How to build any business model with only 10 blocks
All our business model examples start from a simple set of 10 building blocks. To give more insight in the way this works, we give a brief overview of the different components. Of course this is a simplified version of what happens in reality, but these examples can form a great inspiration tool when looking for new business concepts and revenue models.
Part 1: The players
A. The company
The first big entity is a company. In most models this will be the actor that offers the product. The company whose business model is designed, will be coloured blue in differentiation with other players and stakeholders.
B. The consumer
The one that receives the product and gives something in return, is the consumer. In B2B models, the client is a company and will therefore be illustrated with the previous company icon. The general company-client relation is the same in both business systems.
Part 2: The flow from company to client
Product
The first, most straightforward offer to clients is an actual product, ranging from basic commodities up to finished goods. A BMW car is one example, but today also digital products can be included.
Service
A first way to upgrade your business model is to offer a service next to the product. BMW in this case will not only sell you a car, but will include maintenance and other services around the product. Of course, a lot of companies offer only services without product.
Experience
The two concepts of product and service are commonly applied throughout our economy. In the last years, several companies have moved a step further by offering an experience to customers. BMW does not sell a car with a service in this case, but a driving experience.
Reputation
Today, the next upgrade to reputation can only be found in a few sectors. In these cases, ‘reputation’ selling can be described as the most essential brand experience. If you take the example of BMW, then you could say that some people don’t see their BMW as a driving experience but as the core values and reputation of the brand as such. Hereby, customers are able to shape their own identity with that of the company. Typically reputation will be placed in the top of Maslow’s hierarchy of needs, which makes this type of transaction extremely valuable to companies.
Part 3: The flow from client to company
Money
The typical currency that clients pay with, is money – which is critical to company’s revenue models. This is in contrast to exchange. The building blocks make a differentiation between two types of money. This first icon represents the normal value of a good, including profit.
Less Money
This second icon represents money as well, but less than the normal amount covering cost and profit of what is offered. Usually this transaction implies that other revenue streams are added to the traditional business model.
Attention
Attention has become an important new currency that clients can pay with. Free business models are often based upon this principle: clients get a product or service for free, but pay with their attention (to 3th party advertisers).
Exposure
Active exposure is the next step in the evolution of currency. People are not only offering their own attention, but also that of their peers in their social environment. For some businesses the spreading of their ideas and brand values becomes more important than the immediate return in money. Of course, companies can’t just rely on active exposure, so their business model should include more players and other transactions. Many start-ups and even big web 2.0 companies are still struggling with this. There is a lot of exposure and value offered to clients, but there is no sustainable business model to capture that value in revenues and profit.
Conclusion
These 10 building blocks offer a new way of designing and innovating business models. Although a lot of details can’t be covered with this set, it is the power of using generic building blocks that enables you to visually map models, compare different businesses, and identify underlying trends. When you have questions like ‘how to apply the eBay business model in my industry’ or ‘how to innovate’, you can start very practically by taking successful new business models and transfer their general principles into your industry. Specific cases will illustrate what the innovation is in the business model of new start-ups, how you can make the transfer from one model to another, and which key success factors should be taken into account.
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March 25th, 2009 at 10:48
Interesting approach. I can see many of the elements that come up when I run business modeling workshops with my customers. The backbone I use to guide customers in the development or formalization of their business model uses Brandenburger & Nalebuff’s Value Net framework, which is great because it has this philosophy of “co-opetition” and because it gives a very holistic / integral vision of the business. And in fact I tend to believe that the business model is not only how a company interacts and transacts with its market, but also how the entire ecosystem works to produce value for the company and beyond the company’s increasingly porous walls.
What you present here is really a great complement in the sense that it makes it possible to review very specific elements of the company – customer relationship with each direction of the flow being analyzed separately.
Great food for thought + great content.
March 25th, 2009 at 11:28
Alex, Thanks for the feedback! You are absolutely right about the growing importance of companies’ ecosystem. Where the initial focus of our visual approach is more on the company-client interaction (i.e. revenue model), we plan to grow into a broader mapping of ecosystems later on. Do you have a specific (business model innovation) case in mind that would be interesting to map out?
March 25th, 2009 at 13:00
really cool article :)
March 25th, 2009 at 14:37
I think this is a very interesting visualization, and agree with Alex’ point. One thing I didn’t see in the flow from client to company is information. Especially considering the increasingly porous walls of the company, the information from the consumer is becoming more valuable in designing market-relevant business models. Or, in your model is that idea covered in a broader application of exposure?
March 25th, 2009 at 15:01
Ellen, very good point about information. Could you share a number of start-ups or initiatives that you think about? Then we can check in each case whether or not this can be mapped with the current 10 blocks. Thanks for the feedback.
March 25th, 2009 at 15:18
Interesting way of thinking of business models. I particularly like the feedback loop with attention/exposure.
The missing part of this representation seems that there is little on how a company does all this. You focus on the WHAT and the WHO, but say little about the HOW. Many business models are based on heavy innovations in the HOW spectrum, e.g. easyJet, Skype, NetJets, etc.
March 26th, 2009 at 19:21
You’re right but later on we will pay attention on how a company can make the transition from one model to the other. In such a case you’ll see that we will focus on the HOW. An innovate distribution channel for instance can give the necessary momentum to take a business model to the next level.
March 26th, 2009 at 19:34
Hi Philippe, Not sure I’m following what you mean here. Are you looking for formal feedback mechanisms? If so, there are many companies that use primary consumer research, and those processes can be mapped out quite well. However, that doesn’t always lead to the best insight as to the right way to actually use the information. I think this gets to Alex O’s point about the HOW.
Let me know if I understood your point.
March 29th, 2009 at 22:33
This is a really interesting discussion. I like Ellen’s comment about the porous nature of the “walls” of modern companies and therefore her assertion about the importance of information, which is not simply one of the elements exchanged between company and client but rather something that affects every other item in the flows between company and client. Also, Alex O really has a point bringing up the issue of HOW and in fact I’d say that the WHY is almost as important when it comes to the definition of the HOW in any of the ten blocks… Answering the WHY is something that will necessarily bring us very close the the company’s raison d’être, “mission” / mantra (in the Kawasaki Art of the Start way) and strategy…
To answer Philippe’s question to my initial feedback: it so happens that I worked with Jamendo (www.jamendo.com) at the very beginning and we went through an exercise to map the ecosystem. Some of that stuff is confidential and I cannot disclose it… Also, around 2000 I did a piece of work for a VC backed company that was active in the Wi-Fi business with an initial ambition to clear roaming traffic for such commercial networks. The mapping of the ecosystem gave convincing evidence that it would not work and the company ended up doing something else, although it eventually went belly-up for a number of reasons having to do with VC impatience (these guys were way too early in that market – now would probably be a much better time for the exact same proposition)… Not too sure what you expected with your question, but the cases I have both used the “value net” framework and very standard value chains to identify players and interactions that needed to be taken into account to structure the business model.
Perhaps all the people who made comments here should go out, have a beer for a couple of hours, continue this discussion live and come up with an upgraded version of the model?
March 30th, 2009 at 16:03
Thank you for creating a very elegant model. I agree with Alex O when he says the model is missing the “how” element, but I guess your intention is to map the value exchange rather than offer how-to tools. In the latter respect, Alex O’s approach http://tinyurl.com/5hp3c8 is going to be hard to better as he’s set the bar very high. A suggestion: in the flow from client (mmm … a consultant’s word … user? customer?) how about including “permission to communicate with”, a la Seth Godin (http://tinyurl.com/5a8ar8), or something along those lines? Or would you say that’s covered by “attention”? (In which case I’d disagree.) Thank you again. Jack
April 18th, 2009 at 10:50
[...] example how businesses are evolving when embracing new currency transactions as descibed in our 10 building blocks model. The most important transaction in their system is ‘reputation for exposure’. Below you [...]
April 24th, 2009 at 15:04
The 10 blocks is a good way to generalize but expert facilitation is often required if the product is new or the market segment is new for the participants. In our practice area, enhancing our clients’ business agility, we focus on the answers to a few key questions that forces participants to concentrate on customer centric value. The first question is what is the compelling value to the consumers of your product/service? In the retail consumer space it is emotive and/or utility. In the commercial consumer space it is all about economic consequences. Unless there is a compelling story proceeding further is a waste of time. The second key question is what is the compelling mix of function, brand, quality and performance over price against the alternative for this market segment. The alternatives are: competition, customer doing it themselves and the customer’s cost of doing nothing. The lattter could be opportunity cost. We also build a client specific ecosystem, a business reference ontology, for our clients so they can better understand how to monetize their value proposition. This also allows them to understand who their strategic partners should be as well as strategic sourcing usually based on market territory. We usually do this in 3 days or less.
May 2nd, 2009 at 15:14
[...] the concept of online auctions where people buy and sell goods from each other. As discussed in How to build any business model with only 10 blocks, companies can change a business model by moving from products to services or experiences – [...]
May 17th, 2009 at 02:57
[...] How to build any business model with only 10 blocks (via Board of Innovation) [...]
June 5th, 2009 at 14:16
[...] companies asked us if they could make use of our 10 building block model to visualise their business concept. Not only companies like Beebole but also students used already [...]
August 3rd, 2009 at 18:40
This would be very useful as a section in an intro to entrepreneurship class for universities. I often struggled explaining a business model to students in a simplistic way. I would also like it if the students presented their business plans with these illustrated business models. Maybe you can contact some people in that field, email me for some contact.
Of course, it does leave out some of the important details like the arrangement of the value chain, which is the major difference between business models like Walmart and Kmart, or how fast inventory turn over is key part of Walmart’s business model and how that helped them beat everyone else.
Dr. Brian Glassman
Ph.D in Innovation Management from Purdue University
August 10th, 2009 at 03:31
[...] uma simbologia muito simples, constituída por 10 simbolos o Board of Innovation dewsenvolveu um método que permite representar gráficamente qualquer modelo [...]
December 1st, 2009 at 14:41
[...] These frameworks all try to break a business down to a manageable number of building blocks. Some can do with 4 such blocks (e.g. Johnson) others have 9 (e.g. Osterwalder) or 10 (e.g. de Mey and de Ridder). [...]
January 7th, 2010 at 07:08
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January 23rd, 2010 at 15:07
[...] How to build any business model with only 10 blocks All our business model examples start from a simple set of 10 building blocks. To give more insight in the way this works, we give a brief overview of the different components. Of course this is a simplified version of what happens in reality, but these examples can form a great inspiration tool when looking for new business concepts and revenue models. (tags: business strategy crowdsourcing article management innovation visualization blog) [...]
January 27th, 2010 at 08:41
[...] These frameworks all try to break a business down to a manageable number of building blocks. Some can do with 4 such blocks (e.g. Johnson) others have 9 (e.g. Osterwalder) or 10 (e.g. de Mey and de Ridder). [...]
February 24th, 2010 at 01:49
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February 26th, 2010 at 16:12
You could go further by exploiting the counterparts: no one ever gives something for free in business… so any actor that gets anything could be asked for a counterpart… in whatever form it is.
Visually it would imply that any actor gets at least an incoming and outgoing arrow.
Measuring the difference between what one gets and gives is a way to assess the value of the business model to that person.