In zen buddhism there is a saying, that when before you study zen, a mountain is a mountain. When you begin your zen studies all mountains become different, but when you have become a zen master, a mountain is a mountain.
I have had the same experience if we replace “zen” with “business models”.
Several years ago I heard a story about the Danish entrepreneur Aage Damgaard, who started several businesses in different industries and became a leading patron of art. The legend tells that every time an employee suggested a new product for the company, Aage Damgaard asked him three questions:
- Can we make it?
- Can we sell it?
- Can we make money on it?
In 2006 I came across Alexander Osterwalders great thesis about business models – The Business Model Onthology – and started my early works on the first version of the Business Model Architect ELEMENTS. The purpose was to make it simple and easy to work with business model development. However, after several years of studies and practical work with business models I realised, that Aage Damgaard had actually already come up with the simplest way to work with business models: Ask the four questions…
- What do we offer?
- How do we make it?
- How do we sell it?
- How do we make money on it?
So I decided to design the Business Model Architect BUILDING SITE in Aage Damgaard-style with the four key elements of a business model:
Obviously there is a little more to a business model than that, and probably the second best attempt – after Aage Damgaard – to make it easy to understand what a business model is, is made by Alexander Osterwalder and Yves Pigneur with the Business Model Canvas:
The business model canvas outlines nine building blocks of a business model:
- Value proposition – what you offer.
- Customers – who you make it for.
- Channels – how you reach your customers.
- Customer relation – how you relate to your customers.
- Revenue – how you make money.
- Key Activities – what you do.
- Key Resources – what you have.
- Key Partners – who helps you.
- Cost Structure – what it costs to rund the business.
I love the simplicity of the Business Model Canvas and if you look at it, it actually answers all of Aage Damgaards questions. So I decided to combine Aage Damgaard and Alexander Osterwalder while adding my own special blend of spices:
Product – What do we sell?
- Customer value – Why do customers buy?
- Positioning – How do we want our customers to percieve out offer compared to alternatives?
- Price level – How should we price it compared to alternatives?
- Experience Cycle – When in the purchasing and consumption process to we offer unique experiences?
Sales – How do we sell it?
- Customers – Who are our customers?
- Channels – How do we reach our customers?
- Customer Relation – How do we GET, SERVE, KEEP and GROW our customer relationships?
Organisation – How do we make it?
- Activities – What do we do in our business?
- Resources – What to we have – or need to acquire – to do it?
- Partnerships – How to we cooperate with partners?
Finance – How do we make money?
- Revenue – How do we make money?
- Price Model – How to we define the price of our products?
- Costs – What are our costs?
So if you want to start building you business model – whether you use Osterwalders canvas or the BUILDING SITE, you can start building you business model in 13 steps here…