The Entrepreneur’s Book Guide #8: Business Model Generation by Alexander Osterwalder

Book Reviews from one entrepreneur to the others

Again, I have been slacking in putting out reviews. Just so much stuff going on, including my own book, which is in the making! Super excited about that!
So in case you want to circle back, here’s the link to my last book review.

I have a bit of time for myself this week, so I hope to put one or two reviews in the bank on top of this one. But for now, I hope you enjoy this one.

So here we go! Let’s dive straight into this book, Business Model Generation, by Alexander Osterwalder.

About the author

Alexander Osterwalder (born 1974) is originally from Switzerland. Education-wise he hails from the field of Political Science before taking a sharp turn for a PhD in Information Systems.

And today?

Well, today Alex Osterwalder ranks among the leading business thinkers of the world. In 2013 Osterwalder won the inaugural Innovation Luminary Award by the European Union and in 2015 he won the strategy award by Thinkers50, called the “Oscars of Management Thinking” by the Financial Times.

So how come?

Well the key reason behind this is: Osterwalder invented the Business Model Canvas. Many people in the startup world are quite familiar with “the canvas”. Other startup gurus like Steve Blamk have picked it up in their books and talks, thus driving adoption of the tool all around the world. For those a bit less familiar with it, the Business Model Canvas is a strategic management tool to visualize, challenge and (re-)invent business models.

Or in plain English: The business model canvas allows you to describe and analyze your entire business on one single page. Pretty cool, huh?

The Business Model Canvas

I myself have used the canvas on multiple occasions, in my startup, in my consulting engagements and also in a corporate setting. I find the Canvas one of the most useful management tools I know and I believe everyone who has anything to do with building or managing a company should be familiar with it.

So without further ado — let’s familiarize ourselves with it.

About the book

Business Model Generation is Alexander Osterwalders’s absolute bestseller. It has sold more than one million copies to date and has been translated to almost 40 languages. USA Today named Business Model Generation among the 12 best business books of all times. The German edition was named Management Book of the Year 2011 and Fast Company Magazine named it one of the Best Books for Business Owners in 2010.

So it seems to be a pretty good book, right?

But calling Osterwalder the author of the book is a bit misleading. In fact, he is the lead author of Business Model Generation. He created the book with his former PhD supervisor Professor Yves Pigneur and 470(!) collaborators from 45 countries. It was initially crowd-funded and self-published in 2009, before being published “for real” by Wiley & Sons in 2010.

The book is essentially a handbook to working with the Business Model Canvas. The Canvas is, in essence, a visual representation of a Business Model. From the book:

A business model describes the rationale of how an organization creates, delivers and captures value.

The Business Model Canvas allows us to deconstruct, describe and analyze any Business Model by breaking them down in building blocks. The book introduces the concept and walks through the nine building blocks of a Business Model. These building blocks are:

1. Customer Segments: An organization serves one or several Customer Segments
2. Value Propositions: It seeks to solve customer problems and satisfy customer needs with value propositions
3. Channels: Value Propositions are delivered to customers through communication, distribution and sales channels
4. Customer Relationships are established and maintained with each Customer Segment
5. Revenue Streams result from value propositions successfully offered to customers
6. Key Resources are the assets required to offer and deliver the previously described elements…
7. Key Activities: … by performing a number of Key Activities
8. Key Partnerships: Some Key Activities are outsource and some Key Resources a acquired outside the own organization
9. Cost Structure: All business model elements together result in the Cost Structure.

So, there you have it. Beautiful, simple and elegant — and so incredibly useful!

The book then goes on into working with these building blocks. It shows some examples of different configurations of these building blocks and highlights the patterns that emerge. We then learch how to design business models using the canvas.

• Which tools can we use to gain insights and come up with business models?
• Which questions do we eed to answer for each building block?
• How do changes in one element affect all the others?

All in all, a book densely packed with hands-on advice and very actionable insights.

What do I think about the book?

You can compare this book to an intensive, immersive language training in a language that you last spoke in high school. Sure, before the course you can formulate some simple phrases and even understand some bits here and there. However, you are severely limited in your abilities to communicate. But once you take four weeks of intensive, immersive language training you unlock so much communicative potential.

This is what this book did to me. I obvoiusly was familiar with business models and was used to explain concepts like value chains and customer segmentation. But I was lacking a framework to tie it all together and explain the whole thing in a simple and elegant way. Now I have it.

Once you have understood the concept behind the Business Model Canvas, you can break down and communicate almost every business model. You understand and can explain why a company does X and not Y.

I have rarely read a book as eye-opening as this. It has vastly improved the way I think businesses and given me a tool to communicate complex issues to all audiences.

I can not recommend this book enough.

My Rating

• Entertainment: 3 out of 5
  This is book is extremely helpful and full of great insights —and it’s a beautiful and delightful read. The design is nice and entertaining and its writing is very accessible. It obviously is still a business book, so it’s neither nailbitingly suspenseful nor stomach-ache inducing funny. But if your into learning more about business you’ll be entertained well enough.
• Novelty: 5 out of 5
  This book has been around for a while, so by now the Canvas has made inroads into the broader startup world. But when I first read it, I was amazed by the possibilities it opened up for me. Back then, it was truly eye-opening and innovative.
• Usefulness: 5 out of 5
  This book is as useful as it gets for anyone who wants to build or manage a business. And this goes for startups and established companies alike! I especially like the fact that using the Canvas gives you a tool to describe and discuss a business model with anyone — no matter what background you have. Especially in diverse teams with people from tech, business and other fields, creating a common language around key concepts of value creation is absolutely invaluable.
• Applicability: 5 out of 5
  This book is a applicable as it gets. It walks you through the entire process of designing and analyzing business models. Along the way it also introduces some very useful techniques such as Prototyping, Storytelling and others.
• Overall rating: 5 out of 5
  5 out of 5. That says it all. Read it.
• Must-read factor: Definitely
  If you are in any way, shape or form interested in building, running or just simply understanding business— read this book.

Over to you: What did you think about the book? Did you enjoy this review? Want me to change something? Let me know in the comments!

About the Entrepreneurs Book Guide

As I am building my company, MinuteHero, I am trying to fill some of my vast knowledge gaps by reading lots of books. Over time I have recommended or given as a gift quite a few of these to friends or business partners.

Soon people started to ask me for book recommendations. This gave me the idea for the Entrepreneur’s Book Guide. I wanted to write book reviews specifically for those of you who want to start your own company or are already running a startup. In the reviews, I will try to explain what I liked or didn’t like, what was useful and actionable and how this book helped me in building MinuteHero.

The reviews are in no particular order, but I do plan on creating an index that is sorted by author and by topic once I have a few of these under my belt. for now, here are the links to my previous book reviews:

The Entrepreneur’s Book Guide #1: Zero to One by Peter Thiel and Blake Masters

The Entrepreneur’s Book Guide #2: The Innovator’s Dilemma by Clayton M. Christensen

The Entrepreneur’s Book Guide #3: The Seventh Sense by Joshua Cooper Ramo

The Entrepreneur’s Book Guide #4: The Hard Thing about Hard Things by Ben Horowitz

The Entrepreneur’s Book Guide #5: High Output Management by Andrew S. Grove

The Entrepreneur’s Book Guide #6: Predictably Irrational by Dan Ariely

The Entrepreneur’s Book Guide #7: Crossing the Chasm by Geoffrey A. Moore