Business Model Canvas
A business model is a blueprint for your business and a way to show how you deliver value to you customers. This is a quick guide to the business model canvas, first introduced by Alexander Osterwalder and his company Strategyzer. The business model canvas is an easy tool to sketch out you (potential) business model.
Business model canvas consists of nine building blocks which together makes up for your business: The value proposition, key activities, key resources, key partners, customer segments, customer relation, distribution channels, revenue stream, and cost structure.
Key Activities are the main activities which are key for the company to turn input into output: resources into value. This is most often where the company´s products or services are mentioned, as the activities are an essential part of making those products or services.
Key Resources are the resources most necessary for the key activities to be able to create value. The key resources are also the once need to make the rest of the business model possible: The distribution channel and the customer relationship.
Key Partners are the external people or organizations which are essential for the company. Often it is those partners; that makes up for the company’s lack of key resources or key activities. Having key partners is not a sign of weakness but instead a sign of focusing on the company’s core activities instead of trying to be best at everything.
Customer segment are, together with the value proposition, the core of the business model. The two building blocks combined answers the two questions: What value are we creating and for who? The more specific you can define the customer segment, the better. Often you will find that different customer segments require different value propositions and that the company can have several of both at the same time.
Distribution channels most often cover how the customers buy the company’s products or services. But to be more specific it includes all the touchpoints that the customer interact with, before, during and after purchase.
Customer relationship determines the relationship between the company and the different customer segments. If the relationship is automated, the cost goes down along with the opportunity to build a personal connection with the customer and vice versa.
Revenue streams are the way that the company makes its money and the preferable way to bill the customers. Companies do often have more than one way to earn money of their customers. Most important are the customer lifetime value, describing the overall value acquired from customers.
Cost structure describes the financial challenges the company faces with its current business model and how it overcome those challenges through cost management.
The nine building blocks are interdependent, and changes to one of the blocks will most likely affect the rest of the business model in some way. The business model canvas is a tool, which needs to be implemented in the way you think about building and developing a business, not only used once a year.
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