Introducing the Enhanced Business Model Canvas

The Enhanced Business Model Canvas combines the Business Model Canvas with the Operating Model Canvas.

The Operating Model Canvas was proposed by Andrew Campbell, Mikel Gutierrez and Mark Lancelott in their recent book by the same name. (See to the right). The Business Model Canvas was proposed by Alexander Osterwalder and Yves Pigneur in their book "Business Model Generation". I previously blogged about it here.

In suggesting this combination, Campbell, et al, argue that it provides a more operational perspective to the left-hand side of original Business Model Canvas. This directly addresses "important issues such as people, organization structure, location and information systems that are critical to the operating model, but often given too little attention when thinking about the business model."

Here is an example of what an Enhanced Business Model canvas for Uber might look like.

(Please note: I have constructed this canvas by way of example only. I used publicly available information without any privileged knowledge of Uber. As such, I cannot vouch for its accuracy. If you do disagree with anything in this example, this will only serve to demonstrate the usefulness of the tool in fostering understanding.)

I drew the example above in StratNavApp.com. StratNavApp.com is the collaborative online tool for business strategy development and execution.

The  Enhanced Business Model Canvas provides more context and granularity than the original Business Model Canvas does. For starters, it considers 11 elements of the business model, compared to the original 9. And some elements have been altered. The changes are:

1. Locations and Organisation have been added. These are both welcome additions.
1. Location: Michael Porter's work on the strategic importance of location should be enough to convince you. If not, just think of the importance of, for example, Silicon Valley to the tech sector.
2. Organisation: Please see my previous blog about why Structure follows Strategy.
2. Key Partners and Resources have been removed. I would argue that they have, in fact, been replaced with Suppliers and Information respectively. In both cases, the new category appears to be slightly narrower than the original.
1. In the case of suppliers, the greater specificity is probably a good thing. Distributors, for example, may be a Key Partner, but they fit more logically on the right side of the model, which focuses on customers, under Channels.
2. The addition of Information is very welcome in today's data-intensive, big data-driven world. Some other Resources, such as a preferential Location, now have a home of their own. Others, such as patents or exclusive contracts may struggle to find a home in the enhanced model.
3. Key Activities have been renamed as Processes. They are also placed within a horizontal chevron shape, instead of the non-descript blocks in which the other elements reside. I am neutral regarding the name change. Arguably, the shape and orientation of the category make absolutely no difference to the analytical process. However, I can't help but feel that the change highlights the active nature of the Key Processes. It also serves to make the model more distinctive.

Only time will tell whether the Enhanced Business Model Canvas will achieve the popularity of the original. For now, StratNavApp.com offers the ability to use either. Undoubtedly, it does add something to the debate on how best to understand, represent and analyse operating and business models. And I'd certainly be interested to hear your thoughts in the comments below.

Strategy Markup Language ("StratML")

I've recently been learning about Strategy Markup Language ("StratML"), which is an XML-based standard for communicating the type of content typically found in strategic plans and performance reports in machine-readable format.

You can learn more about StratML at:

• this Wikipedia page
• this fido.gov page
• this FAQ from the Association for Information and Image Management ("AIIM")

The original intention was for public bodies (government departments, parastatals, charities, etc.) to use StratML to share their strategic intentions and performance with each other, their stakeholders, and ultimately the general public. However, it could also be used (in a more secure manner) for:

• divisions within large groups and multi-nationals to communicate their strategic intent and performance to their divisional or global headquarters,
• startups to communicate their strategic intent and performance to funders and venture capitalists.
• any business which needs to communicate with regulators, stock exchanges, investors and/or rating agencies.

StratNavApp.com is now able to output elements of strategies developed in this free online tool in StratML format. (Simply click "Generate StratML" on the Reports and StratML page.) To see such an example of StratML in action, here is a description of StratNavApp and its goals in StratML format.

By default, the StratML generated by StratNavApp is only available to registered users of the specific projects to which it relates, but there is also an option to make StratML for specific projects available to the general public (if confidentiality is not a concern). Here is a list of all StratML which has been made publicly available at StratNavApp.com.

You can also create new projects in StratNavApp.com by importing existing StratML. (Simply click the import button on the Projects page.)

The consistently popular SWOT analysis

A recent Google Trends analysis (see below) highlights some interesting insights in the popularity of some of the most widely used Strategy Analysis tools:

The chart above shows the popularity, measured in terms of Google search frequency, of 5 popular strategy analysis tools. (Google Trend analysis allows only 5 search terms at a time.)

1. McKinsey 7-S
2. Strategy Canvas
3. PEST analysis
4. Porter's 5 Forces analysis
5. SWOT analysis

Looking at this analysis, I draw 3 interesting conclusions:

1. Despite being much maligned by many as being too simplistic to be of any real value, the humble SWOT analysis is the most popular of the three models by a wide margin. This is consistent with my own experience: the SWOT analysis is the cornerstone of any analysis, and whilst it is easy to abuse, it is a vital tool when in the hands of a skilled strategist.
2. The popularity of all of the search terms, especially "SWOT analysis" is noticeably seasonal, peaking each November and March. This suggests that interest is still tied to some annual planning process. It is disappointing to see that strategy is still seen as a periodic episode linked to some financial and business planning calendar and not a more fundamental way of thinking about how a business is run on an ongoing basis.
3. Finally, the popularity of all search terms appears to be gradually diminishing over time. It would be heartening to believe that this is simply because everyone is now familiar enough with these terms to no longer need to search them on Google, but my own experience suggests that it is more likely to be because people are more inclined to chase the latest fad rather than relying on fundamental strategic analysis, as suggested by the Strategic Learning framework..

How to use a RAID log

Most of the projects I work on use some form of RAID log.

RAID stands for Risks, Actions, Issues and Decisions. The RAID log is a simple tool to keep track of all of these, which can be very useful in regular project meetings as well as for audit purposes.

• Risks represent those things that could go wrong, either in the execution of the project (project risks) or in the underlying business being changed or created (business risks). For each risk we normally estimate the probability and impact of it happening, and also any actions we are taking to mitigate against it. We also normally assign an owner, who is responsible for monitoring and mitigating against the risks, and set a future review date on which it will next be assessed.
• Actions represent all the things that need to be done. These are typically actions that arise during project meetings and don't necessarily include all of the actions already on the project plan. Each action should have an owner, a due date, and eventually a date on which the action was completed. Each project meeting should review actions, to mark off those completed and review progress against those not yet completed.
• Issues are known problems within the project or the business being changed or created. Many people think of issues are risks which have already happened. Issues are typically notified up the management chain, for example to a project steering committee or business executive team. For each issue, you should identify what you intend to do about it, who should do this, and when it should next be reviewed. Issues should be marked as resolved once the problem is sorted out or the project moves past or around the obstacle.
• Decisions are simply a list of decisions made in a project. They are simply listed as a record of decisions made. You can also record when the decision was made, and by whom it was made.

The secret to a good RAID log is to record the right risks, issues and decisions at the right level of detail. Too many and in too much detail simply creates unnecessary bureaucracy. Too few in too little details does not provide a sufficient record of the state and progress of the business. For example, I have often seen risk logs populated with boilerplate risks: these are generic project risks, such as 'we may not get sufficient executive sponsorship' which don't really add any insight to the project. (If you genuinely think that is a risk, you be better of identifying the underlying reasons which might cause this, and then expressing the risk in those terms.)

RAID logs are an excellent governance mechanism, and worth keeping even if for no other reason than so that you have all of the information to hand if the internal audit department or some other stakeholder decides to audit your project. But don't forget that projects are fundamentally about doing things. So identifying risks and issues without also identifying actions to mitigate them, and making decisions to resolve them will not get you very far.

Resources: You can create and manage your own RAID logs with your team in our secure and collaborative online tool at StratNavApp.com - simply register and select "Control".

How to use Porter's Value Chain Analysis

The value chain is a simple graphical method for

• identifying and describing a firm's main functions,
• understanding how they add value, and
• pinpointing a firm's sources of competitive advantage and differentiation

The sample diagram below shows a generic value chain originally described by Porter:

Of course, this value chain describes a typical business dealing in physical goods. For example, manufacturing or distribution. The value chain for a service organisation might look completely different. See, for example, An investment management Value Chain.

To get the most out of value chain analysis it is important to identify the processes that best describe each operation. Each business should be unique. Therefore, each value chain, even at this high level, could be different.

Once you've mapped out the core functions within the organisation, you can then consider each function in more detail. Consider factors, depending on your purpose, such as:

• people,
• processes,
• technology,
• costs,
• strengths,
• weaknesses, etc.

There are many uses for a Value Chain analysis, for example:

1. Create a general yet holistic and shared level of awareness of the basic functions of a firm and how it creates and consumes value.
   
   This is a useful underpin for many other forms of strategic analysis. For example, you could create a matrix with the 7-Ss of the McKinsey 7S model along one axis and the processes from the Value Chain along the other axis. This will give you a more thorough and detailed analysis.
   
   This is also an important step when working with functional teams from within a business. People from different functional areas tend to have incomplete or skewed views of the organisation as a whole. For example, salespeople tend to have a sales-orientated view. They may underestimate the importance of inbound logistics. A value chain can help you to identify and correct this.
   
   
2. Design a Target Operating Model (TOM).
   
   See also How to design a Target Operating Model (TOM).
   
   The Value Chain is a useful model for ensuring you've designed the Operating Model of an entire organisation. That is including both the core operating functions as well as the supporting functions.
   
   
3. Do a gap analysis and design a strategy to close that gap.
   
   Using the same framework for describing both your existing operation (1 above) and your Target Operating Model (2 above) makes it easier to identify the gaps between the two. Then you can put plans in place to close those gaps. This alone can be sufficient to create a transformation strategy. However, I'd always advise also taking some external factors into consideration before getting too far down this track.
   
   
4. Ensure complete coverage in major change programmes.
   
   A value chain model provides a useful checklist for major change programmes. This will ensure you've considered the impact and implications for all functions within the organisation. For increased consistency, you could create your project's work breakdown structure along the same lines as the value chain.
   
   
5. Facilitate post-acquisition integration.
   
   A  post-acquisition integration is one kind of a major change programme. For an integration exercise, you'd first need to describe both organisations using the same value chain. This, in itself, could increase your understanding of the fit between the two organisations.

Use a Porter's Value Chain template

The diagram shown above was drawn with StratNavApp.com, the free online collaborative tool for strategists - try it now for free. It includes and integrates templates for the value chain and many other popular strategy models.

See also:

• Essential Strategy Analysis Tools