Key Partners
The partners required by the business. A business model is a means of creating and capturing value. This often requires partners as you focus on areas of competitive advantage and look for partners to do everything else. The following are the basic types of partners.Research & Development | Research and product development partnerships. |
Suppliers | Suppliers of parts, components, products and services. This can including the complete outsourcing of manufacturing or services such as customer service. |
Distribution are methods of reaching customers with your products and services such as a wholesaler or retail partner. | |
Firms that add something to your products and services before reselling them. | |
Marketing partners that sell or promotion your products and services. | |
Development | Partners that help you to develop your business such as a firm that will implement technologies for you. |
Sustainability | Partnerships with governments, communities and non-profit organizations that help you to make the world a better place. |
Key Activities
Key activities are what you plan to do to add value. This describes both repeated processes and one time projects that create value for your business.Developing and launching products and services. | |
The core processes of a firm that produce value such as the production lines of a manufacturer or IT operations of a bank. | |
Marketing activities such as developing your brand, promoting your products and closing sales. | |
Activities related to your end-to-end customer experience including elements such as design, customer service and customer relationships. For example, the interior design of a hotel is an element of the hotel's customer experience. |
Key Resources
The resources required to execute your business model.Key human resources including leadership and skills required by the business. | |
Financial | The financial resources required to execute your business plan. This is typically an estimate of the financial capital required to make the business profitable and self-sustaining. |
Physical | Physical capital such as offices and other facilities. |
Relational | Relational capital such as relationships with a key partner. |
Knowledge that you need to develop such as manufacturing know-how. |
Value Propositions
The value generated by a business from the perspective of customers. Answers the question, why should a customer choose us in a crowded marketplace? A value proposition fulfills customer needs and delights customers based on their preferences and perceptions. This typically needs to be unique, unless you have competitive advantages that allow you to win business against others with the same value proposition.Making something more efficient. | |
Making people more productive. | |
Performance | Improving the performance of things. For example, a faster high-speed train that is less bumpy. |
Giving customers an experience they value. | |
Reducing or transferring a risk. | |
Relationships | Facilitating relationships such as a two-sided market. |
Value Capture | Directly capturing value with techniques such as arbitrage. |
Convenience | Making things easier or more comfortable. |
Sustainability | Improving the environment or the quality of life of communities. |
Improving the quality of life of the customer. | |
Improving the value of another product or service with offerings that are complementary. | |
Unlocking | Unlocking value that is trapped. For example, a way for people to rent out assets they aren't using. |
Customer Relationships
What type of relationship you intend to develop with customers. This varies from selling to customers on a transactional basis to developing extensive partnerships with customers whereby they help you to develop your brand, generate demand and design your products.Transactional Selling | Closing one time deals without much regard to repeat business. |
Closing deals that require extensive relationship building, discovery of needs and custom solutions. Requires a commitment to potential customers before closing a deal. | |
Relationship Selling | Establishing and sustaining relationships with customers to continue to sell to them or maintain monthly recurring revenue. For example, a consulting firm that commonly sustains relationships for decades to produce significant customer lifetime value. |
Self-Service | The automation of the customer relationship such that they interface with you through tools you have provided. |
Viewing customer relationships in terms of the culture the evolves around your brand. For example, a restaurant in a business district that becomes a popular after work hangout for 20 and 30-something professionals in the area who are highly social. | |
Viewing the customer relationship in terms of the experience of customer including factors such as the usability of your products and the friendliness of your customer-facing employees. For example, a brand of children's toys that wants to be viewed by every customer as fun, safe, educational and reliable. | |
Brand Advocates | Efforts to engage customers such that they help you to build brand recognition and generate demand using word of mouth. |
Engaging customers in the design of your products and services. |
Channels
Channels are methods of reaching customers. Marketing channels are ways of reaching the customer to sell to them and distribution channels are methods of reaching the customer to deliver your obligations to them. In many cases, a single channel is both a marketing and distribution channel.Direct marketing uses media to directly communicate to the customer. For example, a television commercial that asks customers to call. | |
Personally connecting with a customer such as a consultant who builds relationships with potential customers in person and using social media. | |
Reaching customers with a digital presence such as a web site or app. | |
A physical shop. | |
Events | A physical presence that is temporary such as a booth at a conference. |
A physical shop that doesn't sell anything. For example, a brand shop that allows customers to try products and then buy online. | |
Intermediaries | Selling to intermediaries such as wholesalers. |
Value Added Reseller | A partner that adds something to your products before selling them. For example, a bicycle seat manufacturer who sells to bicycle manufacturers. |
Partnerships | Any of the methods above using a partner. For example, a partner who sells your products in their retail shops or an agent who sells your products to wholesalers. |
Customer Segments
Breaking your customers out into groups known as segments in order to tailor your products and marketing efforts such as your brand. A business model can have a single customer segment or multiple segments. A segment is essentially the same as a niche, target market or target audience.Mass Market | No segments, target the entire market for your product or service. |
Customer needs such as snowboarders who require a large, stiff, responsive board for speed on powder. | |
Customer preferences such as customers who prefer toned-down art on their snowboard such as a natural wood looking board with minor detailing. | |
Customer perceptions such as snowboarders who firmly believe carbon fiber boards are the best without knowing exactly why. | |
Price sensitivity such as a new snowboarder who is going to buy the cheapest board that looks reasonable that will get them on the slopes. | |
Customers who are seeking social status. For example, a customer who buys a product to signal wealth, virtue, youth, style, intelligence or coolness. There are also customers who countersignal such as fashion consumers who don't want any logos on their clothing. |
Cost Structure
A breakdown of your cost structure.The cost of your capital such as the interest you need to pay on loans. This is a little advanced for most business model planning sessions but is a critical factor in a capital intensive business plan. | |
Costs that don't change with business volumes such as overhead and rent. | |
Costs that can be included in unit costs such as the cost to manufacture and sell a product. | |
Modelling how your costs will drop as business volumes increase. You may also be asked how you expect to compete with a large firm that enjoys economies of scale and low variable costs. | |
Modelling how your costs will drop as you diversify your product offerings. If you are a new business, economies of scope tends to work against you as you may have competitors that are able to share costs across a large number of products. |
Revenue Streams
Describing the structure of how you receive revenue.Sales | Selling products, services, experiences, assets, securities or advertising for a one-time price. This includes sales of rental services. |
Fees that recur monthly or yearly. These can be flat fees such as a subscription or a variable fee such as a metered service. | |
Transaction Fees | Charging a flat or percentage fee on a transaction. For example, if your business model is a two-sided market you might charge both a flat and percentage fee on every transaction you broker. Agent commissions can often be viewed as transaction fees. |
Licensing | Agreements that allow others to use your intellectual property for a fee. |
Other | Sales, recurring sales, transaction fees and licensing are by far the most common revenue structures. However, other revenue streams do exist such as arbitrage or incentive payments from partners. |
| Overview: Business Model Canvas | ||
Type | ||
Definition | A template for documenting business models | |
Invented By | Alexander Osterwalder | |
Related Concepts | ||
