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Book Review: Business Model Generation
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Book Review: Business Model Generation by Alexander Osterwalder and Yves Pigneur

Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers

Written by: Alexander Osterwalder and Yves Pigneur. Hoboken, NJ: John Wiley & Sons, 2010. 281 + iv pages.
Reviewed by: Erik A. Johnson

Business Model Generation

Business Model Generation is a hands-on manual designed to help organizational leaders formalize business concept new product development. In collaboration with their design community, authors Osterwalder and Pigneur developed a business model (BM) design approach surrounding "how an organization creates, delivers, and captures value" (p. 14), termed the Business Model Canvas (BMC or Canvas). Novel and useful change in how enterprises or fields operate toward value imperatives is business model innovation (BMI). As a means to achieve this, the Canvas amounts to a prestructured conceptual map (Trochim, 1989) intended to guide business designers via "structured conceptualization for evaluation" (p. 14) that can be seen in the book's visual BM configurations.

The book presents its BM innovation management approach, and exercises with a colorful panoply of text, sketches, diagrams, and photographs. The first five numbered chapters take the reader through the volume's BM generation process, and are followed by a brief outlook chapter and afterword.

Chapter 1, entitled Canvas, describes the four main elements of a BM as its (1) infrastructure, (2) offered benefits, (3) customers, and (4) financial structure. These areas are deconstructed and addressed through nine BMC "building blocks" (p. 15) for BM design and innovation, visually depicted as the interlocking sections of BM conceptual maps:

  1. Customer segments;
  2. Value propositions of products;
  3. Channels of communication, distribution, and sales;
  4. Customer relationships;
  5. Revenue streams;
  6. Key resources;
  7. Key activities;
  8. Key partnerships; and
  9. Cost structure.

Following descriptions of each of the nine building blocks, readers are prompted to access the book's website as a resource for potential BM innovation utilizing the Canvas.

The second chapter is named Patterns for BM similarities interpreted among five selected business concepts through the lens of the BMC approach. The first is the macro-concept of unbundling the corporation (Hagel and Singer, 1999) or dividing it into three separate types of businesses: (1) customer relationship management, (2) product innovation, and (3) infrastructure management (p. 151). The four other concepts include the long tail BM of selling niche products relatively infrequently (e.g., eBay), the multisided platform that facilitates interactions between distinct but necessarily interdependent customer segments such as Google's web searchers and advertisers, the offer of free products (e.g., Skype), and finally open BMs that promote product innovation through outside partner collaboration (e.g., P&G). Noted is that organizations may incorporate several patterns at once.

Chapter 3, dubbed Design, explains particular design techniques deemed appropriate to business modeling success. The six methods discussed involve accessing customer insights, attempting status quo-transcending ideation, creating visual depictions, manipulating visual or textual Canvas elements of promising ideas as BM prototyping, storytelling, and envisioning scenarios of either customer settings or future business environments. Chapter 4, termed Strategy, is about utilizing the BMC perspective regarding strategic theory, particularly the competitive environment (e.g. Porter, 1980), internal and external evaluation factors (Andrews, 1971), market space innovation (Kim and Mauborgne, 1999), and managing multiple BMs within organizations (Goold, Campbell, and Alexander, 1994).

The fifth chapter, labeled Process, describes five phases of the Canvas design process. The stages detailed are mobilizing organizational buy-in and resources, BMI project team data immersion, generating and screening BMs through design inquiry, field testing of BM prototypes via implementation, and managing BM modifications that incorporate market feedback. The Outlook chapter visits topics such as nonprofit contexts, computer-aided modeling, implementation of new BMs, and IT alignment with a newly ideated BM. The afterword succinctly recounts the book's collective design process.

On purpose, Business Model Generation is not a cookie-cutter offering. The tiny font, horizontal page layout, and lack of an index reflect its design-centered character. Helpfully, prospective readers can gauge their interest at by reviewing the gratis 72-page preview. Clearly, the volume's raison d'être is as a primer for its visually based BM innovation management approach. However, the book also serves to highlight informative Internet Age innovation examples, and the BMC mapping format is logically componentialized so that readers can better understand, explore, and even generate novel business concepts as new products. In sum, Canvas impresses as a potentially useful conceptual device for the strategic job of BM innovation, and the accompaniment of interesting content helps make the book a worthwhile read. Those with topical interest who are open to unique visuals and design will likely enjoy the work.

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