Business Model Generation: book review

Business Model Generation by Alexander Osterwalder and Yves Pigneur presents a structure for the development of business models and guides the reader through the main steps of building a business plan. The book also provides examples of innovative business models, for companies such as Amazon.com.

I recently used this book as one of the sources for a business model innovation class in an MBA. It worked quite well. The aspect of the book which attracted most interest from MBA participants was the discussion about various types of revenue streams i.e. the various ways in which businesses can generate sales and revenues.

Traditionally, businesses derive revenues from the sale of products or services. However, the reality is that companies nowadays make money in a number of other ways, from licensing to advertising fees.

The part about licensing resulted in substantial discussion. Licensing consists of selling some form of intellectual property in return for a fee. It is of particular importance for media companies. One participant who works in the travel and hotel industry (in addition to studying for an MBA) pointed out that hotels, for instance, are finding it increasingly difficult to cope with the demands of music publishing companies and associations that are constantly trying to charge hotels for broadcasting ambient music.

The authors propose to structure a business plan in 9 parts, which they call the Business Model Canvas. The feedback from MBA students was that the Canvas lacks a specific part about strategy. This could be due to the fact that strategy is in fact analysed according to its various components – value proposition, supply chain and so on (the jargon is explained in the book). Other business plan elements, such as “mission and values” do not appear to have a role either.

The book was written in an innovative way: it is a co-creation effort, involving more than 400 contributors. The Internet has changed the way books are written – writing is no longer a solitary task. I wonder whether the 400 contributors are paid any fees – but that is a totally different subject…

The book appears to form the basis of a consulting business: there’s an iPad app and the authors organise a number of events. This is often the case for authors who write books on business modelling. In fact Richard Stutely who wrote The Definitive Business Plan has a similar setup on his own website.

Overall, I would recommend the book and I am not alone in doing so. Anders Sundelin, who writes the Business Model Database blog, is also positive.