During my personal exploration phase when starting my biz, I was looking for a more strategic way to set everything on solid grounds. I looked around for tools or strategies and came across several approaches of how to structure, outline and set up a business.
I looked at most of them.
Judging a book by its cover isn’t smart, so it took some time until I found the one that stood out for me. The approach that had finally convinced me was the Business Model Generation, created by Alex Osterwalder.
This approach had a structure I found easy to follow through.
Not only did it look universally valid to me, its visual design was downright pleasant, modern and easy to work with. Once I understood the idea behind it and how varying the parameters influenced the bigger picture, I was sure I had found what would work for me.
Today I still believe that the Business Model Generation is the best approach currently available. If you are in this situation of looking for a strategic way to set up your business’ foundation, I want to share with you some basics of this idea, so that you can utilize it easily for your success.
Why Should You Care?
In a blog post, I obviously cannot go as much into details as I could in a book. But what I can do for you, is conveying the idea of how this model works and how it will fit into your thinking processes. If, after reading this article you want to learn more, I can highly recommend that you get the paper book. Even if you have never had a formal education in business or economy, it is easy to absorb and comes with tons of practical examples.
Going through such a process is a bit of work. And to be honest with you – it is the kind of work that reaches into the marrow of what you will do in your business.
Initially, I have felt some resistance to dig so deep … but, yeah, what’s worth to be done, is worth to be done well.
Having gone through this process, I was able to see the path ahead of me much clearer. And it probably helped me to cut out a few trial-and-errors and saved me from wasting time and money, too.
As a creative business owner, you will be adjusting your business model again and again … opportunities will arise and decisions will be made.
This is normal. Don’t be attempted to think that a business model is a static thing. It’s not. It is nothing that is chiseled in stone. It is not and never will be.
When you use the Business Model Generation tool, you get a framework that is able to absorb the changes that happen elegantly. This is worth gold!
To start, let’s have a look at what a business model actually is.
The Business Model Canvas
The Business Model Generation works on a canvas that is separated into 9 building blocks. You can download a printable PDF for free.
The 9 building blocks are as follows:
[1-3] KEY BUSINESS AREAS
Are the network of suppliers and partners that bring in external resources and activities.
These are the most important activities an organization needs to perform well.
Key resources describe the most important assets required to perform your key activities.
 VALUE PROPOSITIONS
Value propositions are based on a bundle of products and services that create value for a customer segment.
[5-7] CUSTOMER ASPECTS
They outline what type of relationship is established and maintained with each customer segment. This building block also explains how customers are acquired and retained.
The channel building block describes how a value proposition is communicated and delivered to a customer segment through communication, distribution and sales channels.
The building block of customer segments depict the groups of people and/or organizations, a company or organization aims to reach and create value for with a dedicated value proposition.
 COST STRUCTURE
The cost structure describes all costs incurred to operate a business model.
 REVENUE STREAMS
Revenue streams result from a value proposition successfully offered to a customer segment.
How To Build and Refine your Business Model
Finding your business model is an iterative process.
To relieve you from a hidden burden: A business model doesn’t have to be unique.
It is totally okay to borrow one that is already working.
You are free to modify, enhance and adapt its building blocks. Markets, times and trends change. After all, the only constant in life is change. And that’s the very reason why your business models will change over time, too.
To modify an existing model, or even build one from scratch, you will have to ask the right questions. Asking the right questions will eventually lead you to this sweet spot that sets you apart and makes your business unique. It literally is an iterative process. Try not to look too much at the competition. When you find your sweet spot, competition will become irrelevant. There is always space for more than one business in the market.
Asking the Right Questions
Asking the right questions is vital. To filter out your customer’s problems, you can start with these questions to dig a little deeper:
- What would make your customer’s job or life easier?
- What is a customer looking for?
- How do current solutions delight or upset a customer?
- Which savings would make a customer happy?
- How does your customer measure success and failure?
- What would increase the likelihood of a customer booking your service or buying your product?
You could also narrow down relevant issues on reflecting how to help to create gains for potential clients.
- How can you make your customer’s job or life easier?
- How can you copy or outperform current solutions that delight your customer?
- How can you do something customers are looking for?
- How can you create positive social consequences that your customer desires?
The answers to this questions will depend on your niche or line of business you are in.
Give yourself some time.
When you have filled out your first canvas, let it settle for a few days and then review it.
Has your perspective changed somewhere? – Take a second canvas and iterate the process. I found myself getting new ideas and researching them with every iteration. Every iteration honed my model – and I learned a lot!
A Tool Tip
This blog post wouldn’t be complete if I at least wouldn’t mention a tool or two that can help you in this process of developing your business plan.
Here again is the Business Model Canvas for your download. I found the visualization of its building blocks immensely helpful. Using sticky notes comes in handy when you feel that everything is still pretty vague and you need space for adjustments.
Alternatively, there is a tool that you can use that will help you test and refine a business model with real numbers. It comes as a web app or an iPad app, but I need to warn you that it is a little pricey (starts at $300/yr.). The Strategyzer app’ features are for people who develop business models more often, or maybe even professionally. But if rapid sketching and analyzing business models to identify their potentials is something you want to do, then go for it. Being able to calculate with real numbers whether an idea is financially viable is also included. No need for extra spreadsheets to do the math.