free). You can visit his site http://alexosterwalder.com/
Well, I found it very interesting, so now I will share it to you. I think this particular edition would of interest for executives, strategists, innovation managers, entrepreneurs, consultants, and business coaches
The jargon, “Business Model”—seems everybody knows it. But do ask the person next to you, he/she must have different perception of it. Some would say that it’s about ‘making profit’, some says it’s about ‘aligning resources’, etc etc. In fact, nobody seems to really know what creature a ‘business model’ is.
In his workshop, his first statement that attracts me is, “In the old days, people run business by increasing their efficiency, that is, reduce cost hence increasing profit”. This rings bell to me—a great deal. Usually when one is wanting to set-up a business, say, a restaurant, what do they do? They look at others’ business model, try to imitate (or to re-engineer), and to gain more profits than their counterparts, they try to reduce cost, or make it more productive, aren’t they?
In fact, by focusing on these two angles, we’re missing out a great deal of business model angels. Alexander Osterwalder presents a toolkit that lays out aspects of business model on which you can play around. With this tool, the jargon changes from Business Model Development, to Business Model Generation ;). In his toolkit, he presents 9 (yes, Nine!) angles—on which you can brainstorm, breakdown, spin things around and analyse its costs and benefits :
1. Customer Segments
- For whom are we creating value?
2. Customer Relationships
- What type of relationship does our customer segments expect us to establish and maintain with them?
- Which ones have we established?
- Through which Channels do our Customer Segments wants to be reached?
- How are we reaching them now?
- How are our channels integrated?
4. Value Propositions
- What value do we deliver to the customer?
- Which one of our customer’s problems are we helping to solve?
- What Key resources do our Value Propositions require?
- For our distribution channels?
- What Key activities do our Value propositions require? Our distribution channels, customer relationships, etc?
- Who are our key partners?
- Who are our key suppliers?
- What are the most important costs inherent in our business model?
- Which Key Resources are most expensive?
9. Revenue Streams
- For what value are our customers really willing to pay?
- For what do they currently pay?
Each question in each block is broken down (and of course above list is not exhaustive), and as an instance, you’ll elaborate something like this for one of your post-it:
Well, pardon my bombarding you with the above list. But fear not!, because actually it is a really interesting exercise. To be noted—and this is really important–each blocks should not be treated independently; as they’re coming like some jigsaw puzzles, a change in one block may affect changes in several other contingent blocks. This is where excess of the accumulated efficiency (or inefficiency) is generated.
Below are the preview of canvas that you can download and print, and play around with(or for team brainstorming activities, you can also draw it in a big board and let everybody sticks some post-its/draw on it.
Stick some post-its
Or you can draw on it (Nescafe capsules business model as example)
Next step is to estimate cost-benefits from each introduced ideas (see red and green dots at the first example above)—and in the end, you will have net-benefit/cost out of your new model (see below).
The canvas will be made again and again iteratively, making several layers (scenarios) of set of ideas—until your heart content, and you’re ready to analyse.
So why is this important?
Well, just try to answer these :
-Why are Apples product more used than the Microsofts?
-Why is Nescafe bother to produce its own capsules and machines? Is it more profitable for them?
-Batik clothes are now everywhere, what can I do to make it ‘different’, I’m just selling the same batik anyway…
-Chinese products is invading the market, how can I make my small electronic retailer gain more market?
I suppose this tool would help you answer these types of questions…At least, it definitely provides a consistent framework through which to view your business…and hopefully it can make your business a bit (or a lot!) more special than it is now!
What I like about Alexander Osterwalder’s proposition, is not just that it’s brilliant (isnt’t it?!), but he provides a practical tool along with his theory! The book “Business Model Generation” might not be easily accessible (It’s just out this June 2011..but there’s a 70-page preview available on the book website)..However, he provides the glimpse of the tools and some presentations in his website. What is even greater is that The Canvas and tools provided are licensed as creative commons so enjoy it free. Just be sure to link back to businessmodelgeneration.com after each use, and share your work under a similar licence. For the sake for your own learning, please have a peek yourself at these links below :
BUSINESS MODEL GENERATION
The Book at amazon
Alexander Ostewalder’s worthwhile peeks :
http://www.businessmodelgeneration.com/ The whole tool package –He make the tools compatible for Ipad, but of course, manual would also do
http://www.businessmodelalchemist.com/ His Blog—you can get ideas of ‘innovative’ business models for your own purpose (social media, solar energy, etc…ain’t he a giver?)
http://www.slideshare.net/Alex.Osterwalder/business-model-innovation-matter on Why Business Model innovation matters
http://businessmodelhub.com/to join the invigorating forum of business modelers—and to absorb the expert’s resources ;p
@business_design his Twitter
Back to the idea of knowledge sharing or sharing ideas, don’t be afraid! If you’re afraid that someone might steal your idea don’t talk to them about it. But I think most people aren’t going to be interested in taking your idea anyways, they’re too busy thinking about their own. And remember, an idea is just an idea until you do something with it and put it into practice.
So I invite you to put comments—maybe you have tried the tools, maybe you need inspiration, maybe you have your preferred business plan tool, or maybe you are plainly confused, ….and maybe somebody, can help you.
At the next edition (next week), I will share some idea about developing value chain of your business
screen shots are taken from http://www.businessmodelgeneration.com/