DESIGNING & TESTING BUSINESS MODELS

AlexOsterwalder.com @business_design

SteveBlank.com @sgblank

where do I come from, what do I do?

)-:
my workplace

)-:
my current MVP

BusinessModelGeneration.com/toolbox
iPad stencil, actual scale, template by hortis, le studio. Feb. 2010. http://hortis.lestudio.ch

date: author:

project: screen:

this workshop day combines two global bestsellers

BusinessModelGeneration.com

SteveBlank.com/books.html

Swiss Time Machine

1958

[sources: Henry Chesbrough, photo: life.com]

revenue growth of 41% compounded for the next 20 years

[sources: Henry Chesbrough, photo: xerox.com]

Swiss Time Machine

2009

BusinessModelGeneration.com

1,000,000
new book titles were published in the U.S. in 10

11,000
new business books appear every year

12%
decline of sales in major bookstore chains (07-09)

?
so what did we do?

we changed the product...

would a big publishing house have taken us on with this book?

No!

we changed the business model...

you cant write about business model innovation without an innovative business model

$24.-

$36.-

$54.-

$81.-

$250.-

Results

in the top 10 of softcover business books in the US

170000+ English #bmgen copies in print (June 2011)

18 #bmgen translations upcoming in 2011

more importantly...

business models enable (new) products and technologies and help solve (entirely new) customer problems

the 100 Million dollar question

how do you search for the right business model?

1 2 3 4

understanding business models prototyping alternatives of what could be evaluating your business model design testing business models with customer development

but hey, what is a business model anyways?

?
whats a business model?

Business Model Canvas

to describe, challenge, design, and invent systematically business models more

building blocks

CUSTOMER SEGMENTS

images by JAM

VALUE PROPOSITIONS

images by JAM

CHANNELS

images by JAM

CUSTOMER RELATIONSHIPS

images by JAM

REVENUE STREAMS

images by JAM

KEY RESOURCES

images by JAM

KEY ACTIVITIES

images by JAM

KEY PARTNERS

images by JAM

COST STRUCTURE

images by JAM

key activities

value proposition

customer relationships

key partners

customer segments

cost structure

key resources

revenue channels streams

images by JAM

The Business Model Canvas

key value activities proposition OFFER customer KEY PARTNERS key partners
building block

relationships CUSTOMER SEGMENTS customer segments

building block

KEY ACTIVITIES
building block

CUSTOMER RELATIONSHIPS
building block

building block

building block

KEY RESOURCES
building block

CHANNELS
building block

building block

cost

COST STRUCTURE key

buildi block ng

REVENUE STREAMS channels block

building

revenue streams

structure building resources ck blo

images by JAM

BusinessModelGeneration.com/canvas

illustration

how much less or more do the Swiss pay per gram of coffee consumed at home compared to a decade ago?

600% to 800% more

Nespresso changed the business model for espresso

RESULTS

own recycling containers

one of the fastestgrowing businesses in the Nestl group

average growth of 30% p.a. since 2000

global sales of 3.8+ billion USD

Nespressos business Model

KEY PARTNERS KEY ACTIVITIES
B2C tion distribu
marketing

Value Proposition

CUSTOMER RELATIONSHIPS

CUSTOMER SEGMENTS

Nespre

Club

sso

(espresso fans)

households

ine coffee mach rs manufacture

pod production

*** Nespresso machines businesses

growers

coffee

KEY RESOURCES
e coffe

Nespresso

distribu

channel s

tion

pods

il CHANNELS eta **** r ts outle

order

mail

Nespresso.co
call

ts paten

pod produ ctio facilities

center

Nespresso stores

COST STRUCTURE
production

REVENUE STREAMS
resso sales of Nesp pods

B2C distrib ut

ion

marketing

sales of Nespress o machines

but Nespresso almost failed in 1987 due to a nonperforming business model

Nespressos 1987 Model

KEY PARTNERS KEY ACTIVITIES Value Proposition CUSTOMER RELATIONSHIPS CUSTOMER SEGMENTS

manufacturer

machine

KEY RESOURCES

Nespresso system

offices

CHANNELS
joint venture with machine manufacturer

COST STRUCTURE

REVENUE STREAMS

now Nestl is building a portfolio of business models in their coffee business

BusinessModelGeneration.com/canvas

prototype alternatives and ask yourself what could be

lets take some time to work on a really, really big issue in the world?

access to proper sanitation

2.6 billion people lack access

4 out of 10 people in the world lack even the most simple latrine to perform their needs

* single-use toilet bag * self-sanitizing * biodegradable * turns into fertilizer * (mainly) targeted at poor people * low production cost * people already pay for sanitation

The Business Model Canvas

KEY PARTNERS KEY ACTIVITIES OFFER CUSTOMER RELATIONSHIPS CUSTOMER SEGMENTS

KEY RESOURCES

CHANNELS

COST STRUCTURE

REVENUE STREAMS

mini brainstorming session

come up with as many business model ideas as possible for the Peepoo bag (not full Canvases)

* single-use toilet bag * self-sanitizing * biodegradable * turns into fertilizer * (mainly) targeted at poor people * low production cost * people already pay for sanitation

make rough prototypes of the different alternatives to analyze, evaluate and compare them

k n a r F y r h Ge
[source: Sony Pictures]

[source: Sony Pictures]

[source: Sony Pictures]

[source: Wikimedia Commons]

what does that have to do with business models and my organization?

no architect would build something that resembles his rst sketch

what does that mean for us?

BusinessModelGeneration.com

business model prototyping

napkin sketch

Canvas

business case

eld test

prototyping is the conversation you have with your ideas

Tom Wujec

evaluate your business model design

building block
buildin

building block

g blo ck

building block

building block

build ing block

building block

building block

build ing block

building block

buil di blo ng ck

buildin g block

SWITCHING COSTS
How easy or dicult is it for customers to switch to another company?

with this amazing device you can have thousand songs in a pocket

...and your screwing us because it has just become more dicult to switch devices

RECURRING REVENUES
Is every sales a new eort or will it result in follow-up revenues and purchases? How evenly distributed are your revenues through the year?

EARN BEFORE YOU PAY

Are you earning money before you are spending it?

GAME CHANGING COST STRUCTURE

Is your cost structure substanSally dierent and beTer than those of compeStors?

phone calls will be totally free in the future

GETTING OTHERS TO DO THE WORK

How much does your business model get customers or third parSes to create value for you?

go ahead and share on your facebook page...

...that will make my plaWorm more valuable...

...and raise my plaWorms value(aSon)...

SCALABILITY
How rapidly and how easily can you grow your business model without hi[ng roadblocks (e.g. infrastructure, customer support, etc.)?

VIRALITY/ NETWORK EFFECT

How viral is your business model? How substanSal are the benets to share with others?

PROTECTION FROM COMPETITION

How much is your business model protecSng you from compeSSon?

a product/ technology focus is just not enough anymore

break-out session

BusinessModelGeneration.com/canvas

The Business Model Canvas

KEY PARTNERS KEY ACTIVITIES OFFER CUSTOMER RELATIONSHIPS CUSTOMER SEGMENTS

KEY RESOURCES

CHANNELS

COST STRUCTURE

REVENUE STREAMS

testing business models with customer development

a business model might look great on paper...

building block
buildin

building block

g blo ck

building block

building block

build ing block

building block

building block

build ing block

building block

buil di blo ng ck

buildin g block

.. but after all it is only a...

... a set of hypotheses

guess guess
guess

guess
guess guess guess
guess

guess

guess

s s e u g

guess

StevenBlank.com/books.html

THANK YOU!
BusinessModelGeneration.com AlexOsterwalder.com / @business_design BusinessModelAlchemist.com

BusinessModelGeneration.com/toolbox
iPad stencil, actual scale, template by hortis, le studio. Feb. 2010. http://hortis.lestudio.ch

date: author:

project: screen: