Description
During this brief description regarding business model mapping a new tool to encourage entrepreneurial activity.
Business Model Mapping: A New Tool to Encourage Entrepreneurial
Activity and Accelerate New Venture Creation
John Leschke
University of Wisconsin-Stevens Point
This paper describes business modeling—a simple, yet powerful, approach to model and evaluate
alternative business opportunities. A compelling argument can be made that employing this approach can
accelerate the concept development and assessment process and increase the quality of business
propositions carried forward to the business planning stage. Moreover, business modeling is broadly
applicable, being relevant to entrepreneurs, investors, business advisors and non-profit organizations, as
well as existing firms considering new lines of business.
INTRODUCTION
“You don’t have a business, unless you have a business plan!”
How many times have we heard (or said) this statement? Preparing a business plan seems to have
taken on the aura of a “rite of passage” along the path to launching a new venture. But what does an
aspiring entrepreneur still exploring the world of possibilities do?
Does it make sense to invest the time and effort to develop a business plan for every option? Of
course, not; nor does it make sense to make an educated guess which direction to pursue without a
thorough examination of the alternatives and their implications. There must be something in between.
For those caught in this dilemma, an answer can be found in Business Modeling—a process of
documenting the key assumptions of a particular business approach across a broad set of strategic and
tactical components. The resulting Business Model
1
should be sufficient to compare and contrast
competing opportunities and make a determination as to which alternative is best to carry forward to the
Business Planning stage. With a little practice, a number of very comprehensive Business Models can be
developed over the course of several hours, instead of the several weeks or months required to develop a
detailed Business Plan.
Formal Business Modeling methods are relatively new. This paper introduces Business Model
Mapping. This method allows even novice entrepreneurs to quickly grasp the wide range of business
opportunities and, within a very short period of time, assess a number of them to determine which (if any)
is worthy of further development. Despite its simplicity, however, it is equally appropriate for
experienced entrepreneurs, seasoned investors, and existing firms considering new lines of business.
18 Journal of Marketing Development and Competitiveness vol. 7(1) 2013
BUSINESS MODELING
The purpose of a business model is to describe efficiently, yet comprehensively, “the rationale of how
an organization creates, delivers and captures value (Osterwalder, 2010).” It is not intended to capture all
the detail and depth expected in a business plan, but it should be sufficient to communicate a fairly clear
vision of how an idea might be translated into a business and the implications thereof. That is, it would be
sufficient to compare, contrast and critique competing approaches (e.g., an on-line retailer versus a
physical retail storefront) and clearly highlight their differences.
Business modeling is a relatively new concept, only being formalized in the past few years. Based on
his 2004 doctoral thesis, Osterwalder developed the Business Model Canvas business modeling
methodology around 2008 and published a practitioners’ guide in 2010. Prior to Osterwalder’s Canvas
concept, business models tended to be assigned to general categories and designated by a simple
catchphrase (e.g., bricks and clicks, on-line content provider, low-cost producer, razor and blades, etc.).
The Business Model Canvas framework exchanges these aggregate terms and defines a business model in
terms of the nine “building blocks” listed in Figure 1.
FIGURE 1
THE 9 BUSINESS MODELING BUILDING BLOCKS (Osterwalder, 2010)
Business Model Canvas
Building Blocks
Description
Value Propositions the goods and services offered and their distinguishing advantage
Key Activities the most important activities in executing the value proposition
Key Resources the resources necessary to create value for the customer
Partner Network relationships considered essential to accomplishing the value proposition
Customer Segments the specific target market(s) intended to be served
Channels the proposed channels of distribution
Customer Relationship the type of relationship the firm wants with its customers
Cost Structure characteristics of the cost and expense structure
Revenue Streams the way the firm will make money, how it is paid, and pricing
Based on his field research of the business development process in a number of organizations,
Osterwalder concluded that these nine dimensions encompass the business decisions to sufficiently
describe how a firm might approach a business opportunity, hence, providing a framework for
developing, documenting and evaluating alternative approaches. Osterwalder suggests using the Canvas
as a practical, hands-on tool to foster understanding, creativity, discussion, and analysis; for example,
enlarging the Canvas to a wall-sized poster (depicted in Figure 2) to be annotated by teams of people with
sticky notes or markers.
In practice, it is not unrealistic for a small group of experienced people to outline multiple business
models in a very short period of time. Consider the situation of commercializing a new invention; it is not
difficult to imagine a small team documenting multiple business models (e.g., licensing, partnering,
outsourcing, in-house production, wholesaling, retailing or selling the intellectual property outright) in the
matter of a few hours. In this way, a firm can efficiently answer the questions: “How can we …?” and
“What if we …?” and build a solid foundation upon which a thorough evaluation process can begin.
Journal of Marketing Development and Competitiveness vol. 7(1) 2013 19
FIGURE 2
BUSINESS MODEL CANVAS BUSINESS MODELING FRAMEWORK
THE BUSINESS MODEL MAP
The need for a Canvas-like framework arose while teaching an introductory entrepreneurship course
for students with little prior business knowledge. Students from all disciplines—communications, health
and wellness, interior design, the fine and performing arts, as well as business—were encouraged to
enroll. The traditional “business plan” framework was inappropriate for this audience; their limited
background required something equally comprehensive, but simple, high level and easy to construct. It
was also important that the new framework integrated the pre-business planning activities of idea
generation and concept development, as well as the aspect of “the entrepreneur as an individual.” After
several iterations, an independently conceived model incorporating Osterwalder’s work emerged.
16 Components
The Business Model Map introduced in this paper extends Osterwalder’s work, adding some new
building blocks and dividing others into more distinct parts. The Map identifies sixteen “components” of
a Business Model. Entirely new components include Entrepreneurial Fit, Role/Position in the Value
Chain and Intellectual Property while others like Operating Activities and Marketing Activities represent
a more precise delineation among Osterwalder’s Key Activities. Figure 2 shows how the Business Model
Map components correspond to the Business Model Canvas building blocks.
20 Journal of Marketing Development and Competitiveness vol. 7(1) 2013
FIGURE 3
COMPARISON OF MAP COMPONENTS TO CANVAS BUILDING BLOCKS
Business Model Map Components Business Model Canvas Building Blocks
(Osterwalder, 2010)
1. Value Proposition
a. Essential Means
b. Essential Need
Value Proposition
2. Entrepreneurial Fit
a. Current Position
b. Personal/Technical/Strategic Fit
c. Exit Alternatives
3. Role/Position in the Value Chain
4. Target Market/Customer Customer Segments
5. Products/Services Value Proposition
6. Channels of Distribution Channels
7. Revenue Streams Revenue Streams
8. Costs and Expenses Cost Structure
9. Operating Activities Key Activities
10. Key Suppliers and Partners Partner Network
11. Resources and Assets Key Resources
12. Intellectual Property
13. Marketing Activities Key Activities
14. Customer Relationships Customer Relationship
15. Product Alternatives
16. Industry/Economic Environment
The added components call on the modeler to consider a more complete set of issues. Entrepreneurial
Fit demands reflection on the entrepreneur’s personal strengths and limitations, ambitions and goals,
personal values and lifestyle objectives. Since the process of building a business is both a personal as well
as a professional journey, it is critical that “the entrepreneur as an individual” be included in the
assessment. Similarly, if the model is intended to expand an existing business, it is important to consider
the firm’s prior history, current strategy, and competencies.
Describing the Role/Position in the Value Chain is important for perspective. By noting where the
value proposition falls within the overall value chain, the modeler can not only define better the value
added, products and services, channels, target market and other components, but also see where this
particular opportunity fits into the larger scheme of value creation. Perhaps this higher-level perspective
may lead to identifying a new alternative at a different value-adding stage. For example, an entrepreneur
initially intent on opening a retail coffee shop might consider the alternatives of being a wholesaler,
roaster, franchisee, or importer, any of which may, in fact, be more profitable, lower risk, or a better
entrepreneurial fit.
Intellectual Property is important to consider if there are substantial intangible assets currently in
place or required for the model to be successful. Explicitly noting a wealth or dearth of intellectual
property complements the assessment of Fit. It can also suggest examining alternative business models
such as licensing, consulting or selling property rights.
Adding Product Alternatives and Industry/Economic Environment components to the Map fill out the
analysis by incorporating four major elements of business strategy: product substitutes, rivals, other
threats, and dynamics in the external environment.
Journal of Marketing Development and Competitiveness vol. 7(1) 2013 21
A graphical representation of the Business Model Map is shown in Figure 4. A table with working
definitions and question prompts for each of the sixteen components is included as an Appendix.
FIGURE 4
BUSINESS MODEL MAP (GRAPHICAL FORMAT)
Like the Business Model Canvas, this Map can be enlarged and printed out for an entrepreneur or
business development team to mark up or apply notes. Alternatively, the sixteen components can be
presented in a table format. The tabular format is very effective for summarizing the results in an efficient
and compact way, as demonstrated in the following example.
An Illustrative Example: Business Model Mapping for a Coffee Shop
The corner coffee shop is a very familiar business context and serves as an appropriate example to
illustrate the Business Model Mapping tool. The process begins by capturing the essential idea – a coffee
shop—then annotating the Map with short bullet points describing key assumptions, intentions or
implications for each component.
There is no prescribed sequence to business modeling—it is a non-linear, iterative process; however,
working through the components in the general order presented in Figure 5 has a logical flow and most
likely speeds the process. In this case, the entrepreneur has identified two approaches for entering the
coffee business: a small café and an outdoor kiosk.
Role/Position in the Value Chain
Personal/Entrepreneurial/Technical/Strategic Fit
Key Suppliers and
Partnerships
Resources and Assets
Operating Activities Marketing Activities Customer Relationships
Intellectual Property
Pro
Product Alternatives
Industry/Economic
Environment
Exit Alternatives Current Position
Essential
Means
Essential
Need/Want/
Desire
Value
Proposition
Target Customer
Cost and Expenses
Revenue Streams Products and Services
Channels
of Distribution
22 Journal of Marketing Development and Competitiveness vol. 7(1) 2013
FIGURE 5
BUSINESS MODELS MAPS: COFFEE CAFÉ VS. KIOSK (TABULAR FORMAT)
Business Model
Mapping Components
Café Kiosk
1. Value Proposition
a. Essential Means
b. Essential Need
• A café offering fine coffees and
espresso-based drinks in a warm
welcoming atmosphere
• A kiosk offering fast and convenient
hot coffee and espresso drinks for
people on the go
2. Entrepreneurial Fit
a. Starting Position
b. Personal/Technical/
Strategic Fit
c. Exit Alternatives
• No prior restaurant experience
• Changing careers
• Enjoys meeting people
• Enjoy the business then sell in a few
years
• No prior restaurant experience
• Changing careers
• Enjoys meeting people
• Enjoy the business then sell in a few
years
3. Role/Position in the
Value Chain
• Final production step and direct
delivery to customer
• Final production step and direct
delivery to customer
4. Target
Market/Customer
• People seeking a place to enjoy a
conversation and a cup of coffee
• Professionals on the go, on break,
between meetings or on an errand
5. Products/Services • Coffee, tea, espresso, smoothies,
pastries, bulk coffee, iced drinks, t-
shirts and coffee-related gifts
• Hot coffee and espresso drinks, to
go snacks, soft drinks and water
6. Channels of
Distribution
• Café in upscale business district,
shopping district or neighborhood
• Kiosk in high traffic location
7. Revenue Streams • Sales of products
• Premium pricing
• Cash, credit and loyalty cards
• Sale of drinks
• Competitive/affordable pricing
• Cash and prepaid punch cards
8. Costs and Expenses • Coffee and food, milk, staff, utilities,
lease, laundry, insurance, high fixed
costs, high margin
• Coffee and food, milk, outdoor
space rental, wages, low fixed and
variable costs, high margin
9. Operating Activities • Drink preparation, table service,
cleaning, maintenance, scheduling,
purchasing, stocking inventory and
merchandise, opening and closing
• Drink prep, transportation, setup,
teardown, cleaning, maintenance,
purchasing and stocking kiosk,
seasonal prep and shutdown
10. Key Suppliers and
Partners
• Landlord, coffee supplier, other
vendors, health department,
neighboring businesses
• Coffee supplier, kiosk vendor,
equipment maintenance firm,
licensing and permitting agencies
11. Resources and Assets • Personal Savings, furniture, fixtures
and equipment, inventory
• Significant external funding
• Kiosk and brewing equipment
• Personal savings (small amount of
external funding)
12. Intellectual Property • Brand, name and trademark, logo,
knowledge of coffee, location,
specialty drinks, menu, atmosphere,
décor, barista skills
• Location, coffee making, barista
skills, customer service skills,
specialty drinks
13. Marketing Activities • Signage, print media, website,
promotions, events, advertising,
sponsorships, coupons
• Signage, word of mouth, coupons,
social media promotions
14. Customer
Relationships
• Personal, loyal, face to face,
professional, yet friendly, repeat
customers, sense of affinity to café
• Personal, friendly, face to face,
repeat customers
15. Product Alternatives • Home brewing, nearby cafes, non-
coffee beverages
• Home brewing, office break rooms,
nearby cafes, soft drinks
16. Industry/Economic
Environment
• Coffee culture, limited disposable
income
• Coffee as a pick-me-up, faster pace
of life
Journal of Marketing Development and Competitiveness vol. 7(1) 2013 23
This example illustrates the relatively low level of detail and specificity necessary to effectively
capture the key characteristics of each approach. The implications of each business approach are clear and
the differences are made apparent. In just a short time (constructing this example took 45 minutes), an
entrepreneur can comprehensively capture the implications of pursuing a business opportunity in a
particular way and make a more than reasonably informed assessment of its potential risk and reward.
Other Applications
The same process can be applied by established firms. Business Model Maps can be prepared to
evaluate introducing a new product or line, entering a new market or adding another channel. Mapping
could be used to examine the implications of entering a business at different stages of the value chain
(i.e., manufacturer or seller). It can also be used to deconstruct an existing business into its component
business models and help management to see more clearly and exploit synergies and economies between
new or existing opportunities.
This notion—that a firm can be conceptualized as multiple overlays of various business models—is
particularly useful to the new entrepreneur looking ahead to developing a business plan. Having a set of
alternative approaches to entering a market, the entrepreneur is capable of creating a plan in which the
enterprise grows over time by incrementally laying on additional models. This approach makes business
planning more flexible (and realistic) in the sense that the implementation plan can be presented in terms
of incrementally introducing business model segments and achieving certain milestones, rather than a
continuous and prescribed implementation of a single aggregated business model. This contingency
approach allows the plan to be implemented as events transpire and opportunities present themselves
without necessarily needing to prepare a new business plan.
The same benefits apply to other participants in the business development process. Investors, lenders
and economic development agencies can better advise clients and assess risk.
SUMMARY
Business Modeling and its accompanying Business Model Map can be a powerful tool in developing
and evaluating business opportunities before a formal business plan is prepared. The methodology is
broadly applicable—for new ventures or established business, for non-profit and for-profit organizations,
for incremental adjustments to business strategy or major departures into new markets.
Business Model Mapping can rapidly document and evaluate a large number of opportunities making
it vital to firms in fast-moving markets or high-technology environments. Every participant has the
opportunity to present their ideas, share them with others, and feel satisfied that it has received a fair
hearing. After all maps are completed, leadership can begin the process of sifting through alternatives,
setting priorities, laying out implementation stages and determining resource requirements over a realistic
planning horizon.
Coupled with the resources and new programs promoting and supporting entrepreneurs and
entrepreneurship, Business Modeling, in general, and Business Model Mapping, in particular, have the
potential to speed development and shorten the time between conception and launch. Business Modeling
is not a substitute for business planning—training and education in business planning is still necessary—
but Business Modeling should also be part of an entrepreneur’s education. For example, Small Business
Development Centers supported by the SBA, schools of business and other providers could include
Business Modeling in their course offerings, even making it a pre-requisite to Business Planning.
ENDNOTE
1. “Business model” in this paper is distinguished from a “revenue model.” A business model is
comprehensive, encompassing all major facets of a firm, whereas, a revenue model is focused more
narrowly on how the firm makes money (e.g., sale of merchandise, subscriptions, fees, advertising, etc.).
24 Journal of Marketing Development and Competitiveness vol. 7(1) 2013
REFERENCES
Osterwalder, A. (2004) “The Business Model Ontology - A Proposition in a Design Science Approach”
Unpublished PhD Thesis, University of Lausanne, Lausanne, CH.
Osterwalder, A. (2008) “The Business Model Canvas” (www document)http://www.nonlinearthinking.typepad.com (accessed October 29, 2011).
Osterwalder, A. & Pigneur, Y., et al., Business Model Generation: A Handbook for Visionaries, Game
Changers and Challengers, Wiley, 2010.
APPENDIX
BUSINESS MODEL MAPPING COMPONENT DESCRIPTIONS
Business Model
Mapping Components
Component Descriptions
1. Value Proposition
a. Essential Means
b. Essential Need
• What is the nature of the value provided for which the customer is willing to
pay?
o What are essential characteristics of the means or method employed?
o What are the defining needs, wants or desires being met?
2. Entrepreneurial Fit
a. Starting Position
b. Personal/Technical/
Strategic Fit
c. Exit Alternatives
• What is current situation?
• Fit with the entrepreneur’s or existing business’s…
o Ambitions and goals? Attributes and competences? Management
expertise? Technical and managerial experience?
• What are the exit and harvest options?
3. Role/Position in the
Value Chain
• What is the value adding activity?
o Extraction? Processing? Fabrication? Transportation? Wholesale? Retail?
4. Target
Market/Customer
• Who is the target customer or market?
o Demographics? Needs? Wants? Desires? Sources of pain?
• What is the customer’s buying behavior?
o Order-winning criteria? Order-qualifying criteria?
5. Products/Services • What products and/or services are offered?
o Differentiating characteristics? Mix? Functions and features?
• What research and design infrastructure is required?
6. Channels of
Distribution
• What are the channels for distributing the product or service?
o Retail? Wholesale? Distributors? Online Storefronts?
7. Revenue Streams • How will the business make money (revenue model)?
• How is the product priced?
• How is the transaction executed?
8. Costs and Expenses • What are the major cost and expense components?
o What categories are unique to this model? Require close management?
9. Operating Activities • What operating activities are critical to this business model?
o Product design? Logistics? Production? Transaction processing?
o Quality? Flexibility? Cost? Speed?
10. Key Suppliers and
Partners
• Who are the key suppliers and upstream partners?
o J oint ventures? Contractual relationships? Vendors? Networks?
11. Resources and Assets • What resources or assets are critical to implementing the business model?
o Plant and equipment? Human capital? Infrastructure?
12. Intellectual Property • What intellectual property is essential to the business model?
o Distinctive competencies? Patents? Trade Secrets?
• How much additional research and development is required?
o Critical milestones? Resources required? Timeframe?
Journal of Marketing Development and Competitiveness vol. 7(1) 2013 25
13. Marketing Activities • How are the products and/or services to be marketed?
o Product Features and Attributes? Pricing, Placement and Positioning?
• Selling methods and strategy?
o Advertising and Promotion? Media? Branding?
14. Customer Relationships • What kind of relationship between the customer and the company is desired?
15. Product Alternatives • What alternatives exist to address the customers’ needs, problems or desires?
16. Industry/Economic
Environment
• What are the relevant industry, market, technological, and cultural trends?
• What broad economic trends or factors are relevant?
26 Journal of Marketing Development and Competitiveness vol. 7(1) 2013
doc_697452736.pdf
During this brief description regarding business model mapping a new tool to encourage entrepreneurial activity.
Business Model Mapping: A New Tool to Encourage Entrepreneurial
Activity and Accelerate New Venture Creation
John Leschke
University of Wisconsin-Stevens Point
This paper describes business modeling—a simple, yet powerful, approach to model and evaluate
alternative business opportunities. A compelling argument can be made that employing this approach can
accelerate the concept development and assessment process and increase the quality of business
propositions carried forward to the business planning stage. Moreover, business modeling is broadly
applicable, being relevant to entrepreneurs, investors, business advisors and non-profit organizations, as
well as existing firms considering new lines of business.
INTRODUCTION
“You don’t have a business, unless you have a business plan!”
How many times have we heard (or said) this statement? Preparing a business plan seems to have
taken on the aura of a “rite of passage” along the path to launching a new venture. But what does an
aspiring entrepreneur still exploring the world of possibilities do?
Does it make sense to invest the time and effort to develop a business plan for every option? Of
course, not; nor does it make sense to make an educated guess which direction to pursue without a
thorough examination of the alternatives and their implications. There must be something in between.
For those caught in this dilemma, an answer can be found in Business Modeling—a process of
documenting the key assumptions of a particular business approach across a broad set of strategic and
tactical components. The resulting Business Model
1
should be sufficient to compare and contrast
competing opportunities and make a determination as to which alternative is best to carry forward to the
Business Planning stage. With a little practice, a number of very comprehensive Business Models can be
developed over the course of several hours, instead of the several weeks or months required to develop a
detailed Business Plan.
Formal Business Modeling methods are relatively new. This paper introduces Business Model
Mapping. This method allows even novice entrepreneurs to quickly grasp the wide range of business
opportunities and, within a very short period of time, assess a number of them to determine which (if any)
is worthy of further development. Despite its simplicity, however, it is equally appropriate for
experienced entrepreneurs, seasoned investors, and existing firms considering new lines of business.
18 Journal of Marketing Development and Competitiveness vol. 7(1) 2013
BUSINESS MODELING
The purpose of a business model is to describe efficiently, yet comprehensively, “the rationale of how
an organization creates, delivers and captures value (Osterwalder, 2010).” It is not intended to capture all
the detail and depth expected in a business plan, but it should be sufficient to communicate a fairly clear
vision of how an idea might be translated into a business and the implications thereof. That is, it would be
sufficient to compare, contrast and critique competing approaches (e.g., an on-line retailer versus a
physical retail storefront) and clearly highlight their differences.
Business modeling is a relatively new concept, only being formalized in the past few years. Based on
his 2004 doctoral thesis, Osterwalder developed the Business Model Canvas business modeling
methodology around 2008 and published a practitioners’ guide in 2010. Prior to Osterwalder’s Canvas
concept, business models tended to be assigned to general categories and designated by a simple
catchphrase (e.g., bricks and clicks, on-line content provider, low-cost producer, razor and blades, etc.).
The Business Model Canvas framework exchanges these aggregate terms and defines a business model in
terms of the nine “building blocks” listed in Figure 1.
FIGURE 1
THE 9 BUSINESS MODELING BUILDING BLOCKS (Osterwalder, 2010)
Business Model Canvas
Building Blocks
Description
Value Propositions the goods and services offered and their distinguishing advantage
Key Activities the most important activities in executing the value proposition
Key Resources the resources necessary to create value for the customer
Partner Network relationships considered essential to accomplishing the value proposition
Customer Segments the specific target market(s) intended to be served
Channels the proposed channels of distribution
Customer Relationship the type of relationship the firm wants with its customers
Cost Structure characteristics of the cost and expense structure
Revenue Streams the way the firm will make money, how it is paid, and pricing
Based on his field research of the business development process in a number of organizations,
Osterwalder concluded that these nine dimensions encompass the business decisions to sufficiently
describe how a firm might approach a business opportunity, hence, providing a framework for
developing, documenting and evaluating alternative approaches. Osterwalder suggests using the Canvas
as a practical, hands-on tool to foster understanding, creativity, discussion, and analysis; for example,
enlarging the Canvas to a wall-sized poster (depicted in Figure 2) to be annotated by teams of people with
sticky notes or markers.
In practice, it is not unrealistic for a small group of experienced people to outline multiple business
models in a very short period of time. Consider the situation of commercializing a new invention; it is not
difficult to imagine a small team documenting multiple business models (e.g., licensing, partnering,
outsourcing, in-house production, wholesaling, retailing or selling the intellectual property outright) in the
matter of a few hours. In this way, a firm can efficiently answer the questions: “How can we …?” and
“What if we …?” and build a solid foundation upon which a thorough evaluation process can begin.
Journal of Marketing Development and Competitiveness vol. 7(1) 2013 19
FIGURE 2
BUSINESS MODEL CANVAS BUSINESS MODELING FRAMEWORK
THE BUSINESS MODEL MAP
The need for a Canvas-like framework arose while teaching an introductory entrepreneurship course
for students with little prior business knowledge. Students from all disciplines—communications, health
and wellness, interior design, the fine and performing arts, as well as business—were encouraged to
enroll. The traditional “business plan” framework was inappropriate for this audience; their limited
background required something equally comprehensive, but simple, high level and easy to construct. It
was also important that the new framework integrated the pre-business planning activities of idea
generation and concept development, as well as the aspect of “the entrepreneur as an individual.” After
several iterations, an independently conceived model incorporating Osterwalder’s work emerged.
16 Components
The Business Model Map introduced in this paper extends Osterwalder’s work, adding some new
building blocks and dividing others into more distinct parts. The Map identifies sixteen “components” of
a Business Model. Entirely new components include Entrepreneurial Fit, Role/Position in the Value
Chain and Intellectual Property while others like Operating Activities and Marketing Activities represent
a more precise delineation among Osterwalder’s Key Activities. Figure 2 shows how the Business Model
Map components correspond to the Business Model Canvas building blocks.
20 Journal of Marketing Development and Competitiveness vol. 7(1) 2013
FIGURE 3
COMPARISON OF MAP COMPONENTS TO CANVAS BUILDING BLOCKS
Business Model Map Components Business Model Canvas Building Blocks
(Osterwalder, 2010)
1. Value Proposition
a. Essential Means
b. Essential Need
Value Proposition
2. Entrepreneurial Fit
a. Current Position
b. Personal/Technical/Strategic Fit
c. Exit Alternatives
3. Role/Position in the Value Chain
4. Target Market/Customer Customer Segments
5. Products/Services Value Proposition
6. Channels of Distribution Channels
7. Revenue Streams Revenue Streams
8. Costs and Expenses Cost Structure
9. Operating Activities Key Activities
10. Key Suppliers and Partners Partner Network
11. Resources and Assets Key Resources
12. Intellectual Property
13. Marketing Activities Key Activities
14. Customer Relationships Customer Relationship
15. Product Alternatives
16. Industry/Economic Environment
The added components call on the modeler to consider a more complete set of issues. Entrepreneurial
Fit demands reflection on the entrepreneur’s personal strengths and limitations, ambitions and goals,
personal values and lifestyle objectives. Since the process of building a business is both a personal as well
as a professional journey, it is critical that “the entrepreneur as an individual” be included in the
assessment. Similarly, if the model is intended to expand an existing business, it is important to consider
the firm’s prior history, current strategy, and competencies.
Describing the Role/Position in the Value Chain is important for perspective. By noting where the
value proposition falls within the overall value chain, the modeler can not only define better the value
added, products and services, channels, target market and other components, but also see where this
particular opportunity fits into the larger scheme of value creation. Perhaps this higher-level perspective
may lead to identifying a new alternative at a different value-adding stage. For example, an entrepreneur
initially intent on opening a retail coffee shop might consider the alternatives of being a wholesaler,
roaster, franchisee, or importer, any of which may, in fact, be more profitable, lower risk, or a better
entrepreneurial fit.
Intellectual Property is important to consider if there are substantial intangible assets currently in
place or required for the model to be successful. Explicitly noting a wealth or dearth of intellectual
property complements the assessment of Fit. It can also suggest examining alternative business models
such as licensing, consulting or selling property rights.
Adding Product Alternatives and Industry/Economic Environment components to the Map fill out the
analysis by incorporating four major elements of business strategy: product substitutes, rivals, other
threats, and dynamics in the external environment.
Journal of Marketing Development and Competitiveness vol. 7(1) 2013 21
A graphical representation of the Business Model Map is shown in Figure 4. A table with working
definitions and question prompts for each of the sixteen components is included as an Appendix.
FIGURE 4
BUSINESS MODEL MAP (GRAPHICAL FORMAT)
Like the Business Model Canvas, this Map can be enlarged and printed out for an entrepreneur or
business development team to mark up or apply notes. Alternatively, the sixteen components can be
presented in a table format. The tabular format is very effective for summarizing the results in an efficient
and compact way, as demonstrated in the following example.
An Illustrative Example: Business Model Mapping for a Coffee Shop
The corner coffee shop is a very familiar business context and serves as an appropriate example to
illustrate the Business Model Mapping tool. The process begins by capturing the essential idea – a coffee
shop—then annotating the Map with short bullet points describing key assumptions, intentions or
implications for each component.
There is no prescribed sequence to business modeling—it is a non-linear, iterative process; however,
working through the components in the general order presented in Figure 5 has a logical flow and most
likely speeds the process. In this case, the entrepreneur has identified two approaches for entering the
coffee business: a small café and an outdoor kiosk.
Role/Position in the Value Chain
Personal/Entrepreneurial/Technical/Strategic Fit
Key Suppliers and
Partnerships
Resources and Assets
Operating Activities Marketing Activities Customer Relationships
Intellectual Property
Pro
Product Alternatives
Industry/Economic
Environment
Exit Alternatives Current Position
Essential
Means
Essential
Need/Want/
Desire
Value
Proposition
Target Customer
Cost and Expenses
Revenue Streams Products and Services
Channels
of Distribution
22 Journal of Marketing Development and Competitiveness vol. 7(1) 2013
FIGURE 5
BUSINESS MODELS MAPS: COFFEE CAFÉ VS. KIOSK (TABULAR FORMAT)
Business Model
Mapping Components
Café Kiosk
1. Value Proposition
a. Essential Means
b. Essential Need
• A café offering fine coffees and
espresso-based drinks in a warm
welcoming atmosphere
• A kiosk offering fast and convenient
hot coffee and espresso drinks for
people on the go
2. Entrepreneurial Fit
a. Starting Position
b. Personal/Technical/
Strategic Fit
c. Exit Alternatives
• No prior restaurant experience
• Changing careers
• Enjoys meeting people
• Enjoy the business then sell in a few
years
• No prior restaurant experience
• Changing careers
• Enjoys meeting people
• Enjoy the business then sell in a few
years
3. Role/Position in the
Value Chain
• Final production step and direct
delivery to customer
• Final production step and direct
delivery to customer
4. Target
Market/Customer
• People seeking a place to enjoy a
conversation and a cup of coffee
• Professionals on the go, on break,
between meetings or on an errand
5. Products/Services • Coffee, tea, espresso, smoothies,
pastries, bulk coffee, iced drinks, t-
shirts and coffee-related gifts
• Hot coffee and espresso drinks, to
go snacks, soft drinks and water
6. Channels of
Distribution
• Café in upscale business district,
shopping district or neighborhood
• Kiosk in high traffic location
7. Revenue Streams • Sales of products
• Premium pricing
• Cash, credit and loyalty cards
• Sale of drinks
• Competitive/affordable pricing
• Cash and prepaid punch cards
8. Costs and Expenses • Coffee and food, milk, staff, utilities,
lease, laundry, insurance, high fixed
costs, high margin
• Coffee and food, milk, outdoor
space rental, wages, low fixed and
variable costs, high margin
9. Operating Activities • Drink preparation, table service,
cleaning, maintenance, scheduling,
purchasing, stocking inventory and
merchandise, opening and closing
• Drink prep, transportation, setup,
teardown, cleaning, maintenance,
purchasing and stocking kiosk,
seasonal prep and shutdown
10. Key Suppliers and
Partners
• Landlord, coffee supplier, other
vendors, health department,
neighboring businesses
• Coffee supplier, kiosk vendor,
equipment maintenance firm,
licensing and permitting agencies
11. Resources and Assets • Personal Savings, furniture, fixtures
and equipment, inventory
• Significant external funding
• Kiosk and brewing equipment
• Personal savings (small amount of
external funding)
12. Intellectual Property • Brand, name and trademark, logo,
knowledge of coffee, location,
specialty drinks, menu, atmosphere,
décor, barista skills
• Location, coffee making, barista
skills, customer service skills,
specialty drinks
13. Marketing Activities • Signage, print media, website,
promotions, events, advertising,
sponsorships, coupons
• Signage, word of mouth, coupons,
social media promotions
14. Customer
Relationships
• Personal, loyal, face to face,
professional, yet friendly, repeat
customers, sense of affinity to café
• Personal, friendly, face to face,
repeat customers
15. Product Alternatives • Home brewing, nearby cafes, non-
coffee beverages
• Home brewing, office break rooms,
nearby cafes, soft drinks
16. Industry/Economic
Environment
• Coffee culture, limited disposable
income
• Coffee as a pick-me-up, faster pace
of life
Journal of Marketing Development and Competitiveness vol. 7(1) 2013 23
This example illustrates the relatively low level of detail and specificity necessary to effectively
capture the key characteristics of each approach. The implications of each business approach are clear and
the differences are made apparent. In just a short time (constructing this example took 45 minutes), an
entrepreneur can comprehensively capture the implications of pursuing a business opportunity in a
particular way and make a more than reasonably informed assessment of its potential risk and reward.
Other Applications
The same process can be applied by established firms. Business Model Maps can be prepared to
evaluate introducing a new product or line, entering a new market or adding another channel. Mapping
could be used to examine the implications of entering a business at different stages of the value chain
(i.e., manufacturer or seller). It can also be used to deconstruct an existing business into its component
business models and help management to see more clearly and exploit synergies and economies between
new or existing opportunities.
This notion—that a firm can be conceptualized as multiple overlays of various business models—is
particularly useful to the new entrepreneur looking ahead to developing a business plan. Having a set of
alternative approaches to entering a market, the entrepreneur is capable of creating a plan in which the
enterprise grows over time by incrementally laying on additional models. This approach makes business
planning more flexible (and realistic) in the sense that the implementation plan can be presented in terms
of incrementally introducing business model segments and achieving certain milestones, rather than a
continuous and prescribed implementation of a single aggregated business model. This contingency
approach allows the plan to be implemented as events transpire and opportunities present themselves
without necessarily needing to prepare a new business plan.
The same benefits apply to other participants in the business development process. Investors, lenders
and economic development agencies can better advise clients and assess risk.
SUMMARY
Business Modeling and its accompanying Business Model Map can be a powerful tool in developing
and evaluating business opportunities before a formal business plan is prepared. The methodology is
broadly applicable—for new ventures or established business, for non-profit and for-profit organizations,
for incremental adjustments to business strategy or major departures into new markets.
Business Model Mapping can rapidly document and evaluate a large number of opportunities making
it vital to firms in fast-moving markets or high-technology environments. Every participant has the
opportunity to present their ideas, share them with others, and feel satisfied that it has received a fair
hearing. After all maps are completed, leadership can begin the process of sifting through alternatives,
setting priorities, laying out implementation stages and determining resource requirements over a realistic
planning horizon.
Coupled with the resources and new programs promoting and supporting entrepreneurs and
entrepreneurship, Business Modeling, in general, and Business Model Mapping, in particular, have the
potential to speed development and shorten the time between conception and launch. Business Modeling
is not a substitute for business planning—training and education in business planning is still necessary—
but Business Modeling should also be part of an entrepreneur’s education. For example, Small Business
Development Centers supported by the SBA, schools of business and other providers could include
Business Modeling in their course offerings, even making it a pre-requisite to Business Planning.
ENDNOTE
1. “Business model” in this paper is distinguished from a “revenue model.” A business model is
comprehensive, encompassing all major facets of a firm, whereas, a revenue model is focused more
narrowly on how the firm makes money (e.g., sale of merchandise, subscriptions, fees, advertising, etc.).
24 Journal of Marketing Development and Competitiveness vol. 7(1) 2013
REFERENCES
Osterwalder, A. (2004) “The Business Model Ontology - A Proposition in a Design Science Approach”
Unpublished PhD Thesis, University of Lausanne, Lausanne, CH.
Osterwalder, A. (2008) “The Business Model Canvas” (www document)http://www.nonlinearthinking.typepad.com (accessed October 29, 2011).
Osterwalder, A. & Pigneur, Y., et al., Business Model Generation: A Handbook for Visionaries, Game
Changers and Challengers, Wiley, 2010.
APPENDIX
BUSINESS MODEL MAPPING COMPONENT DESCRIPTIONS
Business Model
Mapping Components
Component Descriptions
1. Value Proposition
a. Essential Means
b. Essential Need
• What is the nature of the value provided for which the customer is willing to
pay?
o What are essential characteristics of the means or method employed?
o What are the defining needs, wants or desires being met?
2. Entrepreneurial Fit
a. Starting Position
b. Personal/Technical/
Strategic Fit
c. Exit Alternatives
• What is current situation?
• Fit with the entrepreneur’s or existing business’s…
o Ambitions and goals? Attributes and competences? Management
expertise? Technical and managerial experience?
• What are the exit and harvest options?
3. Role/Position in the
Value Chain
• What is the value adding activity?
o Extraction? Processing? Fabrication? Transportation? Wholesale? Retail?
4. Target
Market/Customer
• Who is the target customer or market?
o Demographics? Needs? Wants? Desires? Sources of pain?
• What is the customer’s buying behavior?
o Order-winning criteria? Order-qualifying criteria?
5. Products/Services • What products and/or services are offered?
o Differentiating characteristics? Mix? Functions and features?
• What research and design infrastructure is required?
6. Channels of
Distribution
• What are the channels for distributing the product or service?
o Retail? Wholesale? Distributors? Online Storefronts?
7. Revenue Streams • How will the business make money (revenue model)?
• How is the product priced?
• How is the transaction executed?
8. Costs and Expenses • What are the major cost and expense components?
o What categories are unique to this model? Require close management?
9. Operating Activities • What operating activities are critical to this business model?
o Product design? Logistics? Production? Transaction processing?
o Quality? Flexibility? Cost? Speed?
10. Key Suppliers and
Partners
• Who are the key suppliers and upstream partners?
o J oint ventures? Contractual relationships? Vendors? Networks?
11. Resources and Assets • What resources or assets are critical to implementing the business model?
o Plant and equipment? Human capital? Infrastructure?
12. Intellectual Property • What intellectual property is essential to the business model?
o Distinctive competencies? Patents? Trade Secrets?
• How much additional research and development is required?
o Critical milestones? Resources required? Timeframe?
Journal of Marketing Development and Competitiveness vol. 7(1) 2013 25
13. Marketing Activities • How are the products and/or services to be marketed?
o Product Features and Attributes? Pricing, Placement and Positioning?
• Selling methods and strategy?
o Advertising and Promotion? Media? Branding?
14. Customer Relationships • What kind of relationship between the customer and the company is desired?
15. Product Alternatives • What alternatives exist to address the customers’ needs, problems or desires?
16. Industry/Economic
Environment
• What are the relevant industry, market, technological, and cultural trends?
• What broad economic trends or factors are relevant?
26 Journal of Marketing Development and Competitiveness vol. 7(1) 2013
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