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While talking about refining business models is very common in Venture Capital discourse it is rarely discussed in PE literature. Bigger companies can benefit just as much from a structured review of the business model that leaves the world of spreadsheets and LBO models and brings management to the fundamental question – how do we make money and what alternatives are possible.

All operationally focused firms have exceptional tools at work to address many aspects of working capital, pricing, procurement and other operational improvements and all great PE firms have fantastic eye for talent and the outstanding way to motivate management. One tool that recently resurfaced from Europe on Business Modeling could help make the 100-day plans or GP/Management alignment discussions even more productive.

What started as a Ph.D. thesis on Business Models by Alex Osterwalder is now a global phenomenon. Not since the late 80s business process reengineering has there been a similar holistic methodology for looking at the business beyond figures and KPIs into structure and end-to-end alignment.

Business Model Generation analyzes all businesses, departments and teams in 9 categories:
– key partners
– key activities
– key resources
– value propositions
– customer relationships
– key channels
– customer segmentations
which results in a certain
– cost structure and
– revenue model

The final outcome of a business model is represented on a “Canvas” somewhat similar to a value chain model. What I found unique about the approach is the visual mapping that allows teams to reach consensus, tradeoffs and specific strategies based on the insight gained. The method which is now a major book series was developed in an open source fashion and many private and PE-owned businesses seemed to be active on their forums.

Here is a little video overview of the method and a “canvas” we created mapping some value creation strategies to their model.


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