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MARCH | APRIL 2015 BizEd 63 Seeing Business Differently ALEX OSTERWALDER DELVES INTO THE PRACTICAL SIDE OF RESEARCH BY TRICIA BISOUX AS A DOCTORAL STUDENT in management information systems at the University of Lausanne in Switzerland, Alex Oster- walder didn't plan to become a tradi- tional academic—instead, he wanted to create real-world tools for practitioners. His 2006 dissertation on business model innovation led to the book Business Mod- el Generation, which he co-authored with his doctoral supervisor Yves Pigneur. It also inspired the creation of the Business Model Canvas, a tool now taught at busi- ness schools worldwide. Unlike tradi- tional business plans, the canvas depicts the business model as a single visual—a nine-block grid. Users fill each block with ideas related to one of nine areas: problem, solution, key activities, unique value proposition, competitive advan- tage, channels to customers, customer segments, cost structure, and revenue stream. The canvas allows users to view all the functions of a business as a whole. Among Osterwalder's latest projects is the website Strategyzer.com, which helps users build and manage their can- vases. In October, he released the book Value Proposition Design, which pres- ents a tool similar to the Business Model Canvas that helps people lay out how they're creating value for customers. BizEd recently spoke to Osterwalder about his work, the pitfalls of publishing, the nature of innovation, and the impact he hopes to have on business practice. How did you develop the Business Model Canvas concept? Because we were in information sys- tems, we wanted to create a comput- er-aided design tool to help business leaders prototype business models, just like architects prototype buildings. In my dissertation, we use the nine building blocks, but we refer to them as the "business model ontology." We use phrases like "core capabilities." You can get away with terms like that in academia, but we wanted to attract businesspeople. We didn't want to scare them away! So we dropped "ontology," and we replaced "core competencies" with terms like "key resources." We wanted this to be extremely practical, with as little jargon as possible. As soon as you have to explain something, you create a barrier to adoption. Did you feel pressure to keep the jargon because you were in academia? You bet. The incentive is to publish, not create tools that are relevant to practi- tioners. There's a lot of cool stuff going on in management thinking at business schools, but little of it makes it into the toolbox of practitioners. We faced another obstacle because what Yves and I were doing fell between two disciplines: information systems and management/entrepreneurship. As soon as you're interdisciplinary, it becomes complicated to publish in the top journals. The final obstacle was that, in aca- demia, the more quantitative a study is, the easier it is to publish. Relevance is often the least important criteria to get published in a top journal. But Yves and I weren't interested in doing some- thing really quantitative, so we used an approach called "design science," a third methodology that falls between qualitative and quantitative research. We knew our approach worked when I put the PhD online, and people started downloading it. Because of the disserta- tion, I started getting invitations to offer workshops in real companies. This was long before the book. It was a surprise. How do you think the Business Model Canvas changes the way someone thinks about a business? The business model canvas gives a ho- listic view of a company. It requires you to ask, "What are the questions I need to answer to create value for my customers and for my company?" The whole thing is grounded in Michael Porter's value chain, which made sense in 1985, when most companies were in manufacturing. But the value chain isn't as effective to de- scribe a Facebook or an AT&T today. The business model canvas is in that same tra- dition, just updated for the 21st century. It's also very visual. Yes, Yves and I underestimated the value of this. Traditionally, managers sit around a table and have long conversa- tions about how they should innovate and create value. But visual tools change the way people interact. So Yves and I bring that into the classroom by having PHOTO COURTESY OF ALEX OSTERWALDER Alex Osterwalder