If you've ever thought about starting your own business, chances are you've probably heard of the Business Model Canvas. What is it exactly? It is a strategic management and entrepreneurial tool that allows you to describe, challenge, invent, and pivot your business model.
We recently had the pleasure of interviewing Swiss entrepreneur Alexander Osterwalder, who shot to international fame with his Business Model Canvas, and asked him about past failures, his advice to startups, and what motivates him.
You co-founded your first startup Netfinance.ch before completing your PhD. What happened to it? What would you have done differently if you had known what you do today?
That was a fun project. Netfinance.ch was a training business to help people invest online with online tools. It was more of a project than a real startup.
If there’s one thing I would have done differently, it's: build less, test more. So, use much cheaper ways of testing ideas to see what resonates.
The second piece of advice would be to think more holistically, to be less product-focused and be more business model-focused in order to figure out the best business model.
At a certain point with Net Finance, we killed the project. It wasn't a failure. E-banking was new at the time, and while we had some success, it was not a scalable business model, so we moved on.
And I think that's a good thing. That was surprisingly wise at the time. Not every company or project needs to survive. You need to know when to move on to the next thing.
You are the author, among others, of Business Model Generation and Value Proposition Design. What was the main reason that you wrote these books? Is there a book, in addition to yours, of course, that you would recommend to young startups?
Today, we’re at five books at Strategyzer [consultancy firm, co-founded by Osterwalder]. Our most successful book is The Invincible Company. But out of the five books in the [Business Toolkit] series, maybe the most relevant for startup entrepreneurs is Testing Business Ideas by lead author David Bland, and me as a coauthor.
I would recommend two books not in the Strategyzer series: Steve Blank’s The Startup Owner's Manual for young entrepreneurs and early startups; and, for startups that have some success and are moving to scale, High Growth Handbook by Elad Gil.
What is in your workspace that keeps you motivated?
Two things keep me motivated: the Swiss mountains, because that's where I get my inspiration. I digest everything I learn from working with companies when I’m on ski tours, back country ski tours, or on hikes.
The second is my family. Spending time with my family gives me the biggest boost in motivation to keep going.
We’re often told that failure comes with the territory for young startups. In your opinion, why is that?
Failure is never the goal, but it's part of the journey.
A startup starts with a vision or an idea, but that's the easy part. Steve Blank likes to say that there's a fine line between vision and hallucination for startups.
What's really hard is to adapt your idea by testing it in the field with customers.
And in that process -- in that journey of testing your idea and adapting it again and again, and again -- you will fail a lot. But the goal is to keep failure cheap and fast so you can learn from it and adapt your idea, until you have a
value proposition that resonates with customers and a business model that can scale.
In my early startup journey, I started with building stuff rather than testing in a cheap and fast way and adapting it before actually launching a product or a service.
There's this myth in startups that you need to build something to test. You do not. You need to start understanding the customer, talk to customers, make brochures to describe your value proposition and see how people react
You will create a lot of things or believe a lot of things that are wrong and that's okay as long as you test that quickly, fail quickly and cheaply, and adapt. As an entrepreneur, you can never avoid making mistakes and failing. The key of being an entrepreneur is to stand up again and again and again. I like to say that the best entrepreneurs are okay with being humiliated and looking stupid a thousand times -- until they look good.
You were born in Switzerland, and you also studied here. Do you recommend starting a business here? Why or why not?
We started Strategyzer in Switzerland and it has been very good. We looked at different places -- Toronto where my co-founder is from and Singapore, because we're always attracted by vibrant Asia -- but Switzerland turned out to be a very good place to start, for the stability, for the legal framework, for taxes.
What was important for us is that we’ve always operated as a remote-first company. We attract talent from around the world. So even though we're a Swiss company very few people physically live and work in Switzerland. Still, it's a great base from which to operate.
What question are you always hoping someone will ask during an interview, but no one ever does?
Maybe the question: what do I think the role of a company is?
For me, companies have four roles: creating value for customers, creating value for the business, creating value for the team and creating value for society.
Companies need to create value for customers because otherwise they'll disappear.
Of course, they also need to create value for the organization. The business model needs to work. Otherwise, it's not profitable and will disappear.
Creating value for the team, the people who work in an organization, is the best way to have a positive impact on society, I think. Because if you're not creating value for your team members, they're going to leave. If you have happy people on your team, they're going to be happy when they go back home to their friends and family.
Finally, companies have an important role to play as corporate citizens contributing to society. Companies that don't have a purpose, that don't make a difference in society, will have a harder and harder time attracting strong talent.
I see more and more people who don't just want to work at a company for the money. They want to work for a company that they can identify with, and where their values align with the values of their employer, like Patagonia, right?
A very special thanks to Alex Osterwalder for taking the time to interview with >>venture>>.
To learn more about the Business Model Canvas and Osterwalder's other works, visit www.strategyzer.com.