The Business Model Canvas

Alexander Osterwalder continues to deliver some of the very best thinking about business models.  He has recently completed some posts for his blog, Business Model Design and Innovation, that codify and condense many of the concepts that have been added to the literature on business model innovation in recent years.  I am providing this extract of his most recent post as an example of his thinking and one that provides a very clean and concise definition of a business model.

A business model is nothing else than a representation of how an organization makes (or intends to make) money. Based on an extensive literature research and real-world experience we define a business model as consisting of 9 building blocks that constitute the business model canvas :

1. The value proposition of what is offered to the market;

2. The segment(s) of clients that are addressed by the value proposition;

3. The communication and distribution channels to reach clients and offer them the value 

proposition;

4. The relationships established with clients;

5. The key resources needed to make the business model possible;

6. The key activities necessary to implement the business model;

7. The key partners and their motivations to participate in the business model;

8. The revenue streams generated by the business model (constituting the revenue model);

9. The cost structure resulting from the business model.

Alex's nine building blocks are illustrated in the graphic below.

Comments

[Syed Ahmad]

How can this model be used for government agencies because government agencies are not in the business of making money?.

[Bill Martin]

While I would agree that governments are not in the business of "making" money, they are definitely in the business of creating sources of revenue and, depending on their agenda, increasing their revenues to fund programs. I believe that all of Alexander's nine building blocks can be applied to any government, government agency, or non-profit institution. Every government agency/non-profit should have a very clear value proposition to it's key constituencies. If it doesn't, then it probably is going to fail to deliver its intended end product/service.