Last month I did a short 7 minute talk in the “Eye Opener” session at eDay in Rotterdam. Have a look at the video.

The waiting is over. Our new book “Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers” is now on the market. Yesterday we shipped over 1′000 pre-purchased books to more than 55 countries.

Enjoy the extensive online preview below and the FREE 72 page pdf preview of Business Model Generation. In order to keep the price affordable we are selling it over our book website for the first few months before distributing it through Amazon.com.

We are curious to hear about your feedback regarding content and form. You may also want to have a closer look at the story and business model of the book, which are very special – more on that at the end of the preview.

Our upcoming book Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers (10% pre-purchase discount) is literally on the way to the printing press – time to summarize the experience.

The past 14 months have been an exciting, but also very exhausting innovation journey. From all my experiences with innovation (I have helped build two and sell one organization) this has been by far the most challenging one. It is only thanks to a great team that this project has produced a powerful book (Yves Pigneur: Co-Author, Alan Smith: Design, Tim Clark: Editing, Patrick van der Pijl: Production). So how did the journey look like:

Starting Point

Goal:

• Produce a book on the topic of business model innovation that stands out in a market where countless strategy and management books are published every year

Assets:

• a “willing” and enthusiastic co-author with the best analytical and structuring skills I can imagine: My former PhD supervisor Prof Yves Pigneur
• a reasonably well frequented blog on business models with a global audience
• a business model innovation approach increasingly practiced around the world, notably in companies such as 3M, Ericsson, Deloitte, and Telenor (based on my PhD dissertation and blog)
• a variable income stream from keynote talks and workshops that almost covers the living costs for my little family (invitations for gigs solely through my blog) and allows for writing

Handicaps:

• “Competing” in a field of big name gurus from Harvard, Insead, Wharton & Co., while I am mainly known through my blog

Initial Ideas:

• Publish the book based on an innovative business model to underline the importance of the concept
• Finance the book through corporate sponsors who would have their logo on the cover
• Bypass publishers
• Sell mainly through Amazon.com

Of course things turned out differently than I initially imagined. It was actually much more exciting, though I hadn’t foreseen most of the obstacles. But let’s first look at the end result of the journey.

Outcome:

• a highly visual, full color, beautifully designed, and practical book with 280 pages on business model innovation
• strong differentiation from traditional strategy & management books
• 470 co-authors who have contributed to making this a better product and who have partially financed the endeavor through their access fees to the Business Model Hub where the co-creation has take place
• Pre-sales through our own website www.businessmodelgeneration.com that have contributed to financing the first print run
• Successfully bypassed publishers (I even got an invitation by the German publishing industry to show how we’ve done it)

What I realized during the project was that Business Model Generation is spearheading an entirely new generation of management books: designed, visual, co-created, approachable and applicable. We had to create entirely new systems and processes to actually produce such a book.

During the work with our creative director and designer, Alan Smith from The Movement, I realized how powerful design is to create a good management book. It’s not “just” about the content, but also about the form. Management concepts are inherently visual, because they deal with simplifying the complexity of today’s business environment in order to make it manageable. Not using visuals to convey these concepts seems silly.

Good design can make management books much clearer and more functional – and as a side effect also more beautiful. As a result of our project I have become intolerant for old-style text-heavy management and strategy books.

So what are the key lessons learned that I could share with writers of future management books?

Lessons learned:

Pros:

• Co-creating the book in a completely transparent way on an Internet platform has been a wonderful experience. We regularly shared content chunks in a very raw and unedited format with 470 co-authors. In addition we gave insights into our challenges and the design process. The feedback and comments led to a greater product – though responding to every one of the 1’300+ comments and integrating them into the book was extremely time consuming. The positive aspect was to see how enthusiastic the crowd was and how some people started to feel ownership of the product. Rightly so, since they contributed and will have their names printed in the book.
• Designing the book under the creative direction of Alan Smith has been an eye-opening experience. I couldn’t imagine writing a text-only business book anymore. Impossible. It just wouldn’t make sense. Design and visualization is – in my opinion – indispensable to convey business concepts. More importantly even, discussing the design of content with Alan helped crystallize key concepts of the book. Thus, design thinking has become core to producing content rather than just an afterthought to make the book look good.
• Differentiation has been “easier” than expected. What we have done in terms of co-creation and book design is truly unique and has attracted many, many curious people. I think it was the only possible path for us “underdogs” in this field of mostly North American gurus (sometimes with Indian roots . Sales will tell.

Cons:

• Playing underdog is tough. The players who we hoped could sponsor the book project didn’t see the potential and didn’t understand. Now that it’s done they are showing up. Too late – we covered the risk of the project ourselves and succeeded. The premium to join
  now is high!
• Resources were extremely limited. It is only thanks to the “sacrifices” of the entire core book team that we could bring this project to fruition. More money would have made the process much easier, yet it probably wouldn’t have led to a better end product.
• Lacking the infrastructure to do what we wanted to do was a challenge. There is no off-the-shelf platform on the Web where an author can co-create with readers and ask them for a participation fee. We tinkered with Ning and Paypal and my blog to put something workable together.
• Amazon.com is a must-have distribution channel. However, to sell on Amazon we must give them 55% of our sales price. This leaves us with 45% to cover production costs and shipping to their warehouses. We will probably have to charge a much higher price than we want to simply to cover our costs. However, solely selling at a reasonable price through our own website www.businessmodelgeneration.com based on a Dutch fulfillment center is not an option. Amazon has a de-facto monopoly…

Those were some initial thoughts… There is certainly more and I will write more when we have started to deliver books end of September.

Have a look at the “making of” pages coming directly from Business Model Generation to learn more about what we’ve done.

Making of…

It’s a really exciting topic and I am a firm believer in the combination of “doing good” and “doing well”. In my opinion the traditional frontiers between nonprofits focusing on social and environmental impact, and corporations solely focusing on profits will disappear – because of new and innovative business models. So many young professionals want to make a difference, but are not willing to forgo decent salaries. Personally, I think that’s not a contradiction. The challenge is to come up with the business models that combine both impact & profit.

Michael Shuman, author of Going Local, nicely summarizes why I think nonprofits must be replaced with different business models (and I’m speaking with the experience of somebody who worked in the HIV/AIDS and malaria field):

There’s a very good argument that many of the attributes of typical nonprofits – heavy reporting requirements, self-reappointing boards, poor access to capital, awful labor standards (in the name of the public interest) – make them lousy vehicles for social change…I think we need to rethink the structure of do-good enterprises.

In my presentation I mainly focused on showing how the Business Model Canvas can be used to describe and design “new” models like Grameenphone, MyC4, Grameen Bank, Kiva and more. Have a look and tell me what you think:

By the way, we are looking for funding to write a social entrepreneurship version of our book Business Model Generation: A Handbook for Visionaries, Game Changers and Challengers. We know that this would be of immense value and that it would have a huge audience. Organizations like the Skoll Foundation, Ashoka and others are likely to be interested, but we don’t have the contacts there…

Sellaband provides an alternative to the traditional music industry. It is a platform that empowers artists to record their next album, funded by their fans.

Read more about the SellaBand business model example and how it came to live in Patrick van der Pijl’s blogpost. Patrick worked with strategy consultant Ouke Arts, strategy visualizers JAM, and Sellaband co-founder Johan Vosmeijer on the case.

If you’re interested in the link between business models and visualization: JAM has done a lot of the visual thinking in “Business Model Generation“!

In fact, when you have designed and thought through your business model you have the perfect basis for writing a good business plan. Structure your business plan into five main sections: The team, the business model, financial analysis, external environment, implementation roadmap, and risk analysis.

The Team

One of the elements that particularly venture capitalists look at first is the management team of a project. Is the team experienced, knowledgeable and connected enough to pull-off what they propose? Highlight why your team is the right one to successfully build the business model you propose in the document.

The Business Model

In this section you showcase the attractiveness of your business model. Use the Business Model Canvas to give an immediate overview of your model. Ideally you sketch it out with drawings. Then describe the value proposition, outline why you believe potential customers need it and explain how you are going to reach the market. Use stories. Then highlight the attractiveness of your target markets to get the reader of the business plan interested. Finally, outline what key resources and activities are required to build and operate the business model.

Financial Analysis

This is traditionally an important part of the business plan that will attract a lot of attention. It contains the financial information that you can calculate based on your organization’s Business Model Canvas and a set of hypothesis of how many customers you can reach in a specific time period. This includes elements such as break-even analysis, sales scenarios and operating costs. The Canvas also helps you calculate capital spending and more generally how much it will cost you to implement the business model. Based on all these calculations you outline your funding requirements.

External Environment

In this section of the business plan you outline how your business model is positioned regarding the external environment. Outline market forces, industry forces, key trends, and macroeconomic situation. Summarizing, you need to stress what the competitive advantages of your business model are in this landscape.

Implementation Roadmap

This section gives the reader an idea of what it takes to implement your business model and how you will do it. It includes a summery of all projects and the overall milestones. A project roadmap, including Gantt charts, then outlines the implementation agenda. The projects can be directly derived from your organization’s Canvas.

Risk Analysis

At the end of the document you describe limiting factors and obstacles, as well as critical success factors. These can be easily derived from a SWOT analysis of your Business Model Canvas.

This is a brief excerpt of the “outlook part” of my Business Model Generation book.

Scan your environment by mapping out four main areas. These are a) market forces, b) industry forces, c) driving trends, and c) macro-economic forces. Each can be divided into sub-areas that allow you to draw a picture of your business model’s environment (see image below).

Continuously scanning your business model’s environment is important because the economic landscape is driven by growing complexity (e.g. networked business models), increasing uncertainty (e.g. technology innovations) and market disruptions (e.g. new disruptive value propositions). Understanding the changes happening in this environment help you more rapidly adapt your model to shifting external forces.

You should apprehend this environment as a sort of design space. It is a context in which you conceive or adapt your business model by taking into account a number of design drivers (e.g. new customer needs, new technologies, etc.) and design constraints (e.g. regulatory trends, dominant competitors, etc.). This environment should in no way limit your creativity or define your business model upfront. However, it should influence your design choices and help you make more informed decisions.

Anders Sundelin who launched the Business Model Database Blog
Patrick Stähler the sharp brain behind fluidminds
Peter Froberg who focuses on the freemium business model
Saul Kaplan of the amazing Business Innovation Factory

For all others who have a special focus on business model innovation, who read this blog and who blog about it themselves: don’t hesitate to post your URL as a comment…

Boris Fritscher, a brilliant student who has just started working on his PhD, has conceived a Web-based tool to sketch and edit business models. Now this Business Model Editor called BM|DESIGN|ER is open to the public in the form of a beta version (I talked about Boris’ work previously here and here). The more you test it and play around with it the better it will get. All you need to give in return is substantive feedback! I hope to see the tool on TechCrunch soon – I think it is a substantial basic tool for start-ups to play around with their business model.

Check it out the BM|DESIGN|ER here:
http://bmdesigner.com/

Personally, I believe we can make a lot of progress in the field of computer supported business design. While I am a great fan of working on whiteboards and/or with post-it™ notes, I also think computer-aided systems have an essential complementary role to play (and one day we will be able to conveniently brainstorm with virtual post-it notes).

Some of the main advantages of computer aided business model design over paper are:

• Highlighting of linkages between business model building blocks throughout a model – e.g. what resources, activities and partners do we need to serve a specific customer segment.
• Navigating between layers of a business model – e.g. this allows us to look at the different interlinked parts/layers of Amazon.com’s business model, which has expanded from online retailing towards providing Web infrastructure to other companies.
• Automatically generating financial spreadsheets based on visually conceived business model prototypes.
• Advanced manipulation of business models, such as storing, merging, comparing, versioning and sharing models.

Of course this all sounds a bit futuristic and it remains to be seen how business people pick up on this. But look at the history of information systems in business and you might be able to trace a trajectory: We started out with modeling accounting information and now have sophisticated software-based accounting systems. Then we started modeling order and warehouse management. That brought us sophisticated enterprise resource planning systems. We moved on and started modeling and redesigning processes. Now we have quite advanced Business Process Management Systems. So what is the next bastion? Business Models: New ways of creating value

Boris, bravo for providing a first advance in this direction! Let’s have fun playing around with and advancing the BMeditor!!! Boris put all the examples of our upcoming book, Business Model Generation, into the system. That will give you something to start with…

The “real” book will be out in September and can be pre-ordered at a special 25% discount on www.businessmodelgeneration.com. The reason it takes a little bit longer than planned is because we are co-creating the book. Integrating 400+ people in the process is time-consuming, but makes for a better book!

A number of those co-creators from our business model book writing Hub also took place in the Business Model Knowledge Fair last Friday. It was extraordinary to see them face to face. They came from many different places: US, Spain, Canada, Slovenia, Germany, and more (12 countries in total – on the Hub participants are from 40+ countries).

As to the event: The day was perfectly run by Patrick van der Pijl from Business Models Inc, who moderated the presentations and workshop sessions. The event took place at the “Hotel De Goudfazant” – an innovator’s venue.

I kicked off the day with a presentation on… Business Models. Check out the slides:

After my Intro Patrick interviewed the entire core book team, including my co-author Yves Pigneur, designer Alan Smith and editor Tim Clark (Patrick is himself involved managing production and distribution). To give the audience a feel for the book project FISH-EYE media produced a short video trailer of the book writing. Enjoy it:

Then, after his short video intermezzo, four business model innovation practitioners presented their work. Bas van Oosterhout of Capgemini presented his work at DSM, Marielle Sijgers presented Seats2meet.com and Harry Verwayen of Kennisland presented his work at the National Archive. Really impressive what these people are achieving!

In the afternoon we continued with something that I find core to systematically approaching business model innovation: Visual Thinking. The visual strategists of JAM, who are substantially contributing to the book, ran a dare2draw session. They got all 60 participants to draw their business model. Look at the photo proof (or check out all the photos here):

After the drawing session Tim Clark and Alan Smith took over. Tim presented his exciting and relevant research on the relationship between cultural context and business models, particularly related to Japan. Alan gave us a great insight into design methods and design thinking. Absolutely crucial when it comes to business model innovation.

The end of the day was devoted to the business model Hub where we co-created the book. First, Martijn Pater of Fronteer Strategy – a co-creation specialist – outlined the guiding principles of co-creation. Then the participants jointly brainstormed on a couple of questions to continue this business model innovation community: What are the lessons learned? What business model questions remain unanswered. What do we really need to focus on as a community of practitioners. Let’s hope this effort will go much beyond the book!

If you are interested in buying one of the remaining “broken” & unfinished limited editions of Business Model Generation, of which only 200 examples will ever be printed, you can do that here. The book is printed in black & white, contains about 70% of the final content, of which 50% is fully designed. This limited edition was part of the package of the Business Model Knowledge Fair. What makes it a collector’s item is that the print house got the printing wrong. The page order was misaligned, which completely messed up the design and made the book almost unreadable.

Buy the “broken” limited edition of Business Model Generation now for $250.- and you will get the final full color print in addition for free this September.

Caveat: This is a collector’s item of which only 200 examples will be printed. The book is not finished, not fully designed and has a print error.