Alexander Osterwalder is the co- developer of the Business Model Canvas and in his recently published interview with Bill Fischer under the aegis of IMG Business School he elaborated on the origin of the Business Model Canvas. He also wrote a piece way back in 2011, in his then blog – Business Model Alchemist, on the 7 questions to assess your Business Model Design which is surprisingly relevant today.
He starts by asserting that “Ultimately, customers are the only relevant judges of your business model.”
Every business model has a product or service that focuses on a ‘customer’s job to be done’ (Value proposition). According to him you start by asking how well your ‘Value Proposition’ is getting your target customer’s job done? Also ask how critical is this job which will eventually indicate if there will be a budget to solve it.
The next step is to answer the following 7 questions and rate each answer in a scale of 0 to 10. You will get a sense of where you are in your Business Model Generation.
- How much do switching costs prevent your customers from churning?
- How scalable is your business model? ( Hint : If you are selling SAAS, you are pretty scalable)
- Does your business model produce recurring revenues? ( SAAS does, just keep a negative churn ))
- Do you earn before you spend? ( Are you collecting in advance or in arrears?)
- How much do you get others to do the work?
- Does your business model provide built-in protection from competition?
- Is your business model based on a game changing cost structure?
You should read the article (link below) as each point is backed by examples (some may be a bit dated). And Alexander recommends you read it in conjunction with Steve Blank’s Customer Development process. I agree.
If you want some feedback on your BMC feel free to reach out. I am right here in LinkedIn.
