Top critical review
Judging By Its Content - Not Its Format
Reviewed in the United States 🇺🇸 on September 20, 2011
I purchased this book to refine what I know about business models, which always seemed like an ill-defined concept when found in popular writings and even through my business school experience. I wanted to know about the fundamentals of a business model and its creation as well as providing sound examples of business model structures along with the underpinnings of when they work and why. This book seemed perfect for my undertaking but falls short of an essential book on the subject, coming off merely as an overview with some random unrelated business topics thrown in for good measure.
One problem that proliferates throughout the book is in how it categorizes components when dissecting model elements. Their categories are time and again overlapping and incomplete - thus appearing arbitrary. For example, when detailing the different types of revenue streams, the following categories are given as distinct and complete: Asset Sale, Usage Fee, Subscription Fee, Lending/Renting/Leasing, Licensing, Brokerage Fees, and, Advertising. How would you categorize the hotel business? The authors put this under Usage Fee. Why? It seems a lot like Renting to me. How about Gillette's razor blade model? The authors talk about it later in the book (termed the Bait-And-Hook model), but do not categorize this type of revenue stream here. Odd. But the overarching problem is that the categorization throughout the book is consistently arbitrary, and reminds me of Michael Scott from The Office proclaiming, "There are four kinds of businesses: tourism, food service, rail roads, and sales, ... and hospitals/manufacturing, ... and air travel".
Another problem is that the book delves into topics that are ancillary at best to the primary topic and are better covered in books dedicated to the topic. For example, under the guise of how to design a business model, the authors get diverted into the topic of creating an innovative ideation process. If you really want to know how to do this, read Innovation Tournaments by Terwiesch & Ulrich. The section of the book about scenario planning is cursory at best and overly simplistic at worst. Read The Entrepreneurial Mindset by McGrath & MacMillan to learn about discovery-driven planning, a very useful framework which isn't even covered in Business Model Generation.
The book contains a major section on strategy, which is nothing more than a bastardization of Porter's 5-Force model. The issue here is that Porter's model is clear and concise whereas the BMG book again suffers from bad categorization. I am not sure why they felt they needed to re-invent Porter's framework (perhaps copyright restrictions), but what really bothered me was the misapplication of the framework. Porter's model, contained within the Positioning school of strategic thought, deals only with static corporate strategy, i.e. the question of in which businesses you should compete assuming they are not changing. It does not tell you how to compete once your business is chosen. At the time of generating business models, I would assume that your business is already chosen. Sure, it is fundamental to have a deep understanding of the business itself, so at the time of generating a business model, if you haven't already done a 5-Forces analysis, you should probably do it post-haste. In fairness, the authors use their bastardized strategy analysis with hopes of developing a disruptive business model. They defer to the popular book Blue Ocean Strategy by Kim and Mauborgne, but if you really want to learn how to generate disruptive ideas, read both The Innovator's Dilemma and The Innovator's Solution by Christenson.
The part of the book that I most looked forward to was the section on Patterns, i.e. the primary architectures of business models. This was indeed a good section, but it is hardly a treatise on the subject, and what's more, has a bent toward IT examples and the dotcom mindset - which proliferates throughout the entire book. I was hoping for something more academic and fundamental. I wanted to know what patterns work in which situations and why. There was no depth to be found here.
One point that struck me as particularly curious is that on one of the final pages of the book, the authors admit that the business model is only one part of the full business plan. It would seem to me better to write a book about generating business plans, in total, with business models contributing a meaty chapter.
The best part of the book is their Business Model Canvas, which is a template used to dissect and even generate business models. It would be useful when doing strategy cases in business school, and I am sure I can find some application for it in my strategy work. It's novel, but not groundbreaking - plus you can download it for free from their website.