The Business Model Canvas – 9 Steps to Creating a Successful Business Model – Startup Tips The Business Model Canvas, is strategic management and entrepreneurial tool. It allows you to describe, design, challenge, invent, and pivot your business model. The Business Model Canvas has comprised of 9 key segments: The left-hand section of the Business Model Canvas is the Infrastructure section and comprises three key areas:
Key Activities: The most important activities in executing a company’s value proposition.
Key Resources: The resources that are necessary to create value for the customer.
Partner Network: In order to optimize operations and reduce risks of a business model, organizations usually cultivate buyer-supplier relationships so they can focus on their core activity.
The middle section of the canvas describes the business offering and is the value proposition delivered to different customer segments.
Value Propositions: The collection of products and services a business offers to meet the needs of its customers. According to Osterwalder, (2004), a company’s value proposition is what distinguishes itself from its competitors. The value proposition provides value through various elements such as newness, performance, customization, “getting the job done”, design, brand/status, price, cost reduction, risk reduction, accessibility, and convenience/usability. The value propositions may be: Quantitative â€“ price and efficiency Qualitative â€“ overall customer experience and outcome
The right-hand side of the Business Model Canvas describes the customers, the channels through which you deliver services and the relationships you have with your customers.
Customer Segments: To build an effective business model, a company must identify which customers it tries to serve. Various sets of customers can be segmented based on the different needs and attributes to ensure appropriate implementation of corporate strategy meets the characteristics of selected group of clients.
Channels: A company can deliver its value proposition to its targeted customers through different channels. Effective channels will distribute a companyâ€™s value proposition in ways that are fast, efficient, and cost-effective. An organization can reach its clients either through its own channels (storefront), partner channels (major distributors), or a combination of both.
Customer Relationships: To ensure the survival and success of any business, companies must identify the type of relationship they want to create with their customer segments.
The bottom section of the canvas describes the finances.
Cost Structure: This describes the most important monetary consequences while operating under different business models. A company’s DOC.
Revenue Streams: The way a company makes income from each customer segment.
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Question 5 – Fill out another section for the business of your business model canvas: Key Partnerships. Just write down what you would actually write down for your business, in a way that your team will understand.
Forming strong partnerships with your ecosystem is a great tool to help in expanding your reach and making sure that your business is delivering its promise to clients.
Some essential partnerships in business include:
Alliances these are entities that can complement your offerings or your reach to your clients â€“ these can include joint ventures or general partnership agreement
Suppliers are essential in providing you non-core business elements that allow you to focus on your core areas of strength
Continuous evaluation of the available partnership options is essential to stay abreast of the latest developments.
Question 6 – Fill out another section for the business of your business model canvas: Cost Structure Just write down what you would actually write down for your business, in a way that your team will understand.
Important Cost Structures
Cost structure refers to all the costs that you incur to deliver on your business model. Keeping your costs under control is essential to maintain a healthy business.
2 Essential Cost Structure elements include:
Fixed Costs â€“ which refer to all costs that you need to incur whether you sell or not. These could include factory, general administration staff, rent, management staff costs etc..
Variable Costs â€“ which refer to costs that are associated with the sales of your products or services. The more you sell the more these costs would go up. Variable costs include things like the raw material for your products or cost of consultants that you would etc..
When you are starting up a business keeping the fixed costs as low as possible is essential so that you donâ€™t run out of cash too quickly before you start selling enough products and services to cover your costs.