Osterwalder business model: what is it?

Strategic planning is important for every business. One of the most popular tools is the Osterwalder business model. It is simple and effective, suitable for both developing and long-standing companies. In this article, we’ll talk about the history of the appearance of the model and analyze each block in detail.


What is the Osterwalder business model?

The Business Model Canvas is a strategic management tool used to describe business models of new or existing enterprises. It is a scheme of 9 blocks describing the various business processes of the organization.

The model was created by Alexander Osterwalder and Yves Pigne. They gave a detailed description of the scheme in the book Alexander Osterwalder & Yves Pigneur: The Business Model Generation.

Operating firms use the model to search for new growth points, analyze competitors and determine best business development practices. There is a misconception that the tool is used in startups and small companies, but in fact it is used by such “giants” as IBM, Ericsson, Deloitte and many others.

At the planning stage of a startup, applying Canvas is difficult. Filling all the blocks is possible when suppliers and partners are found, sales channels are identified and costs are calculated.

The creators of the tool (Osterwalder and Pinier) in their scientific work recommend that entrepreneurs do not confine themselves to compiling one model. To find the best option, ask yourself complex questions, take into account various scenarios of the company’s development, and then you can choose the best business model that will have a positive effect on business development.

What needs to be done before building business models?

Before creating your first business model, do the following:

  1. Analyze different areas of activity. By registering as an individual entrepreneur, creating a company or planning a new product, several types of activities are chosen. As a rule, they proceed from plans for the future: what they plan to do. At this stage, think in which areas you will work most likely.
  2. Select a priority direction. From the abundance of the spheres of activity under consideration, choose the priority one – the one from which you plan to get the most profit. Build a long-term business development strategy around it.
  3. Make an assortment of products on offer. Analyze the market, find out which products are in demand and which are sold poorly. To achieve the most effective result, consider the first group of products, refuse the second.
  4. Think over and formulate an advertising strategy, choose tools for promoting products and methods of competition. Think about a marketing strategy: how to promote a product on the market, to whom to sell (your target audience), what competitive advantages should customers pay attention to bypass competitors, etc.

In simple terms, before drawing up the first business models of Osterwalder, you should have at least a minimal plan for the development of the company: the main area of ​​activity, the range of goods, marketing strategy, etc.

Canvas will help reveal strategic ideas and find new growth points. If you make a plan without an idea of ​​the business, there will be no sense.

How to fill in the Osterwalder business model?

The model consists of 9 blocks:

  1. Consumer segments.
  2. Value propositions.
  3. Sales channels.
  4. Customer relationship.
  5. Revenue streams.
  6. Key Resources
  7. Key activities.
  8. Key partners.
  9. Cost structure.

Next, we consider in detail the principles of filling blocks in this sequence.

Consumer Segments


A segment is a group of people with a common problem or need. In this block, describe all segments on which the company is focused. The success of advertising campaigns in the future depends on the accuracy of determining segments.

For example, you sell accounting software. Segment – accountants in commercial organizations. In this case, the advertising campaign will be successful. But if you make a mistake and define managers as a segment, you will get low conversion and a lost advertising budget.

In filling out the block, answers to questions will help:

  • For whom do we create products (provide services, produce goods, etc.)?
  • How can we characterize our consumers in one word?
  • Is it possible to quickly find the target audience and talk with her about the proposed product?
  • Which of the different customer groups is most important?

Value propositions


Determine why consumers should buy your product (product, service), and not contact a competitor. A value proposition should solve a client’s problem or close one of the needs. As a rule, it is a collection of goods or services for a particular segment.

Think about the main value your product has for consumers. If there are problems with this, contact the audience, let them tell you what specific problems they managed to solve after the purchase / order. In general, the task is to determine what you are better than competitors.

In filling out the block, answers to questions will help:

  • What value do we provide to consumers?
  • What problems help them solve?
  • What needs do we satisfy?
  • What does a product / product / service consist of?

Distribution Channels


Distribution channels – points of contact with consumers. These include everything from informing to after-sales service. If you find it difficult to fill out the block, use the template distribution channels:

  • Informing. How is a value proposition delivered to a consumer?
  • Rating. How is the product positioned against competitors?
  • Sale. How is the sale?
  • Delivery and adaptation. What are the methods of delivery to the client and the formation of the first positive impression of the product?
  • Service. How is after-sales service provided?

All sales channels are very important. Do not think that contact with the customer ends on the sale. Constantly “touch” it after the transaction in order to induce a repeat purchase. But for this to work, you will have to plan at least these 5 distribution channels.

In filling out the block, answers to questions will help:

  • What channels of interaction will allow us to communicate with our customers?
  • How do we interact with them now?
  • Which ones are most effective?
  • Which are the most profitable?

Customer Relationships


Relations with customers – methods of interaction with consumers. Think about how you build communication with the target audience? And do you build at all? There are several types of customer relationships:

  • personal support;
  • self-service;
  • free or shareware use;
  • co-creation;
  • individual or group training.

Before filling out the block, also think about what tasks the business is currently facing? Depending on this, customer relationships can develop in several scenarios:

  • Attraction for a one-time sale (for example, an automobile salon).
  • Holding for regular collaboration (e.g. maintenance service).
  • Classification for working with consumers of a certain type (for example, drivers of SUVs or sports cars).

That is, first determine the current tasks, and then think about the type of customer relationship and how to interact with them.

In filling out the block, answers to questions will help:

  • What kind of relationship do customers expect?
  • What kind of relationship is there now?
  • Why did the relationship become so?
  • Do they resemble the current business model?

Revenue streams


In this section, describe how the business makes money. There are several ways to generate revenue streams:

  • Sale of goods. The most popular source of earnings for companies. It comes down to the sale of goods / products to the final consumer, dealer networks, etc.
  • The fee for using the service. The client uses the service and pays for the time or volume. For example, the creation of a site in accordance with the statement of work. The organization determines the necessary amount of time to complete the order, based on this the final cost is formed.
  • Payment subscription. A fixed fee for using something for a certain period of time. For example, a monthly subscription for access to an online movie theater.
  • Rent. Temporary use of an asset at a fixed rate without paying its full value. For example, a data center leases a server. The consumer does not pay the full cost of the equipment, but only a certain part, depending on the period of use.
  • License. The income arises as a result of the temporary transfer of intellectual property to the client.
  • Commission. The business acts as an intermediary and receives a certain commission for this. For example, a site for selling sites charges 3% of the amount of each transaction for acting as a guarantor and protects both parties from fraud.
  • Advertising. Selling the target audience to advertisers. For example, the placement of advertising banners on the site.

The described revenue streams have their own pricing mechanisms that are directly related to the value proposition.

In filling out the block, answers to questions will help:

  • What are customers willing to pay for?
  • What are they paying for now?
  • How do they pay?
  • How would they rather pay?
  • What part of the total profit brings each stream?

Key resources


Describe the assets needed to operate and scale the business model. These should be resources that help to convey a value proposition to customers, keep in touch with them and profit from activities.

For each asset allocated, specify the sources of receipt: acquisition of property, lease, borrowing from partners, etc.

Focus on 4 popular asset categories:

  • Material resources. Physical objects – raw materials, machine tools, vehicles, real estate, points of sale, etc.
  • Intellectual resources. Knowledge – technology, patents, program code, brands, trademarks, etc.
  • Staff. People are marketers, managers, programmers, mechanics, joiners, painters, etc. Those who are responsible for creating products, providing services, manufacturing.
  • Finance. Money – current assets, loans, investments, etc.

In filling out the block, answers to questions will help:

  • What resources are needed to create and implement value propositions? Relations with our customers? Sales channels?

Key activities


In the last block, you described the materials used to create value propositions – you answered the question “what?”. Now think and describe the main work carried out to implement value propositions – answer the question “how?”. In other words, describe the business operations.

We simplify the task by describing the classifications of the main activities:

  • Production. If you are manufacturing a product, describe in detail the procedures for purchasing raw materials, logistics to the place of production, ensuring the smooth operation of equipment, and controlling the quality of the final product.
  • Solution of problems. If the business model provides for the provision of services to solve consumer problems, describe approaches to work, a knowledge management system, ongoing research, staff training, diagnostic measures, and ways to control customer satisfaction.
  • Infrastructure management. If the company is a service, platform or application, describe the planning and development of new functions, testing, user support, and customer experience management.

In filling out the block, answers to questions will help:

  • What needs to be done to maintain product value?
  • What cannot a company exist without?
  • What needs to be done regularly to constantly improve the quality of work?

Key partners


Everything is simple here – list the companies with which you collaborate on an ongoing basis to create a value proposition. The bread producer has flour suppliers, the game studio has a developmental school for developers, and the online accounting department has a board of accountants to verify the correct operation of the service.

Simply put, the partners are third-party companies that supply the missing or non-core parts of the business model.

In filling out the block, answers to questions will help:

  • Partnerships with which companies help reduce risks?
  • Who can become our supplier?
  • What types of activities can be transferred to partners without compromising on quality?

Cost structure


The last block is very important. You must take into account all the costs that the company incurs when creating value propositions. Fill in the block based on previously defined resources, core activities and partners.

Additionally, divide the costs into fixed (which do not depend on production volumes) and fixed (which depend on production volumes).

In filling out the block, answers to questions will help:

  • What are the important costs we incur to produce the product?
  • What resources are most expensive for us?
  • What types of activities are most expensive?

Osterwalder’s business model gives a general idea of ​​the business: what we do, who we sell to, how much we spend, where we get profit, etc. The tool is popular because of its simplicity. One page, 9 blocks – special knowledge in the field of strategic planning is not required to fill out the table. Summarized information makes it clear where there are problems, what you should not work with, and what, on the contrary, can be improved.

And one last tip: do not fill out the model alone. Get together as a team, discuss, draw conclusions. If possible, attract users, conduct surveys, ask questions directly, etc. So you get the maximum information and can use the completed table for the development of the company.

More information about business models can be found on our six-month online course “Profession: Product”! Find out details

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