Search Results for: business model

The Project Business Model Timeline

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This post is the fourth in a series of ten about real life experiences of using business model thinking as a foundation for planning and delivering change. Writing this post I’ve had the help of a true friend and admirable colleague (Eva Kammerfors) whom I’ve shared many of the referred to business model experiences with. […]

Business Model Analysis with the Business Model Canvas

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<p><span style=”color: #505050; font-size: 11px; line-height: 19px;”>In an earlier blogpost </span><span style=”color: #505050; font-size: 11px; line-height: 19px;”>we described the issue of ‘doing the things right’ vs. ‘doing the right things’. In that blogpost we introduced the </span><a style=”font-size: 11px; line-height: 19px;” title=”Blog ‘Business Models: Do the right thing'” href=”http://www.bizzdesign.com/blog/business-models-do-the-right-thing/”>Business Model Canvas</a><span style=”color: #505050; font-size: 11px; line-height: 19px;”> (Osterwalder, 2009) as a useful tool for describing how a business creates, delivers and captures value.</span></p><p>In this posting, we will elaborate on Business Models, introducing the subject of Business Model Analysis. We will describe the rationale for doing analyses and present different possible techniques using the case of Nextpresso, a virtual coffee-cup company. The example model is included, in a trial version of our software. Download the trail version of the <a title=”Business Model Module” href=”http://www.bizzdesign.com/tools/business-model-canvas-module/”>BiZZdesign Business Model Canvas Software</a> to learn more about this Tool.</p><h2><span style=”color: #e3004a; font-size: 11px; line-height: 14px;”>Business Model Analysis</span></h2><div class=”captionImage left” style=”width: 600px;”><p>Analysis of business models answers questions concerning why and how a venture is, or will be, viable and valuable; After completing a Business Model Canvas for a current or future business Model, designers have questions such as:</p><ul><li>Where are our revenues coming from? </li><li>What value is delivered to which markets? </li><li>What costs are involved in delivering that value? </li><li>Are our perceived key activities and key resources as important for gaining revenues as we think they are? </li><li>If we change our model in a specific way, what are the effects?</li></ul><p>This requires insight in the elements of the business model, attributes of the elements and the relations between different elements. Results from analysing these elements, attributes and relations become the foundation for business model change and innovation in an organization. When conducting analysis on a business model, there are different perspectives to start from. In our example, each possibility for an analysis is done from a different perspective, answering a specific question.</p><h3>Case and tool introduction</h3><p>In this blog we will present different possibilities for analysis on the Business Model Canvas for a virtual coffee-cup company, Nextpresso. The Nextpresso machines brew espresso from coffee capsules, a type of pre-apportioned single-use aluminium container of roasted coffee with a variety of flavours. Nextpresso initially operates in the Dutch coffee market and intends to “cuppify” the traditional coffee world from there.</p><p><span style=”font-size: 11px; line-height: 19px;”>We will present several possibilities for analysis using the <a title=”Business Model Canvas tool” href=”http://www.bizzdesign.com/tools/business-model-canvas-module/”>BiZZdesign Business Model Canvas Software Tool</a></span><span style=”font-size: 11px; line-height: 19px;”>. Using a tool for Business Modelling is useful since the model is created and stored in a central place, reducing the risk of miscommunication and maximizing the effect of collaboration. Furthermore, communication is made easier through publication functions (html, word, pdf-posters), making the business model better accessible. Needless to say, this is quite important for models that describe how your company creates value. Especially in the case of Business Model Analysis, tooling can help identifying strengths and weaknesses through relating building blocks, and providing insight in cash flows by calculations. Finally, tools help you to work your way “downstream” from your high level business model, to more detailed implementation views e.g. process models, customer journey maps and enterprise architecture models.</span></p><h3>Business Model Canvas for ‘Nextpresso’</h3><p>The Canvas below presents the current business model of Nextpresso. As said, Nextpresso is a coffee-cup company, providing “Great espresso experiences at home and at the office”.</p><p><img class=”left” src=”http://www.bizzdesign.com/assets/BlogDocuments-2/_resampled/resizedimage600476-Business-model-canvas-for-Nextpresso.png” alt=”Business Model Canvas made for Nextpresso” title=”This Business Model Canvas was made for the virtual coffee-cup company Nextpresso” width=”600″ height=”476″/></p><div class=”captionImage left” style=”width: 600px;”><p class=”caption”>Business Model Canvas Nextpresso</p></div><h2><span style=”font-size: 1em; line-height: 19px;”>Comparison of business models</span></h2><p>If we enter a new market, how will this affect our revenues? If we stop providing certain services, will we decrease our costs? Why is the model of our competitor more successful than our model? Comparing different business models is useful in addressing such questions. The Nextpresso case provides a good example of such an analysis:</p><p><img class=”left” src=”http://www.bizzdesign.com/assets/BlogDocuments-2/_resampled/resizedimage600449-Business-model-canvas-for-Nextpresso-new.png” alt=”Business Model Canvas made for Nextpresso” title=”This Business Model Canvas was made for the virtual coffee-cup company Nextpresso” width=”600″ height=”449″/></p><div class=”captionImage left” style=”width: 600px;”><p class=”caption”>New Business Model Canvas Nextpresso</p></div><p><span style=”font-size: 11px; line-height: 19px;”>The Canvas represents the business model of Nextpresso according to the situation before the value proposition ‘Great espresso experience at the office’ was added. At first Nextpresso provided machines and cups for households only. One can see the differences in Customer Segments, Channels, Customer Relationships and Revenue Streams. When elements from the other business model would have been removed, one should have these elements indicated with red. While knowing these differences, Nextpresso can calculate the differences in revenues and costs before and after this change. In the next example, we will present an example of calculating these costs and revenues.</span></p><p><span style=”font-size: 11px; line-height: 19px;”>Typical usage of business model comparison addresses questions regarding GAP-analyses (difference between as-is and to-be models), analyses on optional changes to a business model and comparison of alternative business models for the future. (Note: the feature to compare business models canvasses is standard available in BiZZdesign-software from release 4.2 and up)</span></p><h2>Analyzing Revenues and costs</h2><p>What value do we deliver to which markets and what costs are involved in delivering that value? Where are our revenues coming from? What prices generate what sort of revenues? The ‘Costs and revenues’ function provides a useful way of addressing these questions. Organizations get a simple and clear oversight in the size of the markets they operate in, revenues per revenue stream and costs per cost structure. </p><div class=”captionImage left” style=”width: 600px;”><img class=”left” src=”http://www.bizzdesign.com/assets/BlogDocuments-2/_resampled/resizedimage600122-Business-model-canvas-Nextpresso-cost-and-revenue.png” alt=”Business Model Canvas Costs and Revenues made for Nextpresso” title=”This Business Model Canvas Costs and Revenues was made for the virtual coffee-cup company Nextpresso” width=”600″ height=”122″/><p class=”caption”>Costs and Revenues. Business Model Canvas Nextpresso</p></div><div class=”captionImage left” style=”width: 531px;”><img class=”left” src=”http://www.bizzdesign.com/assets/BlogDocuments-2/Business-model-canvas-detailled-cost-structure.png” alt=”Business Model Canvas detailled costs structure made for Nextpresso” title=”This Business Model Canvas detailled costs structure was made for the virtual coffee-cup company Nextpresso” width=”531″ height=”278″/><p class=”caption”>Detailled costs structure. Business Model Canvas Nextpresso</p></div><p><span style=”font-size: 11px; line-height: 19px;”>For an overview of revenues and costs, specific information per Cost Structure and Revenue Stream serves as input:</span></p><p><span style=”font-size: 11px; line-height: 19px;”> </span></p><div class=”captionImage left” style=”width: 530px;”><img class=”left” src=”http://www.bizzdesign.com/assets/BlogDocuments-2/Business-model-canvas-detailled-marketing.png” alt=”Business Model Canvas marketing made for Nextpresso” title=”This Business Model Canvas marketing was made for the virtual coffee-cup company Nextpresso” width=”530″ height=”275″/><p class=”caption”>Marketing. Business Model Canvas Nextpresso</p></div><p align=”center”><span style=”font-size: 11px; line-height: 19px;”> </span></p><h2>Analyzing the customer relations</h2><p>In the Nextpresso case, management asks themselves: “Do we have different operating concepts for our segments ‘Households’, ‘Office users’ and ‘Companies’? Why? How many? Using the Customer Relations Landscape Map in BiZZdesign Architect, an answer to those questions can look like this:<span style=”font-size: 11px; line-height: 19px;”> </span></p><div class=”captionImage left” style=”width: 530px;”><div class=”captionImage left” style=”width: 600px;”><img class=”left” src=”http://www.bizzdesign.com/assets/BlogDocuments-2/_resampled/resizedimage600202-Business-model-canvas-customer-relationships-landscape-map.png” alt=”Business Model Canvas detailled marketing made for Nextpresso” title=”This Business Model Canvas detailled marketing was made for the virtual coffee-cup company Nextpresso” width=”600″ height=”202″/><p class=”caption”>Detailled marketing. Business Model Canvas Nextpresso</p></div><div class=”captionImage left” style=”width: 600px;”><div class=”captionImage left” style=”width: 600px;”><span style=”font-size: 11px; line-height: 19px;”>If you want to know what operating concepts your organization has for different Product Market Combinations (PMCs), this Customer Relations Landscape Map can be of service. It is typically conducted by organizations operating in segmented markets, e.g. retail banking, where concepts for wealth management relations are very different from concepts for standard retail banking relations.</span></div><div class=”captionImage left” style=”width: 600px;”><span style=”font-size: 11px; line-height: 19px;”><br/></span></div></div><h2/><h2/><h2>Analyzing the channels</h2><p>If you want to analyze, in addition to standard PMCs, through what channels your value propositions are delivered to your market segments, the ‘Channels Landscape Map’ can be of service. With this matrix, organizations can get better insight in <em>how</em> they deliver value.<span style=”font-size: 11px; line-height: 19px;”> </span><span style=”font-size: 11px; line-height: 19px;”> </span></p><div class=”captionImage left” style=”width: 600px;”><img class=”left” src=”http://www.bizzdesign.com/assets/BlogDocuments-2/_resampled/resizedimage600315-Business-model-canvas-channels-landschape-map.png” alt=”Business Model Canvas Channels made for Nextpresso” title=”This Business Model Canvas channels was made for the virtual coffee-cup company Nextpresso” width=”600″ height=”315″/><p class=”caption”>Channels. Business Model Canvas Nextpresso</p></div><p> </p><p>This Channels Landscape Map may be extended by mapping the Channels on different phases a customer is in (e.g. orientation, comparison, purchase, usage, complaint)</p><h2>Presenting your business model</h2><p>Communication to various stakeholders in your organization requires view mechanisms and various presentation options. BiZZdesign Architect provides many presentation options which we will discuss in a next posting.</p><h2>Conclusions and next steps</h2><p>We described types of analysis and we zoomed in on analysing the Business Model Canvas. Analysis of business models answers the question why and how a venture is, or will be, viable and valuable. Based on questions that represent perspectives on analyzing business models, the Nextpresso case shows different possibilities for conducting analysis. Tooling is a useful aid in business model analyses, making calculations and communication easy. Feel free to share in your thoughts and suggestions on alternative analyzes from your practice.</p><p><span style=”font-size: 11px; line-height: 19px;”>BiZZdesign organizes </span><a style=”font-size: 11px; line-height: 19px;” href=”http://www.bizzdesign.com/training/business-model-management/”>training on Business Model Innovation</a><span style=”font-size: 11px; line-height: 19px;”> in London (UK), Brussels (BE) and Amersfoort (NL – </span><a style=”font-size: 11px; line-height: 19px;” href=”http://www.bizzdesign.nl/training/business-model-management/”>see our Dutch website</a><span style=”font-size: 11px; line-height: 19px;”>). More about BiZZdesign’s Business Model Management services and a reference to recent webinars on this subject can be found </span><a style=”font-size: 11px; line-height: 19px;” href=”http://www.bizzdesign.nl/consultancy/business-model-management/”>here</a><span style=”font-size: 11px; line-height: 19px;”>.</span></p></div></div>

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The Project Business Model Results

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This post is the third in a series of ten about real life experiences of using business model thinking as a foundation for planning and delivering change. Writing this post I’ve had the help of a true friend and admirable colleague (Eva Kammerfors) whom I’ve shared many of the referred to business model experiences with. […]

The Project Business Model Profile

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This post is the second in a series of ten about real life experiences of using business model thinking as a foundation for planning and delivering change. Writing this post I’ve had the help of a true friend and admirable colleague (Eva Kammerfors) whom I’ve shared many of the referred to business model experiences with. […]

The Project Business Model

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This post is about real life experiences of using business model thinking as a foundation for planning and delivering change. The collection of these experiences have been a long slow journey started out in the early 90′s, experimenting with creating small businesses. During the last six years experiences from the field and theory has accelerated […]

Should Business Architects use the Business Model Canvas at the Program level?

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In the Open Group conference at Newport Beach, I listened to a series of presentations on business architecture.  In one of them, the presenter described his practice of using Osterwalder’s Business Model Canvas to create a model of his program’s environment after a business program (aka business initiative) is started.  He felt that the canvas is useful for creating a clear picture of the business impacts on a program.  There are problems with this method, which I’d like to share in this post. 

Let me lay out the context for the sake of this post since there is no business architecture “standard vocabulary.” 

A “business program” is chartered by an “enterprise” to improve a series of “capabilities” in order to achieve a specific and measurable business “goal.”  This business program has a management structure and is ultimately provided funding for a series of “projects.”  The business architect involved in this program creates a “roadmap” of the projects and to rationalizes the capability improvements across those projects and between his program and other programs. 

For folks who follow my discussions in the Enterprise Business Motivation Model, I use the term “initiative” in that model.  I’m using the term “program” for this post because the Open Group presenter used the word “program.”  Note that the presentation was made at an Open Group conference but it does NOT represent the opinion or position of the Open Group and is not part of the TOGAF or other deliverables of the Open Group.

The practice presented by this talk is troubling to me.  As described, the practice that this presenter provided goes like this: Within the context of the program, the business architect would pull up a blank copy of the business model canvas and sit with his or her executive sponsor or steering committee to fill it out.  By doing so, he or she would understand “the” business model that impacts the program. 

During the Q&A period I asked about a scenario that I would expect to be quite commonplace: what if the initiative serves and supports multiple business models?  The presenter said, in effect, “we only create one canvas.”  My jaw dropped.

A screwdriver makes a lousy hammer but it can sometimes work.  The wrong tool for the job doesn’t always fail, but it will fail often enough to indicate, to the wise, that a better tool should be found.

The Osterwalder’s business model canvas makes a very poor tool for capturing business forces from the perspective of a program.  First off, programs are transitory, while business models are not.  The notion of a business model is a mechanism for capturing how a LINE OF BUSINESS makes money independent of other concerns and other lines of business.  Long before there is a program, and long after the program is over, there are business models, and the canvas is a reasonable mechanism for capturing one such model at a time.  It is completely inappropriate for capturing two different models on a single canvas.  Every example of a business model, as described both in Osterwalder’s book and on his web site, specifically describe a single business model within an enterprise.

I have no problem with using business models (although my canvas is different from Osterwalder’s).  That said,  I recommend a different practice: If the business initiative is doing work that will impact MULTIPLE business models, it is imperative that ALL of those business models are captured in their own canvas.  The session speaker specifically rejected this idea.  I don’t think he is a bad person.  I think he has been hammering nails with a screwdriver.  (He was young).

Here’s where he made his mistake:

multistream value chain

In the oversimplified value stream model above, Contoso airlines has three business models.  The business owners for these three businesses are on the left: Bradley, Janet, and Franklin.  Each are primarily concerned with their own business flows.  In this oversimplified situation, there are only two programs, each with one project.  If the session speaker were working on the Plantheon program, his idea works.  there is only one business model to create.  That nail can be hammered in with a screwdriver.  Lucky speaker.  Showing Franklin his own business model is a good thing.

But if we are working on the Flitrack program, what do we show Franklin?  if we create a “generic” canvas that includes cargo, he will not recognize the model as being applicable to his concerns.  He will not benefit and neither will the program.  In fact, Franklin will think us fools because he had a presentation from Plantheon yesterday showing him an accurate model… don’t you people talk?

Program Flitrack should have one-on-one conversations with Bradley and Janet to develop their business models.  The business model that Franklin cares about does not need to be created again.  It can come out of the repository.  The Flitrack program would consider all three models as independent inputs to the business architecture of the organization impacting the program. 

Anything less is business analysis, not business architecture.

Alex Osterwalder’s Business Model Canvas

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Alex Osterwalder, entrepreneur, “Business Model Generation” author and creator of the Business Model Canvas, discusses how enterprise architects can contribute to business models. He suggests that there needs to be a bridge between Enterprise Architecture and the highest strategic level of business, bringing strategic and implementation concepts together. Continue reading →