Playing To Win
Business Model Generation & Playing to Win
This week, I am continuing my impromptu series on popular strategy frameworks. Previously, I have covered Jobs to be Done & Playing to Win and Blue Ocean Strategy & Playing to Win. My 26th Year III Playing to Win Practitioner Insights (PTW/PI) piece is on Business Model Generation & Playing to Win: Utility & Compatibility. You can find the previous 136 PTW/PI here.
Business Model Generation (BMG), the 2010 business best-seller, is the brainchild of Alex Osterwalder and Yves Pigneur, a student and his professor, respectively. I like that. I had a wonderful and productive time, like Yves, in co-creating and co-authoring with my student Jennifer Riel, who is now a star partner at IDEO and thinker/writer in her own right.
The first thing of interest about BMG is that it isn’t purported to be a strategy framework or even a strategy book. Sure, it gets to strategy as of page 200, but it is notionally a book about business models. Despite its Swiss restraint, BMG is a more comprehensive strategy framework than almost all the rest out there. Jobs to be Done, Disruptive Innovation, Three Horizons, Customer Loyalty, Time-based Competition, etc. are all strategy concepts. Each valuably highlights useful things to keep in mind while doing strategy. But they aren’t strategy frameworks on their own. BMG, in contrast, is unambiguously a comprehensive strategy framework.
In rereading BMG for this article, I was impressed with how modern it felt. It is 13 years old, and I would argue that it has held up well. I was particularly struck by its extensive coverage of two-sided markets/platform business models. The seminal articles in this field by Rochet & Tirole and Parker & Van Alstyne were published in 2003 and 2005, respectively. In the world of ideas, it is a veritable blink of an eye between their publication and the writing of BMG, which would have happened in 2007–2009 to be published in 2010. Their analysis of Apple, Red Hat, Google, and Facebook as platform businesses wouldn’t be considered particularly insightful in 2023. But 2010 was really early in the platform game. I am duly impressed.
Also, I would be remiss to not note how much I love BMG’s visual format. It shows that a very serious book can have a playful and inviting look and feel. I am impressed that they managed to convince the publishers to let them go this far afield from publishing traditions. I know they give designer Alan Smith the bulk of the credit for this innovation, but congratulations to everyone involved!
Utility of BMG
I see only two comprehensive models for creating strategy in wide use in the business world: PTW and BMG. This is my view, and I can well imagine that lots of its fans would include Blue Ocean Strategy (BOS) as the third. For me, BOS is an example of something in between a strategy concept and a comprehensive strategy framework. As I said in my earlier piece about it, I am truly impressed with the ideas in BOS. I just don’t see it as a comprehensive model for getting a company generally from the state of ‘I don’t have a strategy I like’ to ‘I do.’ Rather, I see it as a framework for thinking through one sort of strategy initiative in a certain set of contexts. But if someone wants to see there as being three comprehensive strategy frameworks out there, I am OK with that.
In addition, I know that many other strategy aficionados will say that they have created a comprehensive strategy model, and I am sure there are many who have. But I don’t see any such model in wide use — in fact, even narrow use — across the business world, hence my view that there are only two that are in wide use.
Of course, many strategy academics will say that the Resource-Based View (RBV) of the firm is not only the most important strategy framework, but also the only correct one. I have been clear on my view of RBV previously in this series, so I won’t repeat the arguments. You can find them here and here. Suffice it to say, I think it has little utility as a strategy framework, and the business world treats it that way. It has been 39 years since publication of the first article on RBV by Birger Wernerfelt and I have been advising firms on strategy for every one of those 39 years. I have still only witnessed one mention of RBV by any employee of any company in those (nearly) four decades. Undoubtedly, it is employed by some actual businesspeople with whom I have never interacted. But it just ain’t many — and for good reason. It is a framework produced by business academics for business academics — a wonderfully closed loop. The closed loop is not breached by their students because they drop it when they get into the real world and find it is incompatible with making useful decisions in that world.
In contrast, BMG is used widely. It lays out the nine pieces of the Business Model Canvas and provides an explicit theory about how those pieces need to fit together. It focuses on the whole, not the piece parts. And it provides example after example to drive home its concepts.
Compatibility with PTW
Suffice it to say, there is plenty of compatibility. In fact, there is so much that once when Alex and I sat down to have a serious conversation about potential joint model building — i.e., creating a convergence between PTW and BMG — we ended up getting stuck. The models were too similar to generate lots of helpful synergies from combining the two in some way. Neither of us could identify the potential lift would be great enough to justify the work.
PTW and BMG both argue that strategy requires making choices across a set of categories. BMG has nine such categories; PTW has five. But it doesn’t take heroic work to map one onto the other (in either direction). BMG’s Customer Segments, Channels, and at least part of Customer Relationships are parts of the consideration of Where to Play. The other part of Customer Relationships, plus Value Propositions, Cost Structure, and arguably, Revenue Streams are parts of the consideration of How to Win. Key Activities and Key Resources, and arguably, Key Partners are part of the consideration of Must-Have Capabilities. PTW may delve more deeply into Winning Aspiration and Enabling Management Systems than BMG, but I am not even sure that is true.
Net, there is real compatibility between PTW and BMG on the components and integrations that comprise a winning strategy. And I like Revenue Streams and Key Partners from BMG as good prompts for consideration during a PTW exercise.
Vector of Development
A lot of my methodology development work over the past decade has been focused on the process by which managers work through the task of creating an output that has the true features of a PTW strategy. Of course, it drives me a bit nuts when folks read PTW and then take everything they were already doing, distribute it across the five boxes of the strategy choice cascade, and declare it to be their ‘PTW strategy.’ I suspect that Alex & Yves are similarly disappointed by practitioners taking out a Business Model Canvas and dutifully distributing their current choices across it and declaring it a manifestation of BMG.
The key, as is always the case, is to go beyond adhering to the letter of the law (i.e., filling in the boxes) to realizing its spirit (i.e., a set of choices that fit together and reinforce each other). On this front, the central question is whether the user of a strategy framework, PTW or BMG, is truly capable of carrying out the activities required by the framework? I always have the admonitions of my beloved late mentor Chris Argyris ringing in my ears: knowledge upon which action cannot be taken is barely worth having. So, it is firmly fixed in my mind that the ability of students or clients to complete PTW is key to its value.
On that front, the biggest blockage for students and clients is in the third step of the Strategic Choice Structuring (SCS) process: generating creative possibilities.
I haven’t asked Alex & Yves, but my bet would be that for BMG, it would be the third step in the five-step process they lay out in the book: Mobilize, Understand, Design, Implement, and Manage.
In a desire to honor the principle my mentor taught me; I have worked long and hard on that third step to make it more doable for students and clients. Like Alex & Yves (who graciously quoted me on design in BMG — “Businesspeople don’t just need to understand designers better; they need to become designers” — p 124), I have integrated design principles directly into the SCS process beginning with my work at P&G with Claudia Kotchka, David Kelley and Patrick Whitney in the 2005–2007 period. I have also infused this third step with Integrative Thinking as a tool for generating creative alternatives to the existing familiar possibilities. The tool pits pairs of opposing possibilities against each other and uses the Integrative Thinking technology to come up with a more creative possibility that goes beyond the apparent tradeoff. I haven’t talked to Alex & Yves for a while on this front, but I am sure they are working on ever-better tools for their Design step too.
When I think about BMG and PTW, it reminds me of my days at Monitor Company in the 1980s and 1990s. Unsurprisingly, Monitor was my favorite strategy consulting company — otherwise, I would have spent my many years somewhere else. My second favorite was always Boston Consulting Group (BCG). I admired and respected its contribution to the intellectual property used in the industry. I thought BCG’s wonderful founder, the late Bruce Henderson, was the only strategy thinker/practitioner on the same plane as our terrific co-founder Mike Porter. Its people were generally very smart and intellectually curious. So, had we crazy kids not decided the world needed another strategy consulting firm and built Monitor, I would have wanted to have been at BCG.
Similarly, when it comes to comprehensive strategy frameworks to help a company get from a strategy it finds unsatisfactory to one that is satisfactory, my favorite is my own PTW, which almost goes without saying. If it wasn’t, I would have long since adopted something else!
I think that many strategy concepts like Experience Curve, Growth/Share Matrix, Five Forces, Generic Strategies, Jobs to be Done, Disruptive Innovation, Three Horizons, Customer Loyalty, Time-based Competition, Blue Ocean Strategy, 7 Powers, Balanced Scorecard, Profit from the Core, and more are all valuable (though not RBV or SWOT) things to keep in mind while creating strategy. But they aren’t comprehensive frameworks for creating strategy.
On that front my second favorite is Alex and Yves’ Business Model Generation. And I don’t say that in any disparaging way at all. As is the case with me, I am confident that their own is their favorite. And that is fine with me: if you don’t use PTW to create your next strategy, use BMG.