Business Model Generation E-Book

Alexander Osterwalder

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: Strategyzer
• Sprache: Englisch
• Veröffentlichungsjahr: 2013

Seitenzahl: 253

Beschreibung

Business Model Generation is a handbook for visionaries, game changers, and challengers striving to defy outmoded business models and design tomorrow's enterprises. If your organization needs to adapt to harsh new realities, but you don't yet have a strategy that will get you out in front of your competitors, you need Business Model Generation. Co-created by 470 "Business Model Canvas" practitioners from 45 countries, the book features a beautiful, highly visual, 4-color design that takes powerful strategic ideas and tools, and makes them easy to implement in your organization. It explains the most common Business Model patterns, based on concepts from leading business thinkers, and helps you reinterpret them for your own context. You will learn how to systematically understand, design, and implement a game-changing business model--or analyze and renovate an old one. Along the way, you'll understand at a much deeper level your customers, distribution channels, partners, revenue streams, costs, and your core value proposition. Business Model Generation features practical innovation techniques used today by leading consultants and companies worldwide, including 3M, Ericsson, Capgemini, Deloitte, and others. Designed for doers, it is for those ready to abandon outmoded thinking and embrace new models of value creation: for executives, consultants, entrepreneurs, and leaders of all organizations. If you're ready to change the rules, you belong to "the business model generation!"

Leseprobe

Business Model Generation

A Handbook for Visionaries, Game Changers, and Challengers

Written byAlexander Osterwalder and Yves Pigneur

DesignAlan Smith, The Movement

Editor and Contributing Co-AuthorTim Clark

ProductionPatrick van der Pijl

Co-created by an amazing crowd of470 practitioners from 45 countries

Co-created by:

Ellen Di Resta, Michael Anton Dila, Remko Vochteloo, Victor Lombardi, Jeremy Hayes, Alf Rehn, Jeff De Cagna, Andrea Mason, Jan Ondrus, Simon Evenblij, Chris Walters, Caspar van Rijnbach, benmlih, Rodrigo Miranda, Saul Kaplan, Lars Geisel, Simon Scott, Dimitri Lévita, Johan fflñrneblad, Craig Sadler, Praveen Singh, Livia Labate, Kristian Salvesen, Daniel Egger, Diogo Carmo, Marcel Ott, Guilhem Bertholet, Thibault Estier, Stephane Rey, Chris Peasner, Jonathan Lin, Cesar Picos, Florian, Armando Maldonado, Eduardo Míguez, Anouar Hamidouche, Francisco Perez, Nicky Smyth, Bob Dunn, Carlo Arioli, Matthew Milan, Ralf Beuker, Sander Smit, Norbert Herman, Atanas Zaprianov, Linus Malmberg, Deborah Mills-Scofield, Peter Knol, Jess McMullin, Marianela Ledezma, Ray Guyot, Martin Andres Giorgetti, Geert van Vlijmen, Rasmus Rønholt, Tim Clark, Richard Bell, Erwin Blom, Frédéric Sidler, John LM Kiggundu, Robert Elm, Ziv Baida, Andra Larin-van der Pijl, Eirik V Johnsen, Boris Fritscher, Mike Lachapelle, Albert Meige, Pablo M. Ramírez, Jean-Loup, Colin Pons, Vacherand, Guillermo Jose Aguilar, Adriel Haeni, Lukas Prochazka, Kim Korn, Abdullah Nadeem, Rory O’Connor, Hubert de Candé, Frans Wittenberg, Jonas Lindelöf, Gordon Gray, Karen Hembrough, Ronald Pilot, Yves Claude Aubert, Wim Saly, Woutergort, Fanco Ivan Santos Negrelli, Amee Shah, Lars Mårtensson, Kevin Donaldson, JD Stein, Ralf de Graaf, Lars Norrman, Sergey Trikhachev, Thomas, Alfred Herman, Bert Spangenberg, Robert van Kooten, Hans Suter, Wolf Schumacher, Bill Welter, Michele Leidi, Asim J. Ranjha, Peter Troxler, Ola Dagberg, Wouter van der Burg, Artur Schmidt, Slabber, Peter Jones, Sebastian Ullrich, Andrew Pope, Fredrik Eliasson, Bruce MacVarish, Göran Hagert, Markus Gander, Marc Castricum, Nicholas K. Niemann, Christian Labezin, Claudio D’Ipolitto, Aurel Hosennen, Adrian Zaugg, Frank Camille Lagerveld, Andres Alcalde, Alvaro Villalobos M, Bernard Racine, Pekka Matilainen, Bas van Oosterhout, Gillian Hunt, Bart Boone, Michael Moriarty, Mike, Design for Innovation, Tom Corcoran, Ari Wurmann, Antonio Robert, Wibe van der Pol, paola valeri, Michael Sommers, Nicolas Fleury, Gert Steens, Jose Sebastian Palazuelos, Lopez, jorge zavala, Harry Heijligers, Armand Dickey, Jason King, Kjartan Mjoesund, Louis Rosenfeld, Ivo Georgiev, Donald Chapin, Annie Shum, Valentin Crettaz, Dave Crowther, Chris J Davis, Frank Della Rosa, Christian Schüller, Luis Eduardo de Carvalho, Patrik Ekström, Greg Krauska, Giorgio Casoni, Stef Silvis, Peter Froberg, Lino Piani, Eric Jackson, Indrajit Datta Chaudhuri, Martin Fanghanel, Michael Sandfær, Niall Casey, John McGuire, Vivian Vendeirinho, Martèl Bakker Schut, Stefano Mastrogiacoo, Mark Hickman, Dibrov, Reinhold König, Marcel Jaeggi, John O’Connell, Javier Ibarra, Lytton He, Marije Sluis, David Edwards, Martin Kuplens-Ewart, Jay Goldman, Isckia, Nabil Harfoush, Yannick, Raoef Hussainali, ronald van den hoff, Melbert Visscher, Manfred Fischer, Joe Chao, Carlos Meca, Mario Morales, Paul Johannesson, Rob Griffitts, Marc-Antoine Garrigue, Wassili Bertoen, Bart Pieper, Bruce E. Terry, Michael N. Wilkens, Himikel - TrebeA, Jeroen de Jong, Gertjan Verstoep, Steven Devijver, Jana Thiel, Walter Brand, Stephan Ziegenhorn, Frank Meeuwsen, Colin Henderson, Danilo Tic, Marco Raaijmakers, Marc Sniukas, Khaled Algasem, Jan Pelttari, Yves Sinner, Michael Kinder, Vince Kuraitis, Teofilo Asuan Santiago IV, Ray Lai, Brainstorm Weekly, Huub Raemakers, Peter Salmon, Philippe, Khawaja M., Jille Sol, Renninger, Wolfgang, Daniel Pandza, Robin Uchida, Pius Bienz, Ivan Torreblanca, Berry Vetjens, David Crow, Helge Hannisdal, Maria Droujkova, Leonard Belanger, Fernando Saenz-Marrero, Susan Foley, Vesela Koleva, Martijn, Eugen Rodel, Edward Giesen, Marc Faltheim, Nicolas De Santis, Antoine Perruchoud, Bernd Nurnberger, Patrick van Abbema, Terje Sand, Leandro Jesus, Karen Davis, Tim Turmelle, Anders Sundelin, Renata Phillippi, Martin Kaczynski, Frank, Bala Vaddi, Andrew Jenkins, Dariush Ghatan, Marcus Ambrosch, Jens Hoffmann, Steve Thomson, Eduardo M Morgado, Rafal Dudkowski, António Lucena de Faria, Knut Petter Nor, Ventenat Vincent, Peter Eckrich, Shridhar Lolla, Jens Larsson, David Sibbet, Mihail Krikunov, Edwin Kruis, Roberto Ortelli, Shana Ferrigan Bourcier, Jeffrey Murphy, Lonnie Sanders III, Arnold Wytenburg, David Hughes, Paul Ferguson, Frontier Service Design, LLC, Peter Noteboom, Ricardo Dorado, John Smith, Rod, Eddie, Jeffrey Huang, Terrance Moore, nse_55, Leif-Arne Bakker, Edler Herbert, Björn Kijl, Chris Finlay, Philippe Rousselot, Rob Schokker, Wouter Verwer, Jan Schmiedgen, Ugo Merkli, Jelle, Dave Gray, Rick le Roy, Ravila White, David G Luna Arellano, Joyce Hostyn, Thorwald Westmaas, Jason Theodor, Sandra Pickering, Trond M Fflòvstegaard, Jeaninne Horowitz Gassol, Lukas Feuerstein, Nathalie Magniez, Giorgio Pauletto, Martijn Pater, Gerardo Pagalday Eraña, Haider Raza, Ajay Ailawadhi, Adriana Ieraci, Daniël Giesen, Erik Dejonghe, Tom Winstanley, Heiner P. Kaufmann, Edwin Lee Ming Jin, Stephan Linnenbank, Liliana, Jose Fernando Quintana, Reinhard Prügl, Brian Moore, Gabi, Marko Seppänen, Erwin Fielt, Olivier Glassey, Francisco Conde Fernández, Valérie Chanal, Anne McCrossan, Larsen, Fred Collopy, Jana Görs, Patrick Foran, Edward Osborn, Greger Hagström, Alberto Saavedra, Remco de Kramer, Lillian Thompson, Howard Brown, Emil Ansarov, Frank Elbers, Horacio Alvaro Viana, Markus Schroll, Hylke Zeijlstra, Cheenu Srinivasan, Cyril Durand, Jamil Aslam, Oliver Buecken, John Wesner Price, Axel Friese, Gudmundur Kristjansson, Rita Shor, Jesus Villar, Espen Figenschou-Skotterud, James Clark, Jose Alfonso Lopez, Eric Schreurs, Donielle Buie, Adilson Chicória, Asanka Warusevitane, Jacob Ravn, Hampus Jakobsson, Adriaan Kik, Julián Domínguez Laperal, Marco W J Derksen, Dr. Karsten Willrodt, Patrick Feiner, Dave Cutherell Di Prisco, Darlene Goetzman, Mohan Nadarajah, Fabrice Delaye, Sunil Malhotra, Jasper Bouwsma, Ouke Arts, Alexander Troitzsch, Brett Patching, Clifford Thompson, Jorgen Dahlberg, Christoph Mühlethaler, Ernest Buise, Alfonso Mireles, Richard Zandink, Fraunhofer IAO, Tor Rolfsen Grønsund, David M. Weiss, Kim Peiter Jørgensen, Stephanie Diamond, Stefan Olsson, Anders Stølan, Edward Koops, Prasert Thawatchokethawee, Pablo Azar, Melissa Withers, Edwin Beumer, Dax Denneboom, Mohammed Mushtaq, Gaurav Bhalla, Silvia Adelhelm, Heather McGowan, Phil Sang Yim, Noel Barry, Vishwanath Edavayyanamath, Rob Manson, Rafael Figueiredo, Jeroen Mulder, Emilio De Giacomo, Franco Gasperoni, Michael Weiss, Francisco Andrade, Arturo Herrera Sapunar, Vincent de Jong, Kees Groeneveld, Henk Bohlander, Sushil Chatterji, Tim Parsey, Georg E. A. Stampfl, Markus Kreutzer, Iwan Schneider, Michael Schuster, Ingrid Beck, Antti Äkräs, EHJ Peet, Ronald Poulton, Ralf Weidenhammer, Craig Rispin, Nella van Heuven, Ravi Sodhi, Dick Rempt, Rolf Mehnert, Luis Stabile, Enterprise Consulting, Aline Frankfort, Manuel Toscano, John Sutherland, Remo Knops, Juan Marquez, Chris Hopf, Marc Faeh, Urquhart Wood, Lise Tormod, Curtis L. Sippel, Abdul Razak Manaf, George B. Steltman, Karl Burrow, Mark McKeever, Linda Bryant, Jeroen Hinfelaar, Dan Keldsen, Damien, Roger A. Shepherd, Morten Povlsen, Lars Zahl, Elin Mørch Langlo, Xuemei Tian, Harry Verwayen, Riccardo Bonazzi, André Johansen, Colin Bush, Alexander Korbee, J Bartels, Steven Ritchey, Clark Golestani, Leslie Cohen, Amanda Smith, Benjamin De Pauw, Andre Macieira, Wiebe de Jager, Raym Crow, Mark Evans DM, Susan Schaper

Copyright © 2010 by Alexander Osterwalder and Yves Pigneur. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada.

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ISBN: 978-0470-87641-1

Table of Contents

The book is divided into five sections: The Business Model Canvas, a tool for describing, analyzing, and designing business models, Business Model Patterns, based on concepts from leading business thinkers, Techniques to help you design business models, Re-interpreting strategy through the business model lens, and A generic process to help you design innovative business models, tying together all the concepts, techniques, and tools in Business Model Generation. The last section offers an outlook on five business model topics for future exploration. Finally, the afterword provides a peek into “the making of” Business Model Generation.

Canvas

Definition of a Business Model

The 9 Building Blocks

The Business Model Canvas

Patterns

Unbundling Business Models

The Long Tail

Multi-Sided Platforms

FREE as a Business Model

Open Business Models

Design

Customer Insights

Ideation

Visual Thinking

Prototyping

Storytelling

Scenarios

Strategy

Business Model Environment

Evaluating Business Models

Business Model Perspective on Blue Ocean Strategy

Managing Multiple Business Models

Process

Business Model Design Process

Outlook

Outlook

References

Note to the Reader:

The print edition of this book is designed around large, four-color two-page spreads.

This digital version has been reformatted for smaller ebook readers and mobile devices.

Preface

Are you an entrepreneurial spirit?

yes _______no _______

Are you constantly thinking about how to create value and build new businesses, or how to improve or transform your organization?

yes _______no _______

Are you trying to find innovative ways of doing business to replace old, outdated ones?

yes _______no _______

If you’ve answered “yes” to any of these questions, welcome to our group!

You’re holding a handbook for visionaries, game changers, and challengers striving to defy outmoded business models and design tomorrow’s enterprises. It’s a book for the business model generation.

Today countless innovative business models are emerging. Entirely new industries are forming as old ones crumble. Upstarts are challenging the old guard, some of whom are struggling feverishly to reinvent themselves.

How do you imagine your organization’s business model might look two, five, or ten years from now? Will you be among the dominant players? Will you face competitors brandishing formidable new business models?

This book will give you deep insight into the nature of business models. It describes traditional and bleeding-edge models and their dynamics, innovation techniques, how to position your model within an intensely competitive landscape, and how to lead the redesign of your own organization’s business model.

Certainly you’ve noticed that this is not the typical strategy or management book. We designed it to convey the essentials of what you need to know, quickly, simply, and in a visual format. Examples are presented pictorially and the content is complemented with exercises and workshop scenarios you can use immediately. Rather than writing a conventional book about business model innovation, we’ve tried to design a practical guide for visionaries, game changers, and challengers eager to design or reinvent business models. We’ve also worked hard to create a beautiful book to enhance the pleasure of your “consumption.” We hope you enjoy using it as much as we’ve enjoyed creating it.

An online community complements this book (and was integral to its creation, as you will discover later). Since business model innovation is a rapidly evolving field, you may want to go beyond the essentials in Business Model Generation and discover new tools online. Please consider joining our worldwide community of business practitioners and researchers who have co-created this book. On the Hub you can participate in discussions about business models, learn from others’ insights, and try out new tools provided by the authors. Visit the Business Model Hub at www.BusinessModelGeneration.com/hub.

Business model innovation is hardly new. When the founders of Diners Club introduced the credit card in 1950, they were practicing business model innovation. The same goes for Xerox, when it introduced photocopier leasing and the per-copy payment system in 1959. In fact, we might trace business model innovation all the way back to the fifteenth century, when Johannes Gutenberg sought applications for the mechanical printing device he had invented.

But the scale and speed at which innovative business models are transforming industry landscapes today is unprecedented. For entrepreneurs, executives, consultants, and academics, it is high time to understand the impact of this extraordinary evolution. Now is the time to understand and to methodically address the challenge of business model innovation.

Ultimately, business model innovation is about creating value, for companies, customers, and society. It is about replacing outdated models. With its iPod digital media player and iTunes.com online store, Apple created an innovative new business model that transformed the company into the dominant force in online music. Skype brought us dirt-cheap global calling rates and free Skype-to-Skype calls with an innovative business model built on so-called peer-to-peer technology. It is now the world’s largest carrier of international voice traffic. Zipcar frees city dwellers from automobile ownership by offering hourly or daily on-demand car rentals under a fee-based membership system. It’s a business model response to emerging user needs and pressing environmental concerns. Grameen Bank is helping alleviate poverty through an innovative business model that popularized microlending to the poor.

But how can we systematically invent, design, and implement these powerful new business models? How can we question, challenge, and transform old, outmoded ones? How can we turn visionary ideas into game-changing business models that challenge the establishment—or rejuvenate it if we ourselves are the incumbents? Business Model Generation aims to give you the answers.

Since practicing is better than preaching, we adopted a new model for writing this book. Four hundred and seventy members of the Business Model Innovation Hub contributed cases, examples, and critical comments to the manuscript—and we took their feedback to heart. Read more about our experience in the final chapter of Business Model Generation.

Seven Faces ofBusiness Model Innovation

The Senior Executive

Jean-Pierre Cuoni, Chairman / EFG International

Focus: Establish a new business model in an old industry

Jean-Pierre Cuoni is chairman of EFG International, a private bank with what may be the industry’s most innovative business model. With EFG he is profoundly transforming the traditional relationships between bank, clients, and client relationship managers. Envisioning, crafting, and executing an innovative business model in a conservative industry with established players is an art, and one that has placed EFG International among the fastest growing banks in its sector.

The Intrapreneur

Dagfinn Myhre, Head of R&I Business Models / Telenor

Focus: Help exploit the latest technological developments with the right business models

Dagfinn leads a business model unit at Telenor, one of the world’s ten largest mobile telephone operators. The telecom sector demands continuous innovation, and Dagfinn’s initiatives help Telenor identify and understand sustainable models that exploit the potential of the latest technological developments. Through deep analysis of key industry trends, and by developing and using leading-edge analytical tools, Dagfinn’s team explores new business concepts and opportunities.

The Entrepreneur

Mariëlle Sijgers, Entrepreneur / CDEF Holding BV

Focus: Address unsatisfied customer needs and build new business models around them

Marielle Sijgers is a full-fledged entrepreneur. Together with her business partner, Ronald van den Hoff, she’s shaking up the meeting, congress, and hospitality industry with innovative business models. Led by unsatisfied customer needs, the pair has invented new concepts such as Seats2meet.com, which allows on-the-fly booking of meetings in untraditional locations. Together, Sijgers and van den Hoff constantly play with new business model ideas and launch the most promising concepts as new ventures.

The Investor

Gert Steens, President & Investment Analyst / Oblonski BV

Focus: Invest in companies with the most competitive business models

Gert makes a living by identifying the best business models. Investing in the wrong company with the wrong model could cost his clients millions of euros and him his reputation. Understanding new and innovative business models has become a crucial part of his work. He goes far beyond the usual financial analytics and compares business models to spot strategic differences that may impart a competitive edge. Gert is constantly seeking business model innovations.

The Consultant

Bas van Oosterhout, Senior Consultant / Capgemini Consulting

Focus: Help clients question their business models, and envision and build new ones

Bas is part of Capgemini’s Business Innovation Team. Together with his clients, he is passionate about boosting performance and renewing competitiveness through innovation. Business Model Innovation is now a core component of his work because of its high relevance to client projects. His aim is to inspire and assist clients with new business models, from ideation to implementation. To achieve this, Bas draws on his understanding of the most powerful business models, regardless of industry.

The Designer

Trish Papadakos, Sole Proprietor / The Institute of You

Focus: Find the right business model to launch an innovative product

Trish is a talented young designer who is particularly skilled at grasping an idea’s essence and weaving it into client communications. Currently she’s working on one of her own ideas, a service that helps people who are transitioning between careers. After weeks of in-depth research, she’s now tackling the design. Trish knows she’ll have to figure out the right business model to bring her service to market. She understands the client-facing part—that’s what she works on daily as a designer. But, since she lacks formal business education, she needs the vocabulary and tools to take on the big picture.

The Conscientious Entrepreneur

Iqbal Quadir, Social Entrepreneur / Founder of Grameen Phone

Focus: Bring about positive social and economic change through innovative business models

Iqbal is constantly on the lookout for innovative business models with the potential for profound social impact. His transformative model brought telephone service to over 100 million Bangladeshis, utilizing Grameen Bank’s microcredit network. He is now searching for a new model for bringing affordable electricity to the poor. As the head of MIT’s Legatum Center, he promotes technological empowerment through innovative businesses as a path to economic and social development.

Section 1Canvas

The Business Model Canvas

A shared language for describing, visualizing, assessing, and changing business models

Chapter Contents

Definition of a Business Model

The 9 Building Blocks

The Business Model Canvas Template

Def_Business Model

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

The starting point for any good discussion, meeting, or workshop on business model innovation should be a shared understanding of what a business model actually is. We need a business model concept that everybody understands: one that facilitates description and discussion. We need to start from the same point and talk about the same thing. The challenge is that the concept must be simple, relevant, and intuitively understandable, while not oversimplifying the complexities of how enterprises function.

In the following pages we offer a concept that allows you to describe and think through the business model of your organization, your competitors, or any other enterprise. This concept has been applied and tested around the world and is already used in organizations such as IBM, Ericsson, Deloitte, the Public Works and Government Services of Canada, and many more.

This concept can become a shared language that allows you to easily describe and manipulate business models to create new strategic alternatives. Without such a shared language it is difficult to systematically challenge assumptions about one’s business model and innovate successfully.

We believe a business model can best be described through nine basic building blocks that show the logic of how a company intends to make money. The nine blocks cover the four main areas of a business: customers, offer, infrastructure, and financial viability. The business model is like a blueprint for a strategy to be implemented through organizational structures, processes, and systems.

The 9 Building Blocks

CS Customer Segments

An organization serves one or several Customer Segments.

VP Value Propositions

It seeks to solve customer problems and satisfy customer needs with value propositions.

CH Channels

Value propositions are delivered to customers through communication, distribution, and sales Channels.

CR Customer Relationships

Customer relationships are established and maintained with each Customer Segment.

R$ Revenue Streams

Revenue streams result from value propositions successfully offered to customers.

KR Key Resources

Key resources are the assets required to offer and deliver the previously described elements . . .

KA Key Activities

. . . by performing a number of Key Activities.

KP Key Partnerships

Some activities are outsourced and some resources are acquired outside the enterprise.

C$ Cost Structure

The business model elements result in the cost structure.

1CS Customer Segments

The Customer Segments Building Block defines the different groups of people or organizations an enterprise aims to reach and serve

Customers comprise the heart of any business model. Without (profitable) customers, no company can survive for long. In order to better satisfy customers, a company may group them into distinct segments with common needs, common behaviors, or other attributes. A business model may define one or several large or small Customer Segments. An organization must make a conscious decision about which segments to serve and which segments to ignore. Once this decision is made, a business model can be carefully designed around a strong understanding of specific customer needs.

Customer groups represent separate segments if:

Their needs require and justify a distinct offer

They are reached through different Distribution Channels

They require different types of relationships

They have substantially different profitabilities

They are willing to pay for different aspects of the offer

For whom are we creating value? Who are our most important customers?

There are different types of Customer Segments. Here are some examples:

Mass market

Business models focused on mass markets don’t distinguish between different Customer Segments. The Value Propositions, Distribution Channels, and Customer Relationships all focus on one large group of customers with broadly similar needs and problems. This type of business model is often found in the consumer electronics sector.

Niche market

Business models targeting niche markets cater to specific, specialized Customer Segments. The Value Propositions, Distribution Channels, and Customer Relationships are all tailored to the specific requirements of a niche market. Such business models are often found in supplier-buyer relationships. For example, many car part manufacturers depend heavily on purchases from major automobile manufacturers.

Segmented

Some business models distinguish between market segments with slightly different needs and problems. The retail arm of a bank like Credit Suisse, for example, may distinguish between a large group of customers, each possessing assets of up to U.S. $100,000, and a smaller group of affluent clients, each of whose net worth exceeds U.S. $500,000. Both segments have similar but varying needs and problems. This has implications for the other building blocks of Credit Suisse’s business model, such as the Value Proposition, Distribution Channels, Customer Relationships, and Revenue streams. Consider Micro Precision Systems, which specializes in providing outsourced micromechanical design and manufacturing solutions. It serves three different Customer Segments—the watch industry, the medical industry, and the industrial automation sector—and offers each slightly different Value Propositions.

Diversified

An organization with a diversified customer business model serves two unrelated Customer Segments with very different needs and problems. For example, in 2006 Amazon.com decided to diversify its retail business by selling “cloud computing” services: online storage space and on-demand server usage. Thus it started catering to a totally different Customer Segment—Web companies—with a totally different Value Proposition. The strategic rationale behind this diversification can be found in Amazon.com’s powerful IT infrastructure, which can be shared by its retail sales operations and the new cloud computing service unit.

Multi-sided platforms (or multi-sided markets)

Some organizations serve two or more interdependent Customer Segments. A credit card company, for example, needs a large base of credit card holders and a large base of merchants who accept those credit cards. Similarly, an enterprise offering a free news-paper needs a large reader base to attract advertisers. On the other hand, it also needs advertisers to finance production and distribution. Both segments are required to make the business model work (read more about multi-sided platforms).

2VP Value Propositions

The Value Propositions Building Block describes the bundle of products and services that create value for a specific Customer Segment

The Value Proposition is the reason why customers turn to one company over another. It solves a customer problem or satisfies a customer need. Each Value Proposition consists of a selected bundle of products and/or services that caters to the requirements of a specific Customer Segment. In this sense, the Value Proposition is an aggregation, or bundle, of benefits that a company offers customers.

Some Value Propositions may be innovative and represent a new or disruptive offer. Others may be similar to existing market offers, but with added features and attributes.

What value do we deliver to the customer? Which one of our customer’s problems are we helping to solve? Which customer needs are we satisfying? What bundles of products and services are we offering to each Customer Segment?

A Value Proposition creates value for a Customer Segment through a distinct mix of elements catering to that segment’s needs. Values may be quantitative (e.g. price, speed of service) or qualitative (e.g. design, customer experience).

Elements from the following non-exhaustive list can contribute to customer value creation.

Newness

Some Value Propositions satisfy an entirely new set of needs that customers previously didn’t perceive because there was no similar offering. This is often, but not always, technology related. Cell phones, for instance, created a whole new industry around mobile telecommunication. On the other hand, products such as ethical investment funds have little to do with new technology.

Performance

Improving product or service performance has traditionally been a common way to create value. The PC sector has traditionally relied on this factor by bringing more powerful machines to market. But improved performance has its limits. In recent years, for example, faster PCs, more disk storage space, and better graphics have failed to produce corresponding growth in customer demand.

Customization

Tailoring products and services to the specific needs of individual customers or Customer Segments creates value. In recent years, the concepts of mass customization and customer co-creation have gained importance. This approach allows for customized products and services, while still taking advantage of economies of scale.

“Getting the job done”

Value can be created simply by helping a customer get certain jobs done. Rolls-Royce understands this very well: its airline customers rely entirely on Rolls-Royce to manufacture and service their jet engines. This arrangement allows customers to focus on running their airlines. In return, the airlines pay Rolls-Royce a fee for every hour an engine runs.

Design

Design is an important but difficult element to measure. A product may stand out because of superior design. In the fashion and consumer electronics industries, design can be a particularly important part of the Value Proposition.

Brand/Status

Customers may find value in the simple act of using and displaying a specific brand. Wearing a Rolex watch signifies wealth, for example. On the other end of the spectrum, skateboarders may wear the latest “underground” brands to show that they are “in.”

Price

Offering similar value at a lower price is a common way to satisfy the needs of price-sensitive Customer Segments. But low-price Value Propositions have important implications for the rest of a business model. No frills airlines, such as Southwest, easyJet, and Ryanair have designed entire business models specifically to enable low cost air travel. Another example of a price-based Value Proposition can be seen in the Nano, a new car designed and manufactured by the Indian conglomerate Tata. Its surprisingly low price makes the automobile affordable to a whole new segment of the Indian population. Increasingly, free offers are starting to permeate various industries. Free offers range from free newspapers to free e-mail, free mobile phone services, and more (see FREE as a Business Model for more on FREE).

Cost reduction

Helping customers reduce costs is an important way to create value. Salesforce.com, for example, sells a hosted Customer Relationship management (CRM) application. This relieves buyers from the expense and trouble of having to buy, install, and manage CRM software themselves.

Risk reduction

Customers value reducing the risks they incur when purchasing products or services. For a used car buyer, a one-year service guarantee reduces the risk of post-purchase breakdowns and repairs. A service-level guarantee partially reduces the risk undertaken by a purchaser of outsourced IT services.

Accessibility

Making products and services available to customers who previously lacked access to them is another way to create value. This can result from business model innovation, new technologies, or a combination of both. NetJets, for instance, popularized the concept of fractional private jet ownership. Using an innovative business model, NetJets offers individuals and corporations access to private jets, a service previously unaffordable to most customers. Mutual funds provide another example of value creation through increased accessibility. This innovative financial product made it possible even for those with modest wealth to build diversified investment portfolios.

Convenience/Usability

Making things more convenient or easier to use can create substantial value. With iPod and iTunes, Apple offered customers unprecedented convenience searching, buying, downloading, and listening to digital music. It now dominates the market.

3CH Channels

The Channels Building Block describes how a company communicates with and reaches its Customer Segments to deliver a Value Proposition

Communication, distribution, and sales Channels comprise a company’s interface with customers. Channels are customer touch points that play an important role in the customer experience. Channels serve several functions, including:

Raising awareness among customers about a company’s products and services

Helping customers evaluate a company’s Value Proposition

Allowing customers to purchase specific products and services

Delivering a Value Proposition to customers

Providing post-purchase customer support