I read this book because it was recommended in Personal MBA – Josh Kaufman. This is a great book that covers in good detail how a business plan should look like and what it should contain, if you need one.
This book provides a good outline for writing a business plan. Nice and straightforward.
But for 2020 onwards, i would recommend to more towards:
Business Model Canvas by Alexander Osterwalder
By reading this article, you will discover a thousand and one tips for designing innovative business models to develop or create your business.
You will also discover:
- how to design a great tool to describe, study and create economic models;
- different economic models, based on the concepts of the greatest entrepreneurship theorists;
- the techniques that make designing economic models fun and effective;
- how to evaluate the best strategy for your business model;
- a generic process to help you create innovative business models,
- as well as several tips to ensure the future of your business model.
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Traditional companies are faced with a new generation of ambitious entrepreneurs with increasingly innovative ideas. In today’s economic landscape, the players are multiple, leading to the death of certain models, which will be replaced by other concepts, thus perpetuating a cyclical entrepreneurial dynamic, which it is better to have the keys to understanding in order to make room for one’s business model.
“Business Model” is for visionaries and innovative minds who want to reinvent the economic market of tomorrow! A business model defines the tools with which a structure creates and generates value.
It is recommended to rely on nine pillars that guarantee the profitability of a company. These pillars correspond to the four main dimensions of a company: its customers, its offer, its infrastructure and its financial health.
Explanatory matrix of the new economic model
In the “Matrix” section, Osterwalder and Pigneur propose a matrix or template to describe, represent and analyze the basic elements of the new economic model. This explanatory matrix comprises 9 main blocks which are broken down as follows: Customer segments, Value propositions, Channels, Customer relationships, Revenue streams, Key resources, Key activities, Key partners, Cost structure.
“A business model describes the principles by which an organization creates, delivers and captures value.” (p.14)Alexander Osterwalder and Yves Pigneur
Readers of this article have also read: The 7 Habits of Highly Effective People
Typology of different business model patterns
The “Typology” section offers an overview of different types of business models that are also recognized by leading management thinkers. Osterwalder and Pigneur, focus on five main types which are distinguished by their respective economic motives. The authors define economic motives on the basis of the commonalities found in the different models.
According to them, it is a question of finding “similar characteristics, configurations and behaviours” specific to the logic of the economic model observed. Among the 5 economic models selected for reflection are the unbundled model, the long tail model, the multiplatform model, the free market model and the open economic models.
For each model, there is information on the context, the challenge, the solutions, the principles of application and examples of companies corresponding to each type.
Design: Six techniques for creating business models.
The “Design” part introduces us to six designer techniques to help in the design of “Business Models”. These techniques can be identified as follows: Knowing the client, idea generation, visual thinking, prototyping, storytelling, scenarios.
Let’s take a brief look at these different techniques based on the following considerations.
#1: Know Your Customer
The Know Your Customer technique essentially consists of putting yourself in the customer’s shoes. “Putting yourself in the customer’s shoes is a principle that governs the entire process of designing the business model.” (p.128). Among other things, it is proposed to develop a client profile using the Empathy Map, which includes the following questions:
- What do they see?
- What do they hear?
- What do they really think?
- What are they saying and doing?
- What is their hope?
#2: Idea Generation
With regard to the technique of idea generation, it is proposed to create favourable conditions for the idea generation process. These conditions are :
- Ensuring the composition of a diversified team;
- Identifying and studying the elements that need to be known through immersion in the subject;
- Generating many ideas in each of the nine blocks of the economic model;
- Select ideas according to criteria such as “estimated time to market, revenue potential, potential customer resistance and impact on competitive advantage” (p.142);
- Evaluate the ideas and ask “What does the business model look like for each selected idea?”
#3: Visual Thinking
Visual thinking is presented as indispensable for working on economic models. Two techniques of visual thinking are recommended as tools to facilitate the process of exploring, defining, discussing and changing an economic model.
These are visualization with Post-it notes particularly recommended at the stage of exploring ideas.
Then the use of drawings in association with the matrix which allows to improve the process of definition, discussion, construction and change of an economic model.
Also, these two visual techniques used successively or in conjunction with the matrix have the advantage of helping to better understand the essentials, promote co-creation and improve dialogue and communication.
The prototypes for Osterwalder and Pigneur represent potential business models. They are tools for the discussion, questioning or validation of a concept. They help to explore different directions in which we can lead our business model (p.162).
Put another way, they help us better understand what could be. In this respect, the authors are convinced of the importance of designing and prototyping new business model ideas to gain competitive advantage and create new markets.
They suggest adopting a “design attitude”, i.e., a questioning approach that involves no longer trying to make decisions first but to create options from which to choose.
They point out that the many questions raised at the various stages of development make it possible to create truly revolutionary economic models.
While the matrix helps to represent, construct and analyse the economic model, storytelling helps to communicate the essence of the new economic model in a more tangible way.
The use of stories makes potential futures tangible, helps to clarify the concept, to understand the new model and to see what it means.
Also, telling a story about how the model creates value for the client is bound to generate buy-in.
#6: Customer scenarios
The technique of client scenarios stimulates creativity and helps to project oneself into the future. Imagining several scenarios for the same concept gives flesh to the concept, better adapting the business model to different customer segments and responding to different criteria.
Strategy: A reinterpretation of the strategy
In the Strategy section, you are encouraged to constructively challenge existing business models or examine new ones by considering the environment in which the organization operates.
This is done by analyzing four main strategic areas, namely:
- Business model environment
- Evaluation of business models
- Blue Ocean strategy
And management of several business models within the same company. Here are some indications to better situate yourself.
The business model environment
It is essentially a question of examining the influence of forces outside the company. It is suggested that you approach the “design space” by mapping “four major dimensions of your environment :
- (1) market forces
- (2) industry forces
- (3) key trends
- (4) macroeconomic forces (p. 200)
Evaluating Business Models
The evaluation of the economic model is carried out by analysing the forces present from within the company. It is suggested to combine the business model matrix with the SWOT analysis which considers the strengths, opportunities, weaknesses and threats of the business model. The aim is then to conduct a diagnosis by alternating the examination of the individual elements of each of the blocks of the model and the integrity of the whole.
Find more about SWOT by following this link What Is a SWOT Analysis, and How to Do It Right
The Blue Ocean Strategy
In the Blue Ocean Strategy section, the authors offer a powerful tool to evaluate existing models and help create new ones. The performance of this tool comes from the combination of the Blue Ocean concept, the Four Actions Grid and the economic model matrix.
Remember that the essence of the Blue Ocean concept is to “create an entirely new market space through fundamental differentiation”. (p.226).
The Grid of the four actions is mainly used to analyse by questioning what to exclude, attenuate, reinforce and create in a service, a product, an idea.
Combined with the Blue Ocean Strategy and the Grid of Four Actions, the economic model matrix provides the overall picture that makes it possible to examine the repercussions of a change on the whole in a structured manner.
The advantage of using its various tools simultaneously and/or successively is to offer the ability to question the economic model “in terms of value creation, customers and costs” and to take into consideration the impacts of its changes on the model as a whole (p.230).
The management of several economic models within the same company
Designing and deploying new business models is a major challenge for management. The management of several business models and the presence of innovative business models within the same company are part of the current business landscape.
They are among the issues and challenges of today’s organizations. Is it necessary to integrate, separate or mix several models within the same company? The authors offer some interesting avenues for reflection on this subject.
Process of designing an economic model
The Process part is dedicated to the whole generic process that allows the design of innovative business models. In this part, you are led to exploit the concepts, techniques and tools proposed throughout the book.
It is important to note that the authors recall the importance of adopting a “Design attitude” approach to design. Why is this important? Because “Design attitude is much less linear than the traditional decision-making approach that focuses on analysis, decision and optimization.
“Uncertain at first, the process unfolds chaotically and opportunistically before focusing on a single point”. (p.246).
This process of designing an innovative economic model consists of 5 phases:
- Mobilizing by creating the optimal conditions;
- Understanding by being completely immersed;
- Designing by transforming ideas and selecting the best ones;
- Deploying the chosen economic model;
- Managing the evolution of the project with the required management structures.
In conclusion, Osterwalder and Pigneur invite you to explore new economic models and apply them to five future issues that they identify as follows:
- The use of the matrix to drive innovation in the public and voluntary sectors;
- The design of computer-assisted economic models;
- The relationship between business models and business plans;
- The difficulty of deploying business models in new and existing organizations;
- The coherence of business models and business information systems.
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In fact, this book breaks with the traditional format of strategy and marketing books. Very visual, it has definite pedagogical and practical qualities. The subjects are treated in a synthetic way. Most of the concepts are presented on a page or two. A book with accessible content, whose comprehension is facilitated by the creative and visual thinking that dominates.
“Business Model – New Generation: A Guide for Visionaries, Revolutionaries and Challengers” has the necessary characteristics to satisfy anyone with an entrepreneurial spirit and interested in improving or implementing new models of revolutionary economic development.
This book offers many tools to diagnose, assess, challenge and improve the business model. It guides the reader progressively towards a new generation economic model that allows to distinguish oneself by creating new values.
Let me know, down in the comments what tools you think is revolutionary ..