To what extent is the Business Model Canvas constraining? A Co-Creation Canvas example

The Business Model Canvas, as described in Business Model Generation by Osterwalder and Pigneur (2010), presents an easy and very general usable business model framework. However, a question that rises is will (should) each business model fit into this template? Is it sometimes required to innovate the template itself to describe or discover new business models?

An example that I used for experimenting with an alternative template is (service) co-creation. Simply stated, the idea of co-creation is that the separation between a producer and consumer becomes less strict. It is not the producer any more who is the only active party while the consumer is passive. This means that the consumer brings in resources and performs activities to create value together with the producer and has associated costs. To reflect this in the business model canvas, I adapted the template as shown in the figure below.

In a more general sense, we now work with a multi-level business model framework. At the higher level the core value logic is reflected in the specification of the template (for example, the template for co-creation in the figure below). At a lower level the value logic is reflected in the description in the template (which has not been added to the template in the figure below).

Describing and analysing the public discourse on business models

Ghaziani and Ventresca (2005) published some interesting research about the public discourse on ‘business models.’ It commenced in the early 1970s and rose to prominence halfway the 1990s, at the same time as the digital economy. Their research shows that in the early discourse was framed around computer/systems modelling while the later discourse is mostly framed around value creation. In addition, the term business model is also often framed as a tacit conception where its meaning is taken-for-granted.

Ghaziani and Ventresca (2005) conclude that the business model discourse is mostly framed around value creation. Even when the meaning is framed differently these frames still embody the same idea, namely, ‘the question of how to create value in the face of a changing business environment.’ ‘The different frames emphasize different aspects of the same problem. Generating revenues and managing relationships, although ostensibly different, both have something to say about the challenge of creating value in the unsettled Digital Economy.’

Ghaziani and Ventresca also note that while different communities are sensitive to a global meaning of the term business model, they also use it in ways that suit their local needs, for example in marketing its meaning is also often framed around relationship management.

See also previous posts on earlier/related concepts, Drucker's Theory of Business and Humphrey's TAM.

Ghaziani, A., & Ventresca, M. (2005). Keywords and cultural change: Frame analysis of Business Model public talk, 1975–2000. Sociological Forum, 20(4), 523-559.

Testing Business Model Hypotheses: The BM/H Matrix

As Osterwalder and Blank argue, we have to understand that a business model is often just a set of hypotheses and we have to consider alternative business models. However, how to deal with multiple hypotheses and models? This is where a Business Model/Hypotheses Matrix (see figure below) comes in handy as addition to the inspiring and colourful Business Model Canvasses.


The BM/H Matrix is relatively straight forward and provides a good overview of the relations between the business models and hypotheses. One of the main insights is to make explicit whether the same hypothesis comes back in multiple business models, something that is not that easy with just a set of canvasses.

The BM/H Matrix allows also for more advanced use, most importantly help prioritizing hypotheses for testing. It supports understanding what the most critical hypotheses are in terms of the number of business models that include them. There can even be more sophisticated ways of prioritization possible if we weigh the business models (e.g. the profitability of each model).

See also an earlier post on testing business model hypotheses.

IDEO on Business Model Visualisation

IDEO first discuses the purpose of business model visualisation: Communicate it, consider the whole and be creative. They then introduce their visualisation approach. It starts with the value proposition and the markets segments. After that the channels and pricing models are addressed. These four elements constitute the consumer facing business model. Then the competitive strategy is addressed. This is followed by discussing the capabilities and partners. These two elements give the next element, costs. All these elements together constitute the static business model. The pricing model and the costs determine the profitability. Then the dynamics are added by addressing the growth strategy.

HackFwd: Business Models and How Technology is Changing Them from IDEO on Vimeo.

The business model: An organization or network perspective

Whether the business model applies to an organization and/or an organizational network is often left open. I had a look at some definitions to get some clarity about this for myself. (Note that the definitions do not always cover the full conceptualization of the business model concept by the authors.)

Some definitions refer explicitly to a specific organization while others refer to the business network. Examples referring to the network level are the definitions of Timmers (1998), Mahadevan (2000), Gordijn and Akkermans (2001), Weill and Vitale ((2001) and Tapscott (2001). Examples of referring to the organizational level are Rappa (2000), Afuah and Tucci (2001) and Osterwalder, Pigneur and Tucci (2005). Rarely a definitions refers to both explicitly (see, for an example of an exception, the definition of Shafer, Smith, & Linder, 2005) and some leave out in the definition itself whether they refer to organizations or networks (see, for example, the definitions of Chesbrough & Rosenbloom, 2002; Morris, Schindehutte, & Allen, 2005).

While the explicit inclusion of (and the implicit focus on) organization and network in the business model definitions differ, most of them do include both levels in their conceptualization based on their further discussion, operationalization and application of the business model concept (see also some of the related business frameworks and elements of these authors). A focus on a specific organization does seem to make more sense when the emphasis in the definition is on sustainable revenues, profitability and competitive advantage, as discussed above.

Those that refer to organizations (or firms) in their definition are not explicit about the organizational level, whether they refer to the corporate or business unit level. Most seem to imply the business unit level, for example, Chesbrough and Rosenbloom (2002) refer to the relation with business unit strategy. In addition, it is left open whetter a business unit has one business model or can have multiple business models sequentially and/or simultaneously.

In related work on value innovation, Kim and Mauborgne (2005) take the strategic move as unit of analysis instead of the organization, which they define as ‘the set of managerial actions and decisions involved in making a major market-creating business offering.’ This unit of analysis may be a fruitful approach for business models. In addition, there are some definitions that have a different unit of analysis than the organization or network, for example, a specific service (Bouwman, De Vos, & Haaker, 2008).

References

Afuah, A., & Tucci, C. L. (2001). Internet business models and strategies: Text and cases. New York, NY: McGraw-Hill/Irwin.
Bouwman, H., De Vos, H., & Haaker, T. (2008). Mobile service innovation and business models. Heidelberg, Germany: Springer.
Chesbrough, H., & Rosenbloom, R. S. (2002). The role of the business model in capturing value from innovation: Evidence from Xerox Corporation's technology spin-off companies. Industrial and Corporate Change, 11(3), 529-555.
Gordijn, J., & Akkermans, H. (2001). Designing and evaluating e-business models. IEEE Intelligent Systems, 16(4), 11-17.
Kim, W. C., & Mauborgne, R. (2005). Blue Ocean Strategy: How to create uncontested market space and make the competition irrelevant. Boston, MA: Harvard Business School Publishing.
Mahadevan, B. (2000). Business models for Internet-based e-commerce: An anatomy. California Management Review, 42(4), 55-69.
Morris, M., Schindehutte, M., & Allen, J. (2005). The entrepreneur's business model: Toward a unified perspective. Journal of Business Research, 58(6), 726-735.
Osterwalder, A., Pigneur, Y., & Tucci, C. L. (2005). Clarifying business models: Origins, present, and future of the concept. Communications of AIS, 16(1).
Rappa, M. (2000). Managing the digital enterprise: Business models on the Web. Retrieved 2000, February 18, from http://ecommerce.ncsu.edu/business_models.html
Shafer, S. M., Smith, H. J., & Linder, J. C. (2005). The power of business models. Business Horizons, 48(3), 199-207.
Tapscott, D. (2001). Rethinking strategy in a networked world: Or why Michael Porter is wrong about the Internet. Strategy + Business, 24, 1-8.
Timmers, P. (1998). Business models for electronic markets. Electronic Markets, 8(2), 3-8.
Weill, P., & Vitale, M. R. (2001). Place to space: Migrating to eBusiness models. Boston, MA: Harvard Business School Press.

Do we need Twitter to tweet?

As Twitter is moving towards ‘new’ Twitter and they start feeling the pressure to monetize, for example via sponsored Tweets, the platform may make the world an even better place, or not? Will all these extras and commercial messages decrease the user experience and move it away from where it is good at and why people started using it in the first place?

This makes me wonder, do we need Twitter to tweet? Are there other options, for example in the peer-to-peer sense, to make tweeting a general functionality available for everyone and not being controlled by someone? People can use their own clients or portals (maybe with or without advertising), but the tweeting itself would (could/should) be a basic service implemented via some communication protocol. (Okay, here I move beyond my expertise, but I hope you get the idea ;-)