Book Review: Business Model Generation

Business Model Generation

Business Model Generation launched in 2010 and has since become a global success story. It was written as a practical guide to enable people to implement effect change in their organisations and businesses via the redesign and transformation of business models. The most groundbreaking aspect of the book is the introduction of the business model canvas. The structure is shown below, and as you can see it is made up of nine key building blocks.

Business-Model-Canvas

Prior to the creation of the canvas, businesses and organisations communicated their business models via business cases. These would be created in spreadsheets, written up in documents, and presented in slides. The canvas was created to enable a shared understanding of what a business model actually is. With this format, the model can be easily manipulated to enable those discussing strategy to try out alternative models. Here for example is the business model canvas of the Financial Times:

business-model-canvas-ft

Author Alex Osterwalder describes the benefits of using a more visual language:

Visual thinking is indispensable to working with business models. … Because business models are complex concepts composed of various building blocks and their interrelationships, it is difficult to truly understand a model without sketching it out.

A business model really is a system where one element influences the other; it only makes sense as a whole. Capturing that big picture without visualizing it is difficult. In fact, by visually depicting a business model, one turns its tacit assumptions into explicit information.

I would certainly agree with this, but just because you have visualised a concept does not necessarily mean you really have captured the whole, and it does not guarantee that the visualisation is actually of high quality and helpful. In reading Business Model Generation I kept swaying from one extreme to another. Many times I kept saying to myself this is too simple, and then at other times I could really see the benefits of such simplification.

I have now settled down and arrived at a final conclusion: the canvas is one of those simple tools that at first sight you think is obvious, but in fact if it was so obvious someone would have done it earlier. It’s simplicity is a huge strength, so long as whoever is using it does not get caught up in thinking that having a business canvas is the be all and end all. The reason I say this is that there is that one of the chapters in the book examines the wider business environment, and the diagram from the book lists the additional complicating factors, without positioning them into a new framework or canvas:

business_model_generation_strategies_forces

One theme I talk a lot about is the act of seeing. I am always interested in looking at how people are using both the current business model canvas, and also how they are looking to improve it. It is one thing to have a business model for a new product or service, but the current business model canvas has no explicit reference to the organisation’s core values. If people within an organisation really do live by their core values (as opposed to publishing a mission, vision and value statement which reads well but is not followed) then all other activities flow from this. For this reason I quite like a remodelled Value Envelope canvas created by Jeroen Kraaijenbrink:

Photo credit: Jeroen Kraaijenbrink

Photo credit: Jeroen Kraaijenbrink

I think one final comment is that the presentation of the book has been designed to be luscious and seductive. This is no bad thing, but I do wonder if the authors missed a trick in examining the realities of some of the companies they provide case studies and commentary on. For example, Amazon features prominently, with two different case studies, the first being their web services and the second being a more strategic look at how and why Amazon needed to diversify. As the authors say in the opening paragraphs, Business Model Generation is about “creating value, for companies, customers and society. It is about replacing outmoded models.” A recent report on Amazon by the Financial Times was quite an eye opener, stating that some workers walk between seven and fifteen miles a day. (Source: Amazon Unpacked, Financial Times).

Amazon have also launched another service called Mechanical Turk. This allows anyone with a computer and internet access to carroy out crowd-sourced jobs (which are described as HITs – Human Intelligence Tasks). This sounds like a great new business model, but often the jobs are poorly paid, with workers signing an agreement which means they are not covered by minimum-wage requirements. Employers can reject work on any grounds, and those doing the work have few options to complain and claim compensation for unpaid work.

So when we examine Amazon, despite a business model canvas which on the surface seems to be cutting edge and next generation, in fact harks back to the beginning of the twentieth century and good old fashioned Taylorism. This is not a paradigm shift from the industrial revolution, it is the industrial revolution with computer chips and security tags and time and motion studies.

On Transition Consciousness I do every so often look at organisations and business leaders I rate and who I think have something extremely valuable to add to the global conversation on the shape and evolution of business, and how business can be inspired by nature. I think that the Business Model Canvas is a valuable tool, but we need to ensure that we do not become seduced by it. In the right hands it becomes an extremely powerful tool to promote effective dialogue and to aid creative thinking around the logic and structure of new business models. But without Values at the core of the thinking, we are in danger of believing the hype and not being able to see that what seems like a visionary business model is in fact just “business as usual” in a different disguise.

Just to be clear on how I rate the book, I do recommend people to read it. While many reviewers on Amazon criticise it for being too simplistic, I think the actual concept of the canvas is powerful, and for those who have not worked with business models and business cases before, for those who are looking at starting or developing a new business for the first time, the book is an excellent introduction. A canvas by its very nature is blank, waiting to be drawn upon, and I can see many ways in which it can be used creatively to develop new insights, innovations, communication and team building in organisations, and in fact I am developing various workshops utilising the canvas at this moment in time. But ultimately, it can only reflect the quality of thinking which goes into the thinking behind the business models, and so we continually need to seek out mentors, role models and also inspiration from nature if we really want to be a part of what Peter Senge calls The Necessary Revolution.

5 responses to “Book Review: Business Model Generation

  1. Thanks for this… but don’t you find the “profit-first” Business Model Canvas leave rather a lot of topics off the table for Transition Businesses?

    This was part of the inspiration for the work of the Strongly Sustainable Business Model Group and the creation of the Strongly Sustainable Business Model Canvas. An introductory blog post including a ~3 min audio/visual overview and a longer slide share can be found here: http://blog.edwardjames.biz/2013/04/Introducing-SSBMC.html.

    If you want more details and / or and update on events since April drop me a line.

    Cheer and thanks again for the review of BMG…

    Antony

  2. Hi Anthony

    Thanks for posting a comment. I have had a quick look at your work – really interesting. I think Osterwalder and co in their defence would argue that BMC is applicable to any business model, including NGOs and non-profit organisations etc. Many people are clearly finding it a huge help in developing their thinking about their business models, but I think that once you have fully utlised it, then there are still many more things you can do, which is where the various expanded and adapted canvasses come into play.

    As for Transition Business, I have already written about some of the work happening in Brazil in this area in this article:
    https://transitionconsciousness.wordpress.com/2011/10/27/an-interview-with-monica-picavea-the-transition-of-organisations-in-brazil/

    As for your own work, I think a really interesting angle is how it can integrate with Balance Scorecard and also strategy maps. Balanced Scorecard doe help people think about the wider context, and many big organisations are using it to some degree or other. So this could be something to explore.

    I have written a couple of articles on some of the work on Balanced Scorecard here:

    https://transitionconsciousness.wordpress.com/2013/08/09/strategy-execution-summit-2013-day-one-the-transition-of-business/

    https://transitionconsciousness.wordpress.com/2013/08/12/strategy-execution-summit-2013-day-two-the-transformative-learning-journey/

    Regards

    Simon

  3. Wow this is great… so many synergies.

    I think you know that the profit-first BMCanvas was based on Osterwalder’s PhD – the Business Model Ontology. This explicitly used the Balanced Scorecard. But the Balenced Scorecard rather dissappeared from the Canvas (though if you follow the Canvas anti-clockwise starting at the bottom you have “financial”, “customer”, “learning & growth” (aka Value Props), and “Process” (I’m not using the correct names here… and of course the original order swaps the last two items).

    But, I don’t know about you but I have a lot of problems with the sustainability “extensions” to the Balanced Scorecard* – so I’ve not used those – but I am still using the basic ideas of the original Balanced Scorecard in the Strongly Sustainable Business Model Canvas. Indeed it is much more obvious than in the profit-first Business Model Canvas – each of the 4 aspects of the Balanced Scorecard is shown as a “perspective” of a sustainable business model (stakeholder; product, learning and development, process, measurement).

    FWIW te group I’m a co-founder of, the Strongly Sustainable Business Model Group (http://www.SSBMG.com), hosted out of the Ontario College of Art and Design University’s Strategic Innovation Lab. are well connected to Alex and Yves (several of our members are in the list of the ~470 co-creators of BMG).

    And yes, you’re 100% right the profit-first BMCanvas people would claim it is applicable to any type of organization (except I think Government). But when you ask, as I did in my recent 3 year academic research project (http://www.edwardjames.biz/Research), “if you were trying to design a sustainable business is the BMCanvas necessary AND sufficient?” you find out everyone thinks its necessary BUT NOT sufficient!

    This was the gap I hope I’ve started to close with the SSBMCanvas, which is in turn conceptually “powered by” the SSBMOntology.

    If you have the time I’d love your feedback on our work and plans for the SSBMCanvas… Love your feedback (http://survey.ssbmg.com/), or you can sign-up for project updates (http://signup.ssbmg.com/), like our Facebook page (https://www.facebook.com/stronglysustainablebusinessmodels), and join our LinkedIn group (http://www.linkedin.com/groups/Strongly-Sustainable-Business-Models-5005769/about) (you can follow me on Twitter too – @aupward – I just followed you!)

    * Figge, F., Hahn, T., Schaltegger, S., & Wagner, M. (2002). The Sustainability Balanced Scorecard – linking sustainability management to business strategy. Business Strategy and the Environment, 11(5), 269.

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