2010
Design
Alexander Osterwalder & Yves Pigneur
[BUSINESS MODEL GENERATION]
This book is printed on acid-free paper. o Copyright Š 2010 by Alexander Osterwalder. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions. Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages. For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002. Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.wiley.com. ISBN: 978-0470-87641-1 Printed in the United States of America 10 9 8 7 6 5 4 3 2 1
bmgen_final.indd 4
6/15/10 5:31 PM
Desi bmgen_final.indd 122
6/15/10 5:39 PM
sign bmgen_final.indd 123
6/15/10 5:39 PM
“Businesspeople don’t just need to understand designers better; they need to become designers.” Roger Martin, Dean, Rotman School of Management
bmgen_final.indd 124
6/15/10 5:39 PM
This section describes a number of techniques and tools from the world of design that can help you design better and more innovative business models. A designer’s business involves relentless inquiry into the best possible way to create the new, discover the unexplored, or achieve the functional. A designer’s job is to extend the boundaries of thought, to generate new options, and, ultimately, to create value for users. This requires the ability to imagine “that which does not exist.” We are convinced that the tools and attitude of the design profession are prerequisites for success in the business model generation. Businesspeople unknowingly practice design every day. We design organizations, strategies, business models, processes, and projects. To do this, we must take into account a complex web of factors, such as competitors, technology, the legal environment, and more. Increasingly, we must do so in unfamiliar, uncharted territory. This is precisely what design is about. What businesspeople lack are design tools that complement their business skills.
Design 126 Customer Insights 134 Ideation 146 Visual Thinking 160 Prototyping 170 Storytelling 180 Scenarios
The following pages explore six business model design techniques: Customer Insights, Ideation, Visual Thinking, Prototyping, Storytelling, and Scenarios. We introduce each technique with a story, then demonstrate how the technique applies to business model design. Here and there we've added exercises and suggestions for workshop activities that show you specifically how the design technique can be applied. Book references are provided at the end for those interested in exploring each technique in more depth.
bmgen_final.indd 125
6/15/10 5:39 PM
Technique_No. 1
Customer Insights
bmgen_final.indd 126
6/15/10 5:39 PM
bmgen_final.indd 127
. . . The teenagers are young, hip snowboarders answering questions posed by Richard Ling, a senior sociologist working for Telenor, the world’s seventh largest mobile operator. Ling is interviewing the group as part of a study to gain insights into the use of photos and photo sharing over social networks. Now that
127
nearly every mobile phone sports a camera, photo sharing is of keen interest to cellular operators. Ling’s research will help Telenor capture the “big picture” of photo sharing. He focuses not just on
desIgn
Outside an o≈ce building on the outskirts of Oslo, four Norwegian teenagers wearing Americanstyle “letter” jackets and baseball caps are engaged in a lively discussion with a man in his 50s . . .
Customer InsIghts
Valentine’s Day, 2008
existing and potential new mobile photo sharing services, but on broader issues, such as the role photo-sharing plays with respect to trust, secrecy, group identity, and the social fabric linking these young men. Ultimately, his work will enable Telenor to design and deliver better services.
6/15/10 5:39 PM
Customer Insights
128
Building Business Models on Customer Insights — Companies invest heavily in market research, yet often wind up
created a seamless music experience for customers, integrating
neglecting the customer perspective when designing products,
the iTunes music and media software, the iTunes online store, and
services—and business models. Good business model design
the iPod media player. With this Value Proposition as the kernel of
avoids this error. It views the business model through customers'
its business model, Apple went on to dominate the online digital
eyes, an approach that can lead to the discovery of completely
music market
design
new opportunities. This does not mean that customer thinking is the only place from which to start an innovation initiative, but
The challenge is to develop a sound understanding of customers on
it does mean that we should include the customer perspective
which to base business model design choices. In the field of product
when evaluating a business model. Successful innovation requires
and service design, several leading companies work with social
a deep understanding of customers, including environment,
scientists to achieve this understanding. At Intel, Nokia, and Telenor,
daily routines, concerns, and aspirations.
teams of anthropologists and sociologists work to develop new and better products and services. The same approach can lead to new
Apple’s iPod media player provides an example. Apple understood
or better business models.
that people were uninterested in digital media players per se. The company perceived that consumers wanted a seamless way
Many leading consumer companies organize field trips for senior
to search, find, download, and listen to digital content, including
executives to meet customers, talk to sales teams, or visit outlets.
music, and were willing to pay for a successful solution. Apple’s
In other industries, particularly those involving heavy capital
view was unique at a time when illegal downloading was rampant
investments, talking to customers is part of the daily routine. But
and most companies argued that nobody would be willing to
the challenge of innovation is developing a deeper understand-
pay for digital music online. Apple dismissed these views and
ing of customers rather than just asking them what they want.
‹‹ bmgen_final.indd 128
Adopting the customer perspective is a guiding principle for the entire business model design process. Customer perspectives should inform our choices regarding Value Propositions, Distribution Channels, Customer Relationships, and Revenue Streams.
6/15/10 5:39 PM
As pioneering automaker Henry Ford once said, “If I had asked my customers what they wanted, they would have told me ‘a faster horse.’” Another challenge lies in knowing which customers to heed and which customers to ignore. Sometimes tomorrow’s growth segments wait at the periphery of today’s cash cows. Therefore business model innovators should avoid focusing exclusively on existing Customer Segments and set their sights on new or unreached segments. A number of business model innovations have succeeded precisely because they satisfied the unmet needs of new customers. For example, Stelios Haji-Ioannou’s easyJet made air travel available to lower- and middle-income customers
tomers?
e sell cus hat can w
W
st
mers mo
ach custo
we re How can ? e≈ciently
th
em
C bus usto ine mer Wh ss m -ce a ode ntric get t job( s) d don l de Wh o(e e sig s) o at a and n ho ho ur re
wc wc our cus a an we custo n we tome lish b ta s e to r ne hel ed me hel Ho do we ne p ph r’s ed wd tionships asp ? i la to m re t o a a h W d l o i i r d v u a e r ? r t rs e e i u m c o u p to ns bes ssed with custo ? H stome t fit the and o r m i m s n w o to t ? p money fr hei do we refer Wh we make r t , How can o r a a out t re us ine s an e be mers? to e latio s? our custo nte nsh sta rpr ip d blis ise oo , hw For u ith wh r c ust the at v wil om m? ling a ers to p lue(s) exp ay? are ect cus tom ers tru ly
Customer Insights
Organiz sign model de s s e in s u b
129 design
yaotiou n-centric
who rarely flew. And Zipcar allowed city dwellers to eliminate the hassles of metropolitan car ownership. Instead, customers who pay an annual fee can rent automobiles by the hour. Both are examples of new business models built on Customer Segments located at the periphery under incumbent models: traditional air travel and traditional car rentals.
bmgen_final.indd 129
6/15/10 5:39 PM
What does she
Customer InsIghts
think and feel?
desIgn
130130
what really counts major preoccupations worries & aspirations
What does she
What does she
what friends say what boss says what inuencers say
environment friends what the market oâ„Śers
hear?
see?
What does she
say and do?
attitude in public appearance behavior toward others
pain
fears frustrations obstacles
gain
wants/needs measures of success obstacles
Source : Adapted from XPLANE
bmgen_final.indd 130
6/15/10 5:39 PM
The Empathy Map How to Use the (Customer) Empathy Map possible Customer Segments that you might want to serve using
a business model can sketch profiles of the Customer Segments addressed therein.
your business model. Choose three promising candidates, and
A good way to start is by using the Empathy Map, a tool developed by visual thinking
select one for your first profiling exercise.
company XPLANE. This tool, which we also like to call the “really simple customer
Customer InsIghts
Here’s how it works. First, brainstorm to come up with all the Few of us enjoy the services of a full team of social scientists, but anybody examining
Start by giving this customer a name and some demographic characteristics, such as income, marital status, and so forth.
a better understanding of environment, behavior, concerns, and aspirations. Doing so
Then, referring to the diagram on the opposite page, use a flipchart
allows you to devise a stronger business model, because a customer profile guides the
or whiteboard to build a profile for your newly-named customer
design of better Value Propositions, more convenient ways to reach customers, and
by asking and answering the following six questions:
131 desIgn
profiler,” helps you go beyond a customer’s demographic characteristics and develop
more appropriate Customer Relationships. Ultimately it allows you to better understand what a customer is truly willing to pay for.
1
2
3
4
5
6
what does she see?
what does she hear?
describe what the customer sees in her environment
describe how the environment influences the customer
what does she really think and feel?
what does she say and do?
what is the customer’s pain?
what does the customer gain? • What does she truly want or need to achieve?
• What do her friends say? Her spouse?
imagine what the customer might say, or how she might behave in public
• What are her biggest frustrations?
• What does it look like?
try to sketch out what goes on in your customer’s mind
• What obstacles stand between her and what she wants or needs to achieve?
• How does she measure success?
• Who surrounds her? • Who are her friends? • What types of oΩers is she exposed to daily (as opposed to all market oΩers)? • What problems does she encounter?
bmgen_final.indd 131
• Who really influences her, and how? • Which media Channels are influential?
• What is really important to her (which she might not say publicly)? • Imagine her emotions. What moves her? • What might keep her up at night? • Try describing her dreams and aspirations.
• What is her attitude? • What could she be telling others? • Pay particular attention to potential conflicts between what a customer might say and what she may truly think or feel.
• Which risks might she fear taking?
• Think of some strategies she might use to achieve her goals.
6/15/10 5:39 PM
What does she
Customer InsIghts
think and feel?
desIgn
132 132
what really counts major preoccupations worries & aspirations
What does she
What does she
what friends says what boss says what influencers
environment friends what the market oΩers
hear?
see?
What does she
say and do?
attitude in public appearance behavior toward others
CREATIVE PROBLEM SOLVING TOOLS
29
bmgen_final.indd 132
pain
fears frustrations obstacles
gain
"wants"/needs measures of success obstacles
Source : Adapted from XPLANE
6/15/10 5:39 PM
In October 2008, Microsoft announced plans to provide its entire suite of OΩice applications online. According to the announcement, customers will eventually be able to use Word, Excel, and all other OΩice applications
Customer InsIghts
Understanding a B2B customer using the Empathy Map
through browsers. This will require Microsoft to significantly reengineer its business model. One starting point
133
customer profile for a key buying segment: chief information oΩicers (CIO), who define IT strategy and make
desIgn
for this business model renovation could be to create a
overarching purchasing decisions. What might a CIO customer profile look like? The goal is to create a customer viewpoint for continuously questioning your business model assumptions. Customer profiling enables you to generate better answers to questions such as: Does this Value Proposition solve real customer problems? Would she really be willing to pay for this? How would she like to be reached?
bmgen_final.indd 133
6/15/10 5:39 PM