MIA014_U1_M5

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.

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ISBN: 978-0470-87641-1 Printed in the United States of America 10 9 8 7 6 5 4 3 2 1

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“Businesspeople don’t just need to understand designers better; they need to become designers.”

Roger Martin, Dean, Rotman School of Management

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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.

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Technique_No. 1

Customer Insights

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. . . 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

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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

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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.

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Customer Insights

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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.

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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.

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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

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Customer Insights

Organiz sign model de s s e in s u b

129 design

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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.

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What does she

Customer InsIghts

think and feel?

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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

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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:

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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?

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• 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.

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What does she

Customer InsIghts

think and feel?

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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

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pain

fears frustrations obstacles

gain

"wants"/needs measures of success obstacles

Source : Adapted from XPLANE

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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

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customer profile for a key buying segment: chief information oΩicers (CIO), who define IT strategy and make

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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?

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