In addition to Business Model Generation there is a great book (though very repetitive around a few key ideas) on developing your business model based on hypothesis testing, Getting to Plan B, written by John Mullins and Randy Komisar.

Their business model definition and key elements have a stronger focus on the financials than Alex’s brilliant visual model, being: the revenue model, the gross margin model, the operating model, the working capital model and the investment model. The two books are very complementary.

Getting to Plan B is about the process of discovering a business model that works (with a start-up perspective), with the assumption that the initial plan is most often wrong. The discovering process can be made systematic by constantly formulating different hypothesis and measurements and continuously follow up and iterate the business model into a new Plan B.

I have reviews/summaries of the two books at my blog.

Take care,
Anders

For the enterprise context I have built in the idea of layers of customers, including both paying and non paying groups (such as regulators etc.) Coming from a corporate project background I am thinking “stakeholders and customers’ in my head.

It is always the point where you are asking the client “So just who are your customers” that the conversation gets awkward.

I am not so sure breaking ‘customer’ down further is that important. The detail you drill into depends on the circumstances.

You can get a long way with the vanilla model Alex provides, and sometimes you need to build on it.

I have read many of your articles in the blog. I can’t stop reading and I just love them. Thank you for sharing so much of your experience and wisdom.

You helped me to understand how important to get out of the building and talk to potential customer. But I just wonder where I should go to find the potential customer and how to get them to talk to me?

Really appreaciate you can write an article about this topic. Can’t wait to read!

Best Regards,
Shell Pan

I believe that it can be hard to figure out who your users and your customers are. Using the Business Model Generation Canvas, it’s not easy to differentiate between someone who pays and someone who doesn’t. Of course, you can define users and customers in all kinds of ways (as Alexander Osterwalder shows in his post, linked above by Steve), but the Canvas does not have a section to separate users from customers and how the rest of the diagram impacts each one. For example, would you have the same distribution channels for users and customers? This might be OK for some businesses but it would not work for others (Google AdWords comes to mind as having different channels for customers [advertisers] and users [someone who runs a search]).

I find using Alexander’s Canvas a very useful tool for brainstorming and doing a quick sanity check of my assumptions, but as Steve says, one still has to validate what you put on that Canvas by getting outside of the building and speaking with customers.

I think it’s important to have both — something everybody “gets” in two minutes and something they can understand and act on in twenty. But that means two different kinds of diagram.

Maybe it’s the difference between a picture drawn with marker pens (showing customers), and one drawn with a pencil (showing users too).

An owners space plan or an architect’s blue print.

Business Plans are like Medical Insurance Questionnaires: no one actually reads them, but if things go wrong they will use every answer against you.