What is a business model is why is this concept valuable for a company? The first time I encountered a definition of business models was a nice article in 2000 called “Changing Business Models: Surveying the Landscape,” by J. Linder and S. Cantrell. However, the best work on the business models is the bood by Alex Osterwalder: I decided be a lucky collaborator on reviewing his first Business Model Generation , which I would totally recommend for clarity, innovation, and the way in which he describes “graphically” and simply concepts often difficult to map and summarize.
The business model canvas is a very important concept: it describes the fundamental logic by which a company intends to create profits and it defines how it deisgn, create and deliver value to targeted customer segment. Being able to describe a business model in clear and simple terms is important to define an enterprise strategy, share it with all the organization stakeholders, identifying actions for improvement and innovation of its components.
What are the basic components needed to describe a business model? The picture above, quoted from Alexander’s book, considers 9 fundamental elements:
- the value proposition offered to customers
- the target segments for which benefits from the value prop
- la type of customer relationship developed with the customers
- the channels used to deliver the value propositions to customers
- the revenue model, which describes how the value to customers in monetize in revenues
- the key activities needed to create and deliver the value prop
- the key resources, which create and empower the competitive advantage od the enterprise
- the partnership needed outside the company to achieve the value prop and to deliver
the cost structure from implementing the activities, acquiring the key resources and partnerships
Thse are not brand new concepts in business strategy , but Osterwalder can be credited of their simplification in just the nine components and for the work surrounding the analysis of their mutual relationships. This canvas allow us draw useful indications on how to improve the performance of a company and how to innovate its core components. Prior to discuss the nine components in details with examples, it should be noted that the logic of value creation is simplified with the creation of profits, that is further decomposed in the revenue model and in the cost structure. The revenue model is associated with the right side of the diagram, which contais all customer related components: the provided value proposition , the pricing model, the target segments and how they are served. The left part of the diagram contains how the company depoy costs to create, acquire and exploit key resources & activities.
A very innovative of the book is that it uses very simplified graphical models: the canvas. The goas is to simplify a business model for the entire organization and thus to make sure all stakeholders can tune and behave accordingly. This “simplification” is also the strategy advocated in the book Blue Ocean : a key strategy is the more effective because the clearer it can be communicated. This is aq very valid point also for small and medium-sized enterprises that are usually born around a value proposition in the head of the entrepreneur, but less to employerr, especially because it seldom becomes less crisp going by due to differentiation and evolution driven by market and competitors.
Published by Carlo Arioli