Amar's mindmap of the Alex Osterwalder/Yves Pigneur book

1. For whom are we creating value?
Who are our most important customers?
Mass Market
Niche Market
Segmented
Diversified
Multi-sided
Platform
Customer Segments (CS)
What value do we deliver to the customer?
Which one of our customer’s problems are we helping to solve?
What bundles of products and services are we offering to each
Customer Segment?
Characteristics
Newness
Performance Customisation “Getting the Job Done”
Design
Brand/Status
Price
Cost Reduction
Risk Reduction Accessibility Convenience/Usability
Value Propositions (VP)
Through which Channels do our Customer Segments
want to be reached?
How are we reaching them now?
How are our Channels integrated?
Which ones work best?
Which ones are most cost-efficient?
How are we integrating them with customer routines?
Channel phases:
1. Awareness
How do we raise awareness about our company’s
products and services?
2. Evaluation
How do we help customers evaluate our
organisation’s Value Proposition?
3. Purchase
How do we allow customers to purchase specific
products and services?
4. Delivery
How do we deliver a Value Proposition to customers?
5. After sales
How do we provide post-purchase customer support?
Channels (CH)
What type of relationship does each of our Customer
Segments expect us to establish and maintain with
them? Which ones have we established?
How are they integrated with the rest of our business
model? How costly are they?
Customer Relationships (CR)
Examples
Personal assistance
Dedicated Personal Assistance
Self-Service
Automated Services Communities
Co-creation
For what value are our customers really willing to pay?
For what do they currently pay?
How are they currently paying?
How would they prefer to pay?
How much does each Revenue Stream contribute to
overall revenues?
CHAPTER 3: DESIGN
Game changing business models
come from deep and relentless inquiry
CHAPTER 1: CANVAS
BUSINESS MODEL GENERATION
(Alex Osterwalder & Yves Pigneur)
Dynamic pricing
Negotiation( bargaining)
Yield Management
Real-time-Market
CHAPTER 5: PROCESS
Revenue Streams (R$)
Fixed pricing
List Price
Product feature dependent
Customer segment dependent
Volume dependent
Types:
Asset sale
Usage fee
Subscription Fees Lending/Renting/Leasing Licensing
Brokerage fees Advertising
What Key Resources do our Value Propositions require?
Our Distribution Channels? Customer Relationships?
Revenue Streams?
Types of resources
Physical
Intellectual (brand patents, copyrights, data)
Human
Financial
Key Resources (KR)
What Key Activities do our Value Propositions require?
Our Distribution Channels?
Customer Relationships?
Revenue streams?
Key Activities (KA)
Categories
Production
Problem Solving
Platform/Network
Who are our Key Partners?
Who are our key suppliers?
Which Key Resources are we acquiring from
partners?
Which Key Activities do partners perform?
Key Partnerships (KP)
Motivations for partnerships:
Optimisation and economy
Reduction of risk and uncertainty
Acquisition of particular resources and activities
What are the most important costs inherent in our business model?
Which Key Resources are most expensive?
Which Key Activities are most expensive?
Is your business more:
Cost Driven (leanest cost structure, low price value proposition, maximum automation, extensive outsourcing)
Value Driven ( focused on value creation, premium value proposition)
CHAPTER 4: STRATEGY
Cost Structure (C$)
Sample characteristics:
Fixed Costs (salaries, rents, utilities) Variable costs
Economies of scale
Economies of scope
CHAPTER 2: PATTERNS

2. CHAPTER 1: CANVAS
Challenge: Costs are too high. Conflicting cultures = trade offs.
UNBUNDLING BUSINESS MODELS
Examples : Telco, Private Banks
Challenge: Targeting less profitable segments with
specific VPs is too costly
1. Democratisation of tools of production: Falling
technology costs give ind'ls access to tools that were
too exp a few years ago. Music, videos/movies,
software (apps) etc.
2. Democratisation of distribution: the internet has
made digital content distribution a commodity. With
lower inventory. communication and transaction costs
opening up new markets for niche products.
Why does this biz mod work (for media)?
THE LONG TAIL
3. Falling search costs to connect supply with
demand: The real challenge of selling niche products
is finding interested potential buyers. Powerful search
and recommendation engines, user ratings and
communities of interest have made this easier.
Examples: Lulu.com, Amazon.com, eBay.com,
netflix.com,
Challenge: Enterprise fails to acquire potential new
customers who are interested in gaining access to
company's existing customer base
(i) Brings together 2+ distinct but interdependent groups of customers.
Matchmaking
Which side do you subsidise? How to price correctly?
One way multi-sided platforms solve this problem is by
subsdising a customer segment (less expensive or
free VP) in order to attract users.
(ii) Such platforms are of value only if the other group of customers
are present. (Chicken & Egg dilemma)
What are they?
(iii) The platform creates value by facilitating interactions between the
different groups.
(iv) A multisided platform grows in value to the extent that it attracts
more users - network effect
1. Platform management
2. Service provisioning
3 x KA
3. Platform promotion
Examples: eBay.com, Visa, Microsoft Windows, FT,
Google, Apple App Store, Wii, Metro
Generate high platform traffic and increase
attractiveness to advertisers
CHAPTER 3: DESIGN
Game changing business models
come from deep and relentless inquiry
Main costs relate to:
(i) Maintaining and developing the platform.
(ii) Traffic generation, distribution and retention costs
Examples City A.M, Evening Std outside tube stations
BUSINESS MODEL GENERATION
(Alex Osterwalder & Yves Pigneur)
FREE as a Business Model
CHAPTER 2: PATTERNS
CHAPTER 4: STRATEGY
CHAPTER 5: PROCESS
Examples: Metro, Evening Standard, City AM
MULTI-SIDED PLATFORMS
The small base of paying users subsidise the free users
Get the basics for free, Pay for more.
How does it work?
1. The cost of adding the free users is low. Typically
automated
When does it work?
2. The rates at which free users convert to paying is
acceptable - typically >10%
Examples: dropbox, Flickr, yousendit, Skype,
Open Source: Red Hat and Linux. Provides support +
stability + cost advantage. Red Hat sell subscriptions
FREEMIUM WITH A TWIST
Some variant business models
Rega: Swiss non-profit org'n for accident airlifting
FREEMIUM UPSIDE DOWN
Patrons don't pay if airlifted
FREEMIUM
Telcos: free phone tied into a long contract
Examples
Razors: Gillette, give away the razor, charge for razor
blades
Focus on delivery of follow up products or services
Brand / patent protection
Usually require a strong brand
R$ & C$: Follow up products cover subsidisation of
initial product. Follow up = high margin + repeated
BAIT & HOOK - aka "Loss Leader" or "Razor + blades" model
How to make it work?
Lock-in of some form - high switching costs
CS: attracted by instant gratification
Challenge: R&D is costly. Productivity is falling
Can be used by companies to create + capture value
by systematically collaborating with outside partners
What is it?
Focus on KR, KA, KP and C$
The Connector: Innocentive (part of P&G). Connects
solvers to problems.
Focus on VP, CR, CH, CS and R$
P&G: Connect & Develop programme. 50% of R&D
with outside partners (tech entrepreneurs, internet
platforms, retirees).
Outside-in, by bringing external ideas, IP, technology
into a firm's devt and commercialisation process.
How does it work?
GSK Patent Pools. Open up patent pools to other
researchers on a license/profit share basis. Targets
less mainstream diseases etc.
Inside-out by providing or licensing external parties
with IP or technology, typically lying idle within the firm.
OPEN BUSINESS MODELS
Principles of Innovation

3. What job(s) do our customers need to get done and how can we help?
What are our customers aspirations and how can we help them live up to them?
What relationship do your customers expect us to establish with them?
For what values are our customers WTP?
How to design- Customer Centric
Don't just focus on existing customers - look at new or
unreached segments
Satisfy the unmet needs of customers
Successful innovation requires a deep understanding
of customers - daily routine, concerns aspirations etc.
Need to know which customers to heed and which to
ignore
How not to design - Organisation Centric
Better Value Propositions
Appropriate Customer Relations
True and accurate WTP
Tomorrow's growth segments wait at the periphery of
todays' cash cows.
What can we sell customers?
How can we reach customers most efficiently?
What relationships do we need to establish with customers?
How can we make money from our customers?
Create a customer viewpoint to continuously question
your business model + assumptions
Customer Insights
The Empathy Map
(created by XPLANE)
http://www.xplane.com/company/about/
1. Brainstorm the possible Customer Segments that
you might serving
2. Choose three promising candidates and select one
for your first profiling exercise
3. Give the customer a name, demographic
characteristics (income, marital status etc)
(i) What does she see?
(ii) What does she hear?
Environment, Friends, what the market offers
What friends/colleagues/boss says?
Who really influences her and what do they say?
What media channels are influential?
How to use the (Customer) Empathy Map
(iii) What does she think and feel?
What really counts? What moves her?
Major preoccupations? Worries?
(iv) What does she say and do?
Attitude in public?
What does she tell others?
(Pay particular attention to the difference between what
she tells others and what she may truly think and feel)
Her appearance? Behaviour toward others?
(v) What is the customer's pain?
4. Using the Empathy Map (using a flip chart) answer
the following questions:
Biggest frustrations?
What obstacles stand between her and what
she wants or needs to achieve?
What risks might she fear taking?
(vi) What does the customer gain?
What does she truly want or need to achieve?
How does she measure success?
1. Team composition: assemble the right diverse team
(Age, seniority, experience, sector, background).
Generate fresh left field ideas.
2. Immersion: Preparation/study before generation
(e.g. Empathy Map, market study, competitor analysis, 6 Forces)
1. Resource driven: originate from the company's existing
infrastructure or partnerships to expand or transform the
business model e.g. Amazon Cloud Services
2. Offer driven: create new VP's that affect the other 8 blocks
e.g. Cemex 4 hour cement delivery vs. industry 48 hours
(A) Epicentres
3. Customer driven: based on customer needs,
facilitated access or convenience. e.g. 23andMe
personalised DNA tests
4. Finance driven: Innovations driven by revenue
streams, pricing mechanisms or reduced cost
structures. e.g. Xerox (monthly charge + charge/copy)
5. Multiple epicentre driven: Innovations driven by
multiple epicentres e.g. Hilti, global construction tool
manufacturer moved from selling tools to renting tools
(R$ + VP + CS driven).
3. Expanding: Use each of the 9 blocks as a starting point for innovation
The Ideation Process
Challenge our thinking and provocative. Should
disturb us as intriguing, difficult-to-execute
propositions.
(B) 'What If' questions
Ideation
(i) Warm up: silly cow/pig/dog/cat exercise. Create an
innovative business model.
(ii) Stay focused: start with a well-honed statement of the problem at
hand
Brainstorming Rules
(Iii) Enforce Rules: via a facilitator. Rules to include
defer judgement, one conversation at a time, go for
quantity, be visual, etc. Facilitators
(iv) Think Visually: write down ideas or sketch them
out on a surface everyone can see. (e.g. Post-it notes
on wall)
(v) Prepare: with some sort of 'immersion experience'
e.g. scouting field trip, discussions with customers, or
any other immersion activity related to the problem at
hand
4. Criteria Selection: What are the most important criteria
for prioritisation? (e.g. implementation time, resources,
revenue potential, impact on competitive advantage etc)
5. "Prototyping": What does the complete business
model for each shortlist idea look like? Prototype
shortlist of 3 - 5 models.
Elmar Mock @ Creaholic
http://www.xplane.com/company/about/
(i) Post-Its: thick marker pens, write one element per
Post-it and write only one point per Post-It
(ii) Drawings: people react stronger to images than
words. Even crude sketches work
CHAPTER 3: DESIGN
Game changing business models
come from deep and relentless inquiry
CHAPTER 1: CANVAS
(iii) Understand the essence: Visual grammar,
Capturing the big picture, seeing relationships
How?
BUSINESS MODEL GENERATION
(Alex Osterwalder & Yves Pigneur)
Visual Thinking
CHAPTER 2: PATTERNS
(iv) Enhance dialogue: collective reference point,
shared language, joint understanding
Visual techniques give 'life' to a bizmod and facilitates co-creation
(v) Explore ideas: idea trigger, Play
(vi) Improve communication: create company-wide
communication, selling internally, selling externally.
Use to tell the story of the BMC…
Level of detail depends on one's goal
- Skype vs. Sellabond
New customer segment
What is it?
A thinking tool that allows us to explore different
directions to take our business model - for example:
A tool of inquiry
Remove a costly resource
Give away free and replace revenue with something
more innovative
What does it look like?
How does it work?
Can take the form of a simple sketch, a complete
BMG canvas, or a financial spreadsheet.
To understand the pros/cons of different possibilities,
we need to construct multiple prototypes at different
levels of refinement.
1. "Thats a nice idea, if only we had the time to
explore different options…."
Interaction with prototypes produces ideas far more
readily than 'vanilla' discussion
'Business as usual' = incremental improvements are
enough to survive/maintain competitive edge
NO. Businesses risk being overtaken/sidelined by
more dynamic competitors/upstarts
How do people react?
2. Market research would be an equally good way to
come up with a new business model
Assumes that data is the most important consideration
when designing new strategic options
Market Research is a single input in designing new
bizmods
Prototyping
Design Attitude
"If you freeze an idea too quickly, you fall in love with it. If
you refine it too quickly, you become attached to it and it
becomes very hard to keep exploring, to keep looking for
better" Jim Glymph, Gehry Partners
The crudeness of early models should be very deliberate
The spirit of inquiry. A willingness to to explore crude
ideas, discard, then take time to examine multiple
possibilities before choosing to refine a few.
Accepting uncertainty until a design direction matures
1. Napkin sketch: draw a basic BMG canvas
2. Elaborated Canvas: Develop a full detailed BMG
canvas. Estimate mkt potential. Think through
connections between blocks
Prototypes at different scales
3. Business case: Spreadsheet including key data.
Sensitivity analysis.
4. Field Test: Test on actual customers. Test VP, CH,
pricing mechanism (R$), etc.
Why use storytelling?
By their very nature, new business models can be
difficult to describe and understand. They challenge
the status quo by arranging things in unfamiliar ways.
Engaging storytelling suspends disbelief in the
unfamiliar. Overcomes resistance.
What the problem is and how it is solved?
Employee tells the story from the company
perspective
Impact/changes to/difference in KA, KR, KP, C$
1. Introducing the new: Making the new tangible. A
good story is a compelling way to quickly outline a
broad idea before getting caught up in the details.
Make Business Models tangible. Keep the story
simple. Depending on your your audience you can
use different protagonists with different perspectives.
Challenges faced. Jobs that need to get done.
Customer tells the story from her perspective
How the new biz mod solves her problems/gets the
job done. And the WTP
Impact/changes to/difference in CR, CH, CS, R$
When to use storytelling
What future business model?
2. Pitching to investors: How will you create value for
customers? How will you make money doing so?
Telling a story illustrates how your business model
solves a customer problem and makes money.
Get 'buy-in' before explaining your model in detail
Making the future tangible: stories offer a strong
technique for blurring the lines between reality and
fiction. A powerful tool for providing tangibility to future
dilemma.
Storytelling
3. Engaging employees: Your team need a crystal
clear understanding of the new business model and
what it means for them.
People are moved more by stories than logic. Ease
listeners into the new or unknown by building the logic
of your model into a compelling narrative.
Techniques
Why use scenarios?
dilemma
How products or services are used?
What kinds of customers use them?
Customers' concerns?
Customers' desires and objectives?
1. Customer scenarios
Guide us through the Customer Segments:
Scenarios
Imagine future possible environments - what is the
most appropriate business model for each of the
future environments
Two main methods
2. Future scenarios
Scenario planning: forces reflection on how a model
might have to evolve under certain conditions. This
sharpens understanding of the model and of
potentially necessary adaptations. Most important it
helps us prepare for the future.
Discussing bizmods around scenarios of concrete
future contexts are more productive than free
brainstorming
CHAPTER 4: STRATEGY
CHAPTER 5: PROCESS
Which channels are most appropriate?
Which rel'ships would be best to establish?
Which problem solutions would customers be most WTP?
Is there a single biz mod that serves them all?
Or do we need to adapt the model for each segment?
Planned future business model
dilemma
Justify change: When you have a strong idea of what
the future competitive landscape will look like. Helps
people imagine where the current biz mod should
evolve to.

4. CHAPTER 3: DESIGN
Game changing business models
come from deep and relentless inquiry
Crucial issues affecting customers and landscape
Market Issues
Which shifts are underway? Where is the mkt heading?
Most important customer segments?
Biggest growth potential?
Market Segments
Declining customer segments?
Peripheral segments that need addressing?
Market forces
Customer needs? Biggest unmet needs?
Needs and Demands
Demand increasing? Decreasing?
What binds customer to a company?
Switching costs
What are the switching costs for a customer?
Importance of brand in this market?
What are customers WTP?
Revenue attractiveness
Where are the largest margins?
Industry Forces
Use Yoffie's 6 Forces
Macro-Economics Forces
Business Model Environment
CHAPTER 1: CANVAS
BUSINESS MODEL GENERATION
(Alex Osterwalder & Yves Pigneur)
CHAPTER 2: PATTERNS
CHAPTER 4: STRATEGY
Key Trends
IT infrastructure
Example: amazon.com 2005
1. Big Picture assessment
Order fulfilment on behalf of companies and individuals
Evaluating Business Models
BM Canvas high level S + W
2. SWOT
Of each of the 9 canvas building blocks
See BMG book pg. 217 - 223 for sample questions
Book by Kim & Mauborgne
Is about creating a completely new industry through
fundamental differentiation as opposed to competing
in existing industries by tweaking established business
models.
Creating new uncontested market space through
value innovation.
What is it?
First Goal: Lower costs by cutting less valuable
features or services.
Simultaneously increasing value while reducing
costs
Second Goal: Increasing value for customers by
creating new benefits & services. Without
significantly increasing cost base
1. Eliminate: Which factors can you eliminate that
your has long competed on?
2. Reduce: Which factors should be reduced below
industry standard?
Business Model Perspectives on Blue Ocean Strategy
4 Actions Framework
3. Raise: Which factors should be raised above
industry standard?
4. Create: Which factors should be created that the
industry has never offered?
1. Cost Impact exploration: LHS epicentre on BM
Canvas
Ask the 4 Action Framework questions about each
building block of the BM Canvas
Blue Ocean + BM Canvas =
2. Value proposition impact: central epicentre on
BM canvas
3. Customer impact: RHS epicentre on BM Canvas
Examples: Cirque du Soleil, Wii
Examples: Nespresso, SMH (Swatch) and Car2go
(Daimler)
(i) Similarity across the 9 building blocks
Look at 3 factors:
Managing Multiple Business Models
(ii) Potential for synergies
(iii) Potential for conflicts
Integrated within group
Options:
Autonomy within the group
Separation (outside the group)
CHAPTER 5: PROCESS

5. CHAPTER 3: DESIGN
Game changing business models
come from deep and relentless inquiry
CHAPTER 4: STRATEGY
Satisfy Market: Tata car, NetJets, GrameenBank, Lulu.com
Bring to Market: Xerox 914, Swatch, Nespresso, Red Hat
Improve market: Dell, EFG bank, Wii, IKEA, Bharti Airtel, Skype, Ryanair,
amazon.com
Create market: Diners Club, Google
Business Model Design + Innovation
Finding the right model
Testing the model before full-scalp launch
Challenges:
Inducing the market to adopt the model
Continuously adapting the model in response to
feedback
Reactive: IBM 90s, Wii, Rolls Royce Jet Engines
Adaptive: Nokia, P&G open innovation, Hilti
Expansive: Nespresso, Xerox 914, iPod-iTunes
Pro-active/explorative: Car2go, Amazon Web
Services
Factors specific to Established companies
Developing an appetite for new models
Aligning old and new models
Challenges:
Managing vested interests
Focusing on the long term
Activities: frame project objectives, Test prelim ideas,
Plan, Assemble team.
1. Mobilise
CSF's: Appropriate people, experience and knowledge
Key dangers: Overestimating value of initial ideas
Activities: Scan environment, study potential
customers (detailed) , interview experts, research
what has already been tried (understand causes of
failures), Collect opinions and ideas.
2. Understand
CHAPTER 1: CANVAS
BUSINESS MODEL GENERATION
(Alex Osterwalder & Yves Pigneur)
Established company activities: Build project
legitimacy, Manage vested interests, recruit a crossfunctional team, get buy-in from decision makers
20 mins of kill/thrill on all ideas. (Devil's advocate)
Established company activities: Mapping and
assessing existing business models, looking beyond
the status quo, searching beyond the existing client
base, demonstrate progress
CSF's: deep understanding of potential target
markets, looking beyond the boundaries defining
target markets
Key dangers: over-researching (disconnect between
research and objectives), biased research because of
pre-commitment to a certain business idea
CHAPTER 2: PATTERNS
CHAPTER 5: PROCESS
Activities: Brainstorm, prototype, test, select
3. Design
Business Model Design Process
Established company activities: prevent taming of bold
ideas, participatory design, old vs. new, avoid short
term focus
CSF's: co-create with people across the company,
ability to see beyond the status quo, taking time to
explore multiple business models
Key dangers: watering down or suppressing bold
ideas, falling in love with ideas too quickly
Activities: communicate and involve, execute
4. Implement
Established company activities: Proactively managing
roadblocks, getting key project sponsorship, old vs.
new business model, communication campaign
announcing the new business model
CSF's: best practice project mgmt, ability and
willingness to rapidly adapt the business model (quick
growth + customer feedback + resolution of issues),
align 'old' and 'new' business models
Key dangers: weak or fading momentum
Activities: scan the environment, continuously assess
your business model, rejuvenate and rethink your
business model, align business models throughout the
enterprise, manage synergies or conflicts between
models
5. Manage
CSF's: long term perspective, pro-activeness,
governance of business models
Key dangers: becoming a victim of your won success,
failing to adapt (Dell)
It is difficult to design an alternative biz mod, but once
you have the decision to select one becomes trivial.
Participants must be willing to invest a significant
amount of time and effort.
Design Attitude
Design Squiggle - uncertain at the outset (messy +
opportunistic) before it focuses on a single point of
clarity once the design has matured. (Damien
Newman, Central - design agency)
Must explore many possible solutions without jumping to adopt one solution
Established company activities: Business model
governance, manage synergies and conflicts,
business model portfolio, keep the beginner's mindset
(constant inquiry + reflection)