Business model

Skate to where the money will be, not where it is now - Christiansen

What is a Business Model?

A business model describes the rationale of how an organization creates, delivers, and captures value. The business model is like a blueprint for a strategy to be implemented through organizational structures, processes, and systems.

The four main areas of a business

Whom What How What is the outcome/Returns

The Business Model Canvas

Book on Business Model Generation Alex Osterwalder and Yves Pigneur The Business Model Canvas

The building blocks

Customer Segments
An organization needs to understand who is their target customer. They may serve one or several Customer Segments. For whom are we creating value?

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Value Propositions
It seeks to solve customer problems and satisfy customer needs with a bundle of benefits. What value do we deliver to the customer? Which one of our customers problems are we helping to solve? Which customer needs are we satisfying? What bundles of products and services are we offering to each Customer Segment?

The building blocks

Channels
Value propositions are delivered to customers through communication, distribution, and sales channels. Through which Channels are Customer Segments to be reached? Can the Channels be integrated? Which ones work best? Which ones are the most cost-efficient?

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Customer Relationships
Customer relationships are established and maintained with each Customer Segment. They deeply influence the overall customer experience. What type of relationship does each of our customers want? Segments expect us to establish and maintain with them? Which ones have we established? How are they integrated with the rest of our business model? How costly are they?

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Key Resources
Key resources are the assets required to offer and deliver the previously described elements. What key resources are required for the value proposition? Does it depend on distribution channel, customer relationship or revenue streams?

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Key Activities
Key activities are the most important actions a company must take to operate successfully. What Key Activities do our Value Propositions require? Our Distribution Channels? Customer Relationships? Revenue streams?

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Key Partnerships
The key partnerships describes the network of suppliers and partners (to acquire resource or reduce risk) that make the business model work. Who are our Key Partners? Who are our key suppliers? Which Key Resources are we acquiring from partners? Which Key Activities do partners perform?

The building blocks

Cost structure
The Cost Structure describes all costs incurred to operate a business model- right from creating value proposition to delivering and maintaining customer relationships. What are the most important costs inherent in the business model? Which Key Resources are most expensive? Which Key Activities are most expensive? Are fixed costs high or variable costs?

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Revenue Streams
Revenue streams result from value propositions successfully offered to customers. For what value are our customers really willing to pay? For what do they currently pay? How are they currently paying? How would they prefer to pay? How much does each Revenue Stream contribute to overall revenues?

The Business Model Canvas

Key Partners Key Activities Value Proposition Customer Relationships Customer Segments

Key Resources

Channels

Cost Structure

Revenue Streams

Source: Business Model Generation, Alex Osterwalder and Yves Pigneur