Alex Osterwalder, author of Business Model Generation, entrepreneur and man on a mission to make Business Models sexy and interesting had a tough act to follow last year at the Business of Software Conference. He was the third speaker of the morning, talking after Professor Clayton Christensen who gave a “jaw-droppingly good” talk about why large companies fail and how entrepreneurial businesses succeed – well worth a watch. That was followed by Jason Cohen’s discussion about Honesty in Business. One attendee messaged me after that talk to say, ‘Wow. All downhill from here…’
Alex gave a brilliant talk about why Business Models matter that inspired creativity and rounded out an exceptional morning of talks. We could hear the sound of pennies dropping all round the auditorium. This is a must watch video and if you haven’t already read it, the book, Business Model Generation, is a must read.
Building Competitive Advantage through Business Model Thinking.
Watch the video or skip below to see a full transcript of the talk.
Alex Osterwalder, Business Model Generation
OK what an inspiring morning. I mean Clay has always been an idol to me in thinking and the research and a lot of what we are going to talk about is built on that & then Jason, in all honesty, I mean that is really going to push us, some of us who try to be more honest. So let’s be honest, who is tired now and attention is going down and getting a bit hungry, hands up, ok[ laughs]
OK this is what I call the death slot of speaking right [laughs] and I always get placed before lunch I think its bit unfair but [laughter] now one of the reason is probably because I will actually get you to do things, so it would be tortured to listen to me for an hour so I am going to get you to work and I am going to get you to work on this method that is published in this book called Business Model Generation.
Now I thought it would be interesting to start with the story of the book, did things differently and I think it connects very well with the theme of truth because we co-created this book which means lets write this book with other people out there and when we do that everything that we pushed out of the content was visible and say, ‘this is crap’. It is very easy to write a book, publish it and if people say it is crap it is never going to affect you. We actually went out there and people said, ‘this does not work in reality, this is not how it works in a company’, so that was really fun process.
So let me go into the book for a second just this whole story of the book because I think it is going to introduce the idea of business small innovation we are going to talk about very well. So I did research on business model and I wrote a PhD on the topic and the title was called I have to check this, ‘The Business Model Ontology Proposition in design sign approach’. So much for truth. You get a PhD for a title like that but if I say Ontology in this room it may fly particularly with those who are more into the technical detail but business people, like we all are, also would runaway. So we thought let’s take this and turn it into a book which is more accessible. We don’t use the word ontology, it is banned. So I thought a couple of years after people were using it I thought I want to write a management best seller and that was very naive because basically, if you see the industry of books, I will start with this to get into a business small thinking, they actually have one million books published every year in English. It is pretty competitive industry and if you take business books eleven thousand are published every year. So guess what? Nobody was waiting for our eleven thousand and first book and we wanted to write a management best seller. How naive can that be? Even worse in that this is a declining industry, twelve percent are disappearing. If you can visualize that, I mean going up in flames and we had the idea of writing a management best seller. When I say ‘we’ it is my co-author who was my former PhD supervisor. I actually said we need to turn this into a best seller; he was a bit more modest. It may also be I am bit more crazy and that’s why I didn’t stay in academia.
Now what did we do? First thing we did, we changed the product, and we actually tried to do everything different from business book because I think business books are quite broken. They are hard to read, they are long, they are fat, they are sometimes theoretical not practical. So we made a book, it is very visual. We did product innovation. We hired a designer who designed books. It is an extremely different book. You can have it in your bag; I am not doing [laughs] a sales pitch here & some of you have already looked at it. Now why did we do it? Because we thought that it would fix part of it which is broken in business book is that to convey ideas you would need visuals, particularly if it is a topic as complex as business models. That was the first part, now would a publishing company have taken a book like that, what you think? Visual book, different from what exists, very expensive book, would a publishing company jump on this, we are unknown, not from Harvard, not from Stanford. There is no chance, no chance of a publishing house taking a book like that and some of them regret now, ok, why is it? Because they have certain ways of doing things certain tradition, certain roots, they have always done it like that, it is very difficult to change. So what did we do? We said, ‘well we are going to change the business model, we are actually going to self publish.’ Self publish has a little bit of distinction too. We saw good things differently. We will co-create as I said, we asked people to join us. That is not revolutionary, for business books at that time it still works. What we also did was we said you probably have not heard of me before [laughs] particularly then and I have come to say, ‘hey I am going to write a management best seller. Have your name in a book.’ It is going to be, something is going to change management. How? Thinking is being done in business models. That’s sound interesting. Ok or could be. Actually we think we are doing so good that we want you to pay us twenty four dollars. So I need your credit card information, you have never heard of me before, you are going to give it to me?[laughs] Actually a hundred people signed up very quickly because we gave them something, we did our market research to understand what they really wanted. People wanted to be part of something bigger, they wanted to participate in a community that discusses business models, and they wanted to join some kind of movement.
So basically people join very quickly, we raise the price fifty percent because we wanted to keep this community small, we raised the price fifty percent – what I call inverse pricing. People still joined, the more we increased price the more exclusive it got, people still joined and three days before sending the book to the printer we didn’t have a publisher. We asked for two hundred fifty dollars and people still joined because they wanted their name in the book. Now do you think a publishing company would have done that, these experiments, opening up and doing this individually? No of course not, and they regret today because the results are pretty impressive. It was a top ten business book last year and many airports you can find it but more interestingly it has gone to the furthest corner of the world. South Africa, Australia, Antarctica, I don’t know [laughs]. Nobody thought we could have an impact, but we did because we did things differently, because we tried, because we experimented and it is mainly because we changed the business model. Now ‘business model’ is a word we use very often, never ever use the word ‘business model’, never. You would be the fourth person in the world. Nobody here [laughs] Ok. So we use it all the time.
Let me do little exercise with you, it is what I call the ‘buzz group’ with your seat neighbor. I want you to just quickly introduce your business model to your seat neighbor, vice versa. In two minutes explain what your business model of your company or Software Company is. Ok, two minutes lets go, what’s the business model of your company [discussion].
