Guestpost: Business Models, Entrepreneurship, and Poverty Alleviation in Kenya

This guestpost tells the special story of how Sebastián Salinas Claro and Joshua Bicknel connected across the globe on the Business Model Hub. They joined efforts in their aim to defeat poverty by teaching entrepreneurship. The results are amazing.

By Sebastián Salinas Claro (with Douglas Cochrane and Joshua Bicknell): My recent journey illustrates the power of social networks and how linkedin and the Business Model Hub brought me to Kenya - all the way from Chile. It was a fascinating experience that all started when I contacted Alex on Linkedin. I told him how I was teaching the Business Model Canvas to disadvantaged youth in the South of Chile with excellent results. He suggested that I post my story on Business Model Hub, which I did. That's where the journey starts.

In August Joshua Bicknel browsed the pages of the Business Model Hub and came across my post. He read about the exciting experience I went through introducing the Canvas in Chile. He decided to contact me, keen to hear more. After a few hours on Skype, I declared my intention to travel to Kenya to work with him on a pilot project. It was quite a commitment from me. Few Chileans travel to Kenya, and it was an even bigger leap considering we had never met. But I took the leap and joined his team in Nakuru, East Africas fastest growing City, in October 2011.
BMGEN goes Kenya

BMGEN goes Kenya
Since then we have been working with unemployed youth supporting them to imagine and design innovative new businesses that create employment and defeat poverty. I want to use this blogpost to discuss some of the insights from this experience, in particular the power of the Canvas as a great leveler. We worked with 4th year Commerce students from Egerton University and unemployed young men and women who never finished high school. Both grasped the Canvas equally fast and applied it to imagine impressive new businesses. In fact, on a number of occasions the non-university students actually impressed us more.
BMGEN goes Kenya
BMGEN goes Kenya
One such occasion was in a session with the Salgaa Sparks youth group. In Salgaa there is no rubbish collection. All waste is either dumped on the streets or burnt. It is a fast growing town and a popular nightspot for transit truckers, so the area is becoming increasingly dirty and unsanitary. Sparks came to us seeking help to develop a solution to this problem. Initially, they didn't imagine starting a business, instead believing the solution to be a volunteer community-cleaning programme. By using the Business Model Canvas we helped them discover a more interesting opportunity altogether.
BMGEN goes Kenya
BMGEN goes Kenya
Firstly, they mapped their idea on the canvas, imagining it as a profitable business, and came up with a rubbish collection scheme. Not a wholly radical idea. A similar schemes exist in other Kenyan settlements. However, they then began to question whether there was any value in the collected waste and soon realized that they could turn the organic materials into fertilizer and sell it to the farmers at $10 a bag. Then they came up with another profitable idea: to rent out their work carts on days when they were not collecting rubbish.
BMGEN goes Kenya
Using the canvas they envisioned, imagined, developed, and refined a very exciting business model with three potential revenue streams. A business that achieves two goals at a time. It cleans-up the environment and provides unskilled youth with jobs. They are currently applying to the Kenyan Youth Enterprise Fund and project that their business will break even in its second month!
BMGEN goes Kenya
Throughout their lives these youth have been excluded because of their social and economic background. By using the Canvas they have, with no formal business training and sometimes not even a high school diploma, produced a very attractive business proposal. This speaks volumes for the capacity of the Canvas as a tool for profound change, empowering communities to start businesses that tackle the current structures of inequality.
BMGEN goes Kenya
We are excited to expand this programme next year. We will take graduates to both Kenya and Chile to work with hundreds of unemployed youth to develop new businesses as we seek to build a global generation of young people with a commitment to defeating poverty through entrepreneurship and not aid. And everywhere we go we will pack the Canvas as the key tool in our arsenal!

Check out our website in www.balloonkenya.com and www.emprediem.com

Signed, Douglas Cochrane, Joshua Bicknell & Sebastian Salinas Claro

Thoughts on Design Thinking by Alan Smith - Designer of "Business Model Generation"

As many of you know, I am a big fan of design thinking applied to business. I believe there is a lot we can learn from designers and their tools to improve the way we innovate and manage in companies. Hence, it's straightforward to have a guest post by a designer.

I invited Alan Smith from The Movement, designer of our upcoming "Business Model Generation" book, to write about his take on design thinking. I've learned enormously about design from Alan while working on the book - it reinforced my love story with design thinking... (more about this topic in "Business Model Generation" ;-) But now, Alan, the stage is yours:

No Parking Policy:

The best class I had in design school was a class called "Design Thinking" with a fabulous professor named Mary Ann Maruska. The best comment I ever got in that class was on a project redesigning a "tow-away zone" sign.

As soon as we got the brief - that instant -I had this bloody brilliant idea of bending the sign-pole at its base and putting a hook through the circle in the "no parking" sign literally towing the sign away.

Brilliant no? What you don't get it? That's ok, most people didn't. I was in love with this idea though!!!! It was so sweet!!! I've done X Y and Z right from a theoretical perspective and damn that's hot!!! I shared it with fellow students. 8/10 times: "ummm". I thought: "pfff. Another dimwit. I'm brilliant. That's ok that they don't get it. Everyone with a brain will."

The course required that you create 10 alternatives, so I half-heartedly went through the process. I made them because I had to. Teacher says so. Jokes on her though, these crap solutions would enforce my Eureka sign and everyone would get it then!

As a young foolish student, my post project-reflection read: "I think my first idea is generally the best for any project. "

Mary Ann's Response : "Really? This must be your first idea on ideas." Went right over my head. But I think I get it now.

Creating alternatives is not just about verifying an idea you like, its about finding one that's better, more appropriate, more interesting, or that leads to something better. Most of all, its about letting go.

This ability to let go dies hard, and with each new field / exercise you enter it comes back without you noticing.

Moving into business model design, I see myself making the same mistakes I made entering graphic design, and afterwards as a systems designer, furniture, motion graphics, web-architecture, management, entrepreneurship, etc...

Like a boxer, you can trust the process like you'd trust a coach. Run the drills knowing that they'll give you value your weaknesses would not allow you to create. Better yet, you'll also train those weaknesses out over time.

When you're new to something, follow medium specific exercises and processes like you follow street-signs. You'll end up arriving at incredible results you never could have found otherwise.

Or, you could just park one idea and hope it doesn't get towed away by the first person who see's through it.

Business Model Designer From Sticky Note To Screen Interaction

Last Friday I was part of the committee for a Masters Thesis defense on business model design at the HEC Business School in Lausanne, Switzerland. Boris Fritscher, whom I previously mentioned on this blog, defended his thesis "Business Model Designer From Sticky Note To Screen Interaction". For his dissertation Boris developed a web-based business model design tool under the guidance of Professor Yves Pigneur, my co-author for an upcoming book on business model innovation.

Boris did an outstanding job combining business relevance with software development. You can check out his presentation and thesis below or on his website. You can also look into a non-interactive demo of his business model design tool. It allows capturing, storing and designing business models (read about it in the dissertation). Boris is not yet opening up the tool to the public, though many readers of my blog have already asked me for access. If we show him how much we want/need this tool he will hopefully change his mind and allow some testers access to an alpha/beta version. Isn't it, Boris ;-) So post a comment to this blog if you think this is relevant!

Have a look at Boris' thesis. It is really interesting and I believe it points us to the future of business model innovation: one where paper based brainstorming is combined and complemented with the advantages of computer aided business model design.

And here the slides Boris presented during his thesis defense:

Book Chunk Project - prototype

Yves Pigneur's and my book on the topic of "Crafting Innovative Business Models" (working title) is only due in May 2009 (approx.). That is way too long to wait. Many people asked us for early access. Hence, I thought it could be a good idea to distribute the book content in separate chunks before.

The slides below outline the draft of this idea of giving interested people early access to our writing for 24.- $US (or maybe a little more). By subscribing to this so-called "book chunk project" you will get several things (suggest more...):

  • first & exclusive access to raw book content
  • influence authors
  • x installments of book chunks (in a non-linear order - as we write them)
  • 50% discount off the final book (approx.)
  • participate in exclusive book chunk webinars
  • access to templates
  • being part of the business model innovation community

I would be interested in your comments on this and if you would be willing to buy such an early and exclusive access. Do you think the pricing is too low? Any suggestion is welcome. In the meantime have a look at the slides that outline this idea that I would launch very soon if I feel an interest from your side:

Book Chunk Project - prototype
View SlideShare presentation or Upload your own. (tags: book project)

Design Thinking & Techniques

I’m just back from a 2-day business model workshop I gave in Medellin, Colombia, with a local telecommunications company. For the first time I really elaborated a bit more on the design-thinking component of sound business model development. I pointed out that business people must display a particular design attitude and use design techniques in order to come up with good new business models.

The participants of the workshop, mainly from engineering backgrounds, responded really well to this message. They seemed to enjoy the co-creation, visual working on the wall, etc., which I got them to do during the break-out sessions.
Here some of the designer’s technique’s that I highlighted for use in business contexts:

  • Observation of clients to understand them, identify needs and design a corresponding business model
  • Co-creation with clients and among multi-disciplinary teams within companies to integrate different perspectives
  • Brainstorming and ideation to achieve break-throughs and come up with new business models
  • Visualization to connect concepts, foster joint understanding and run focused meetings
  • Prototyping to explore several ideas simultaneously and test business models

Initially, I wanted to show the participants the famous IDEO video where they design a new shopping cart in order to illustrate the above design techniques and design attitude. However, since the DVD I had was broken, I had to find some other videos on the Web or from my video library.

After some searching, I finally decided to show two excerpts from “Managing as Designing” from the Weatherhead School of Management. They highlight some interesting thinking on the relationship between design & business. I also showed a very short excerpt (because the whole thing would have scared them) from Philippe Starck’s talk at TED to show that design is not about making “nice” products, but about creating value for the user of a product. Philippe Starck, as many of you certainly now, is a celebrated star designer…

After these thoughts on design I would also like to stress how impressed I was by the workshop participants and the city of Medellin in general. Formerly known as a hub for narco-traffic the city has completely transformed over the past years. There is beautiful architecture everywhere and the economy is booming. Definitely a place I will enjoy to come back to. This is certainly also related to the outstanding hospitality I enjoyed by the persons who invited me.

What is a Business Model?

Update: Based on the overwhelming interest this post got, I updated and republished the version from 2005

A business model is nothing else than a representation of how an organization makes (or intends to make) money. This can be nicely described through the 9 building blocks illustrated in the graphic below, which we call "business model canvas".

Insight: In addition to this post check out the business model design template

The business model topic is very popular among business people today because in various industries we can see a proliferation of new and innovative business models (i.e. new ways of making money). In several industries new business models are threatening or even replacing established companies and conventional ways of doing business. Just have a look at the music or airline industry.

Hence, the interest in business models comes from two opposing sides:

  • Established companies have to find new and innovative business models to compete against growing competition and to fend off insurgents
  • Entrepreneurs want to find new and innovative business models to carve out their space in the marketplace

Within this context the business model concept is a particularly helpful unit of strategic analysis tailored to today's competitive business environment. It helps executives as well as entrepreneurs increase their capacity to manage continuous change and constantly adapt to rapidly changing business environments by injecting new ideas into their business model.

But what actually is a business model?

In management meetings the question of what a business model is (even what “our” business model is) often remains relatively vague. The main reason for this is because business people have an intuitive understanding of business models. Normal, since the business model is about how an organization makes money, which is a manger’s job after all. However, there is often a lack of a more precise and shared understanding of what a business model is. Yet, such a common understanding is required if we want to have high quality discussions of one’s business model and make important business model decisions.

Therefore we have come up with the 9 building block approach to describing business models. It has the characteristics of any other type of model (e.g. in architecture or engineering).

Like other models it is a simplified description and representation of a complex real world object. It describes the original in a way that we understand its essence without having to deal with all its characteristics and complexities. In the same line of thought we can define a business model as a simplified description of how a company does business and makes money without having to go into the complex details of all its strategy, processes, units, rules, hierarchies, workflows, and systems.

Based on an extensive literature research and real-world experience we define a business model as consisting of 9 building blocks that constitute the business model canvas (readers of this blog will realize that this is an updated and slightly adapted version of the model):

  1. The value proposition of what is offered to the market;
  2. The segment(s) of clients that are addressed by the value proposition;
  3. The communication and distribution channels to reach clients and offer them the value proposition;
  4. The relationships established with clients;
  5. The key resources needed to make the business model possible;
  6. The key activities necessary to implement the business model;
  7. The key partners and their motivations to participate in the business model;
  8. The revenue streams generated by the business model (constituting the revenue model);
  9. The cost structure resulting from the business model.

Origins of the term business model

The term business model became popular only in the late 90s, which, personally I think is related to the rapid erosion of prices in the IT and telecom industry. The roots of my assumption lie in Transaction Cost Economics (TCE). Because it became so cheap to process, store and share information across business units and other companies all the way to the customer, many new ways of doing business became possible: Value chains were broken up and reconfigured; Innovative information-rich or -enriched products and services appeared; New distribution channels emerged; More customers were reached.

Ultimately this lead to globalization and increased competition, but, as described above, it also led to new ways of doing business. In other words, today there is a larger variety of how companies can make money: this means new in terms of what they do, how they do it and for whom they do it...

For managers and executives this means that they have a whole new range of possibilities to design their businesses. This results in innovative and competing business models in the same industries. Before, it used to be sufficient to say in what industry you where in, for somebody to understand what your company was doing. All players had more or less the same business model. Today it is not sufficient to choose a lucrative industry, but you must also design a competitive business model. In addition, increased competition and rapid copying of successful business models forces all players to continuously innovate and adapt their business model to gain and/or sustain a competitive edge.

Companies that thoroughly understand their business model and know how the building blocks relate to each other will be able to constantly rethink and redesign these blocks and their relationship to innovate before their business model is copied.

Business Models & Innovation

The term business model is also closely related to innovation. As I mentioned, the business model concept is related to a whole new range of business design opportunities. There are examples of business model innovations in each of the 9 building blocks described. The most obvious is innovating in the value proposition. When mobile phones appeared in the market they offered a different value proposition than fixed line phones. In the early days of the Internet popular indexes like Yahoo! helped people find information on the Web. Regarding target customer segments, low-cost airlines like EasyJet have brought flying to the masses. Dell became really successful by exploring the web as a distribution channel. Gillette has made a fortune by establishing a continuous relationship with customers based on its disposable razors. Apple resurged based on its core capacity of bringing design to computers and electronic gadgets. Cisco became famous for its capacity of configuring activities in new and innovative supply chains. Intel thrived for its capacity to get partners to build on its processing platform. Google tapped in an innovative revenue streams by linking highly specific search results and content with text ads. Wal-Mart became dominant by its ability to slash cost throughout its business model.

For conference or workshop engagements on the topic of business models, please contact me at alex@businessmodeldesign.com and consult my speaker's profile (pdf)

Business Model Innovation Book (book structure prototype)

The reflections on our book on business model innovation are advancing daily. Yves Pigneur, my co-author, and I have come up with a first rough prototype book structure. We will refine our thinking this Friday and we are, of course, curious to hear your feedback.

You can check out the structure in the slidecast below. It gives you an idea where we are heading, though this first draft structure only sketches out the rough outlines.

To listen to and visualize the slidecast, please hit the play button. All the rest is automatic.

I'm looking forward to your first feedbacks...

Workshop Outcome in Mexico

Last week I was in Mexico for Arvetica to facilitate two workshops on Business Model Design and Innovation. The first one was with a group of executives and the second one was with the faculty of the Tecnologica de Monterrey (ITESM). Both were organized by the well known ITESM.

In the first workshop (5 hours) I focused on the utility of the business model concept and a process to achieve business model innovation. In break-out sessions I got the executives to design parts of a business model of a soccer club, which worked out quite well. Here the slides:

In the second workshop (2 days) I emphasized the value of design thinking in business and how it applies to business model design and innovation. The work with the group of about 30 faculty members was quite fun and I made them design an entire (roughly shaped) business model during the two days. Besides that I outlined some of the underlying concepts to business model design and design thinking. Here the slides:

Throughout this first visit to Mexico I had the opportunity to meet some great people. I was very impressed by the strategic thinking and conceptual knowledge of industrialist, Jorge Valdes, of the Valsi and Evans brands and the quality of the people at the Tecnologico, such as Daniel Pandza and Maria Elena Vazquez.

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Business Model Design Blog in Chinese

A while ago I was contacted by Mao Xinyu to translate my blog into Chinese. Well, now businessmodeldesign.cn has gone life. Though I can't read it, I think Mao Xinyu did I great job in translating even the figures into Chinese. Thanks for the great work!

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PinPointers' Experience with the Business Model Concept

Last week I talked to Michael Nørregard Wilkens and Niels Erik Haug-Larsen of the consulting firm PinPointers about their experience with the business model concept.

They do some interesting consulting work and have applied the business model concept in quite innovative ways. For example, with some of their clients they developed the company's business model portfolio in order to help them innovate and streamline according to their strategic objectives.

I will write about the business model portfolio concept in the coming weeks

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Draft Presentation: Competitive Advantage through Business Model Design and Innovation

I just finished a draft presentation for a workshop on the topic "Competitive Advantage through Business Model Design and Innovation". I'm facilitating the workshop next June with about 100 executives in Guadalajara, Mexico. The workshop is hosted by the Tecnologico de Monterrey (ITESM). Your input regarding the slides is most welcome:

At the end I'm going to add some slides on the blue ocean strategy concept by Kim & Mauborgne, as an example of value proposition design...

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