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Map the Basics of Your Business Model — So You Can Improve It

When it comes to understanding and creating effective business models, sometimes it’s just a matter of mapping the basics—and remembering that nothing is permanent.
COLLABORATORS Alex Osterwalder
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There are a million business model tools (by our scientific estimate). The point isn’t which is best, but which are useful for you — either as built or as customized by you and your organization.

Here, from business model design guru Alex Osterwalder, is another. The key is to create “a shared visual language” for your executive team.

“What is a business model?”

Osterwalder, an author and workshop leader in the field of business model design and innovation, asks this question wherever he gives talks. And he receives as many answers as there are people in the room. The differences of opinion drove him to create “a shared visual language to talk about business models.”

His creation, what he calls the Business Model Canvas, outlines nine building blocks essential to designing a proper model. The Canvas’s building blocks — foundational topics such as distribution channels, value propositions, and key partnerships — are hardly novel. But with each parameter arrayed on a single page, it’s easier to diagram and envision how a change to, say, your key resources might lead to a corresponding alteration in your cost structure. So when a patent expires, for instance, you can literally remove it from the key resources box and map out the ripple effect on the other eight building blocks.

Before you pull out your pen and get cracking, consider one final tip: “You never write on the canvas,” says Osterwalder, in a video on his site. “For every building block, you want to use Post-It notes.”

The reasoning: No business model is perfect — or permanent. They are ever evolving. You need the flexibility of removable reminders, not the stubborn residue of ink.

THE PLUS

To watch Osterwalder demo his Business Model Canvas with an actual company — Nestle’s Nespresso unit — queue up his January 25 talk at the Stanford Technology Ventures Program on YouTube, and jump to the 13:43 mark.

Earlier in the video, when the time comes for Post-Its, Osterwalder jokes that he doesn’t own any stock in 3M. He does, however, cite 3M as an organization that uses his approach, a list which also includes Ericsson and IBM.

For his visual approach, Osterwalder credits the work of artist Dan Roam, including the book Blah Blah Blah: What to Do When Words Don’t Work.

For more on Roam and how the simple art of sketching can help you manage yourself and others, mine the Build archives for the article, “Want to Capture Ideas So They Stick? Draw Them.”

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