Budding entrepreneurs often think of the business plan as their fundamental blueprint for building a business. But when you're first starting out, a business plan can represent an overwhelmingly blank page. 

That's where Business Model Generation comes in. It's an extremely popular book that's meant to demystify the complex "stuff" of creating a business. So consider it a complement to your business plan -- a book that can help you frame your ideas, and create a business that will stand the test of time.

 

Business Model Generation is split into these sections: 

Canvas 

How will you begin to build your business? The "Canvas" section of Business Model Generation begins to unlock the "9 Building Blocks" of a business, eliminating the painful guesswork that many entrepreneurs go through. These are: 

• Customer segments: helping you to define who are your most important customers and where will you find them. 
• Value Propositions: helping you to understand how your offerings address a pain point or solve a problem for a specific customer segment. 
• Channels: helping you to understand how your marketing message will take shape and how you will communicate with your customer segment at critical times. 
• Customer Relationships: helping you to define what sort of relationship you'd like to create with your customers, such as full-service or hands-off. 
• Revenue Streams: helping you to understand how you will make money off your customers, and how often and in which forms. 
• Key Resources: helping you to understand the physical, financial, intellectual and human resources you need to create and offer a value proposition to a customer segment. 

• Key Activities: helping you to define the things your company must do to make your business work. 
• Key Partnerships: helping you to pursue the network of suppliers and partners that will help make your business model successful. 
• Cost Structure: helping you to realize the full impact of all costs associated with your business model, including fixed costs, variable costs, and economies of scale. 

Patterns

Business Model Generation wants you to look at common patterns in business development, including some important contemporary innovations, such as "long tail" business models like Netflix and Ebay, and "multi-sided" platforms like Apple and Google.

They also discuss free; as a business model, much like the one marketing guru Joseph Jaffe espouses. "In a perfect world, your paid media budget would be zero," Jaffe says, explaining that instead of "buying" attention in the form of ads, TV commercials and sponsorships, brands would do well to "pay" attention, and harness the affinity their existing fans and customers bring to the table.

Design

The design section deals with not design in way that might spring to mind first -- how things look -- but instead in the way things are structured, and how entrepreneurs can borrow principles from the world of design to build a better business. Customer insights, ideation, visual thinking, prototyping, storytelling and scenarios all come into play here.  

In its emphasis on prototyping, Business Model Generation recalls The Lean Startup's focus on a "minimum viable product." The goal of a minimum viable product (MVP) is to test out a business hypothesis through a quickly produced, stripped-down model of a product that can be brought to market quickly and inexpensively. Examples include Zappos, which, early on, took photos of shoes in local stores, posted them online and then bought the shoes from the stores and shipped them out instead of building a large inventory. Groupon also launched with a incredibly simple version of its eventual daily deal email -- it was simple a PDF and a WordPress site to begin with.

Strategy

The strategy section of the book is organized around looking again at the ideas laid out in the Canvas section, but this time with the objective of applying them to your own business model. 

Process

Process ties everything together with worksheets that help you do your homework and get set applying the ideas within the book to your own business.