Business Model Representations

Written by Sean Murphy. Posted in Customer Development

In a blog post last October entitled “Entrepreneurship as a Science – The Business Model/Customer Development Stack” Steve Blank suggested

Alexander Osterwalder and Yves Pigneur defined a business model as how an organization creates, delivers, and captures value. More importantly they showed how any company’s business model could be defined in 9 boxes. It’s an amazing and powerful tool.  It instantly creates a shared visual language while defining a business.  Their book “Business Model Generation,” is the definitive text on the subject.

Currently there are a number of templates and tools that help teams build a business model canvas:

Osterwalder’s formulation reminds me of Newton’s dot notation for calculus (fluxions or derivatives). It points out the need for a formal notation but it’s too cumbersome and not usefully extensible. I don’t question the need for meaningful and portable representations of business models, and the canvas may be the best thing we have today, but I think it will represent an evolutionary dead end.

It seems like much of the push for it comes from folks who look at many business models (e.g Angels,incubators, and VCs) and want them to be easily comparable, not from entrepreneurs who want to be able to track what they need to validate next and the evolution of their thinking and hypothesis set over time.

For me the approaches suggested below seem more promising, at least through the Find Your Niche stage.

Our approach for bootstrapping entrepreneurs who target businesses includes:


Update Oct 24: Rob Fitz has blogged that he is “Phasing out Canvas and Dashboard Tools.

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Comments (3)

  • Denis Baranov

    |

    Sean, while I agree with you that the canvas doesn’t help entrepreneurs find out what they need to validate next, I disagree with you that it’s an important reason to pay less attention to this tool. As I understand, the canvas wasn’t created to improve the lean process but it was adopted as one of the many tools that aid hypotheses validation because it can show all assumptions in one place.

    The beauty of the canvas is in that quick overview that you say benefits only potential investors. However, this “feature” also benefits entrepreneurs as it allows them to see quickly which business building blocks have been validated and to simplify strategic planning by being a form of a global business dashboard.

    Reply

  • Adam

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    Great article Sean. I haven’t seen any case studies or stories of people walking through ACH for a startup, I wonder if anyone is doing this?

    Reply

  • Sean Murphy

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    We take clients through complex sales and negotiation planning that involves ACH. Our early market exploration approach also incorporates aspects of it, you need to be testing multiple hypotheses at once when the total market for a B2B offering may only be a few hundred to a few thousand customers. You cannot use consumer techniques that only test one thing at a time and assume you have millions of potential customers.

    Often a set of customer interviews support multiple alternative hypotheses that may overlap, compete, or be disjoint. You need to keep an open mind about what prospects are actually telling you.

    Reply

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