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As we know, we are living in a fast-paced era, mostly dominated by constant changes in technology and market trends, businesses need to be innovative enough to quickly respond to the market demands. But how could the organization be innovative? Businesses must have a clear and focused vision about their purpose, and their future activities must be aligned for future growth and sustainability. For this purpose, academics Alexander Osterwalder and Yves Pigneur designed a powerful entrepreneurial tool, Business Model Canvas, to help businesses develop and shape their ideas.
Business Model Canvas is a one-pager consisting of nine blocks: customer segments, customer value proposition, channels, customer relationships, revenue streams, key resources, key partners, key activities and cost structure.
A good business model is definitely a game-changer because it has the potential to give your business a scope for future. It has the potential to turn your failure into a big success.
But above all is another important step: identifying a problem. Businesses aren’t just started without proper analysis of existing problems, and in the end, that’s what businesses are catering – solutions to customers’ problems.
Customer Segments:
Customer Segment is indeed the foundation of any business model. Segmentation is digging out your targeted set of the audience from a clutter. A business having more than one offering can serve more than one customer segments – each value catering different customer groups.
Value Proposition:
According to the authors of the Business Model Generation, “The value proposition is the reason why customers turn to one company over another. It solves the customer problem or satisfies a customer need…some value propositions may be innovative and represent a new or disruptive offer. Others may be similar offers, but with added features and attributes.”
Channels:
Channels are basically a bridge through which you communicate your offerings to your customer segments. They include entities who sell your products or services and after-sale service to your targeted customers. For this purpose, Alex Cowan recommends the use of AIDA.OR model (Attention, Interest, Desire, Action, Onboarding and Retention) and storyboarding to design ‘customer journey’.
Customer Relationships:
Customer relationships are all about how a customer interacts with a company? How a customer interacts with an organization determines the most important elements – customer loyalty, trust and retention.
Revenue Streams:
Revenue streams are often considered as ‘arteries’ of a business model. When business is catering multiple segments, there can be multiple revenue streams too. However, just listing down the sources of earning isn’t enough but to evaluate each on an individual basis whether it is beneficial for business is important. The key is to first analyze how important or big the problem is for a customer and whether he or she is willing to pay for a solution. If not, then opting for that particular source isn’t a good choice.
Key Activities:
Key activities are important operations necessary to carry out in order to deliver your proposed value. Key activities are of paramount importance because it helps in approaching customer segments, effectively delivering proposed value, building customer loyalty, and generating revenues. Key activities vary according to business types (product-driven, scope or infrastructure), hence focus is the same – how to best deliver the value proposition to our target audience.
Key Resources:
Key resources are important assets and resources required to make your business model work and deliver your proposed value. Resources can be of different categories including physical, financial, intellectual and human. Key activities will help define your key resources – what material is required, what kind of people should be hired, what equipment is needed, and much more.
Key Partners:
Key partners are a nexus between key activities and key resources. These help in determining key partners and suppliers needed to make our business model work efficiently. Partnerships can be a major factor in businesses’ success or failure. An organization could be engaged in various partnerships, but the key is to identify the healthy one.
Cost Structures:
Cost structures refer to the cost incurred while creating and delivering the value proposition, maintaining long-term relationships, and generating revenues. Cost analysis should be aligned with key resources and key activities, and if there’s a certain discrepancy, it definitely needs a detailed analysis.
Business model canvas is the foundation for creating your own success. It helps businesses stay focused and have a coherent view of multiple aspects throughout business lifecycle. In the end, all you need is to ask yourself whether the model makes any sense? Could be it done any other way, the better way?
