5 Minutes with… Alexander Osterwalder

Alexander Osterwalder is co-author of the bestselling book Business Model Generation and a global thought leader on business model design and innovation. While there are plenty of books about business models available, there aren’t too many with pictures. Osterwalder encourages business owners to use what he calls “business model canvases” to communicate their business model ideas visually. According to Osterwalder, these canvases help business owners think through their models, make changes, and get employees involved. Daria Meoli recently spoke to Osterwalder about why he thinks a picture book for business works.

Daria Meoli: Why do you think there was such demand in your work and subsequent book?

Alexander Osterwalder: I think there are a couple of reasons. The first one is that business model innovation as a topic is really important nowadays, because entire industries are being transformed. Some industries have business models that have expired. They don’t work anymore. Take the music industry or the movie industry, and in these particular cases, it is because of technology.

But you can say the same thing for the pharmaceutical industry, because their patents are expiring and they don’t have the same type of research as they used to have and it’s not so easy to find a multi-billion dollar budget to come up with blockbuster drugs. And it’s very risky. You can’t use these models anymore. Companies have to reinvent themselves. The other reason is the global economic environment and global competition. There’s more pressure than ever before.

DM: How is this book different from other management books about business models?

AO: We’re not the first people to write about business models. But what we did is a hypothesis. The method around the business model canvas is extremely practical. It’s extremely usable. So I call it the usability of management methods, just like you have usability of a website. We thought that management books were broken. When we asked people what they liked and what they didn’t like about management books, we always heard the same things. They’re too long, too text heavy, and not practical enough. People said they had great concepts, but not the tools that you could easily use Monday morning. People want visual books that provoke more emotions. It’s much easier to convey complex issues and topics like business models through visuals. Words are just not enough.

DM: What should entrepreneurs know about how business models are changing?

AO: I think there is a real revolution going on in entrepreneurship. We used to write business plans, but business plans don’t work. Basically, we’re making them up. We make up the numbers. There’s a whole new way of working now and Steve Blank has written about this in his book, The Startup Owners’ Manual. He takes the business model canvas as the starting point and the entrepreneur starts designing his or her business model. But instead of doing a static plan, he or she would start testing every assumption. And according to what you learned, you dynamically adapt or pivot, as they say in Silicon Valley, the business model. So you learn and you pivot your business model all the time. The testing of business models is a new way of working and it will actually increase the success rate of businesses. It’s a really exciting topic at the moment.