Monday, December 06, 2010

An Extended Business Model Canvas for Co-Creation and Partnering

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. I have been working on the idea that it may be required to sometimes innovate the Business Model Canvas itself to describe or discover new business models based on different kinds of value creation or capture logic.

Up till now I have mainly focussed on extending the Business Model Canvas, not on radically changing it. I tried to do it in such a way that these alternative canvasses do not change the core concepts or the language of Business Model Generation. I have been using the examples of partnering (see here) and co-creation (see here).

However, I was not very happy with the resulting templates as they miss the elegance of the original. So I started redesigning the alternative templates to come up with an extended template that is more closely aligned with the original, but still has the additional elements for focussing on co-creation and/or partnering. The result is the Extended Business Model Canvas for Co-Creation and Partnering as presented in the figure below.

Sunday, December 05, 2010

Alternative business model canvasses: A Partnering Canvas example

In an earlier post I discussed the need to sometimes innovate the business model canvas itself to describe or discover new business models and introduced a Co-Creation Business Model Canvas as example. In this post I will introduce another variety targeted at the Key Partners. Note that these alternatives do not change the core concepts or the language of Business Model Generation as introduced by Osterwalder and Pigneur (2010) nor do they replace the basic template. I see them as complementary; they can be used to highlight different value creation approaches when needed.

The Partnering Business Model Canvas is extended with the activities, resources and cost structure of the Key Partners. I adapted the template as shown in the figure below. In addition, there is also the option to also add partner relationships and channels if this is required. However, this may blow up the canvas too much, making it less easy to understand and communicate.

I see two reasons for the use of this alternative canvas. Firstly, in some business models the business network is very prominent and some of the key resources are owned by the partners or some of the key activities are performed by partners. In particular in business models where the core organization manages the customer relationships and coordinates the value creation but is not so much involved in the supply chain.

Secondly, the (out)sourcing decision is often a very important decision in the business model influencing creating and capturing value (e.g. IMB outsourced the PC operating system to Microsoft). By making the activities and resources of providers more explicit, it becomes more prominent what would be the specific activities and resources of providers that could or should (not) be outsourced.

Saturday, December 04, 2010

Increasing interest in business model innovation

According to a recent survey amongst HBR readers, business model reinvention/innovation is the most pressing concern. A HBR interview on business model innovation with Rita McGrath, Columbia Business School professor, is available as HBR IdeaCast.

One of the topics discussed is the drivers of the increasing interest in business model innovation. According to McGrath there are three major drivers: (1) the increasing speed of everything and the need to be looking for the next big thing (2) intra-industry competition (e.g. electronic gadgets as Christmas gift instead of handbags) requiring companies to rethink their offerings, and (3) the disruptions caused by new business models that create better and more complete customer experiences (instead of just selling products) and that have an increasing number of revenue streams.

McGrath goes into more detail by discussing three signs/stages one should be looking for to know that your business model is overdue: (1) early evidence that gets dismissed or denied (e.g. the gap between your product and the innovations in the market) (2) customers start voicing that alternatives become increasingly acceptable and (3) it hits the financial performance and KPIs.

McGrath mentions three reasons why evidence is often ignored or dismissed: (1) the faith (?) in the assumptions of the current model made by the people in power in the organization (they are not motivated to undermine their own power basis) (2) the evidence is often provided by people who are not central to the strategy process or are seen as not credible (3) either it is threatening or the current business model is so successful that there is a complacency reaction and they feel they do not need to do anything.

McGrath also discusses the relation between business model innovation and change and the investment models and markets.

Finally, McGrath addresses the business model definition, which should include two key dimensions: (1) what are you selling (i.e. the unit of business) and (2) what are the web of activities you are involved in that show up as key metrics that drive performance.