What’s Wrong With the Business Model Framework?
I got my hands on Alexander Osterwalder’s Business Model Generation book in May 2011, which was less than a year after its publication. I read it immediately and was very excited with what I now call the business model framework. Shortly afterwards I had the opportunity to use the approach in a consulting assignment where the client wanted to accelerate international growth.
To support the facilitation I bought the business model toolkit. Armed with the giant business model canvas, the value proposition canvas, the instruction booklets and the business model environment card decks, we were able to analyze the client’s business, identify areas for improvement and determine an action plan in just a few days. In the following six months the client experienced increasing overseas revenue and profit.
Then something strange happened. When I followed up after 12 months, the client had stopped using the business model framework. They no longer used the business model canvas, the value proposition canvas, and the business model environment principles. Instead, they had embarked on a very aggressive and expensive strategy based on a set of untested assumptions. That plan failed, and the company had to revert to the business approach we defined using the business model framework.
Why did the company stop using the business model framework?
Since that first project in 2011, I have used the business model framework in most of my consulting assignments, and since 2014 I have offered a series of workshops in how to apply the approach. And while I am yet to meet someone who isn’t excited with the principles I am surprised to learn that hardly anyone is using it consistently.
Most of the attendees at the workshops never get to buy the posters and use the approach on an ongoing basis. And most of my clients fail to continue using the framework after I leave the building. Why?
I have to say that while people find the business model canvas easy to understand, they have a much harder time with the value proposition canvas, not to speak of the business model environment principles. As we dig into the details of the business model framework, people learn that using it requires mastering a new terminology and that it initially raises many more questions than it answers. With me as the facilitator, we are able to focus on the project and dig our way through the analysis and produce a list of actions we can make right away, but we also create an extensive list of questions that need answering before we can do the really big things. When the project is through and the daily humdrum kicks in, the questions are left unanswered, and business decisions are again made based on gut feeling, prejudices, and superficial analysis.
Business development is not an ad hoc project
There is nothing wrong with the business model framework. Defining business development as an ad hoc project for which you engage a management consultant for five days is the problem. Growing a business is not a single “plan -> execute” exercise, but rather an ongoing repetition of the activities illustrated in the circle to the right. The business model framework remains an excellent foundation and terminology for the process, but it requires that everyone involved becomes proficient in understanding and using the various elements of the framework. And it requires that you take time out on a regular basis to review the progress and the experience accumulated. And it requires that you document your findings, your analysis, your plans, the outcome, and the corrective actions.
Business development is the hunt for a business model that can scale like crazy and it is essentially a series of testing hypotheses. It is a marathon rather than a 400-meter sprint.
Going Global on a Shoestring
In my forthcoming book titled “Going Global on a Shoestring,” I will be using the business model framework to explain how you can design global growth on a tiny budget. I am in search of case stories for the book, so if you use the business model framework consistently, please drop me a note. I cannot guarantee that your case will make it into the book, but I will listen to you.
About the book:
“Going Global on a Shoestring” is written for commercial professionals in the software industry that understand the need for and the enormous potential offered by fast global growth, but need a lean framework for making it happen.
The book provides a repository of practical and tested ideas for how to start global expansion on a small budget, with very few people and from a juvenile position in your domestic market.
Based on Alexander Osterwalder’s business model framework, several selected case stories from the software industry and the author’s experience with growing small information technology companies from incubation to global market leadership, the book provides a lean approach to international expansion.