Nowadays, business models have become crucial starting point of most of the companies. Models describe the way each company should work. Regardless of the type, they are systems of assumptions and ideas, which help to model business reality. Entrepreneurs use them to order significant aspects of their businesses, which enables them to manage their companies well. An effective business model should answer some basic questions about the reasons and goals of the company as well as be simple so that people involved understand it.
Business model canvas is one of the most popular on the market. Created by Alex Ostelwalder, it stems from basic models and makes them more precise. It is a template consisting of 9 elements each company should start with. When you fill in the 9 elements with the content and combine them, apart from describing the service that your company provides, they should also draw the full plan of a reasonable action.
The 9 components of business model canvas consist of:
- Value proposition – all the reasons that make clients choose your product/service. In other words, it is a set of benefits the company offers. Those benefits should consist of special values, nonexistent on the market. If you think of your value proposition, you have to answer the question of clear difference between your service and the services of your competition. Let your vision be short, clear and catchy. Use the so-called “elevator pitch” [30 seconds to attract] to summarize and define your service. If you can take advantage of such a short period of time and attract the attention of your potential customer, your value proposition needs no further development.
- Customer segments – customers are the heart of every business. The basic question here is: what market are you fighting for? Each company should know exactly who does it address its product/service for. In this element of business model canvas, clients should be characterized and then categorized to separate segments. Depending on who your clients are, your strategy should be moulded differently.
- Channels – define the way of communicating and reaching customer segments in order to give them value proposition. While verifying your distribution channels, you should concentrate on both canvass and selling. Experts claim that it is better to start with the channels that are the fastest but the cheapest ones. Nowadays, each company should spend money on effective e-marketing. While using social media it is important to remember that appropriate tools should be used for appropriate customer segments. There are 5 main stages: provide the information about your product/service, let the customer check the value proposition, purche, deliver the product/service and finally, after-sales support. A good business model takes all those stages into consideration.
- Customer relationships – the nature of each relationship can be different depending on the needs of each client and customer segments that you support. They can be personal (e.g. B2B) or automated. Their main aim is to build the atmosphere of trust and maintain those relationships.
- Revenue streams – Osterwalder wrote: “if a customer segment is the heart of every business model, revenue stream is his artery”. This element describes the way the company generates revenue from each customer segment. There are many ways of obtaining it, however, it is often related to services that are being sold. Customers can pay for using the product, subscription or licensing. There are many ways and some of them can be combined together. For instance, if a customer buys a video game, he pays once for his product, but if he wants to play online on different levels, he has to pay again.
- Key resources – things needed to generate value proposition and reach customer segments by means of channels. In business model canvas the key resources can be divided into financial (money), physical (machines, cars, servers, office), human (experienced consultants, highly-educated scientists) and intellectual (customers’ data, patents, knowledge).
- Key activities – can be divided into 3 sectors: production, problem solution and managing the platform/network. Production is designing, creating and supplying. Problem solution is an activity which focuses on supporting and helping your customer to understand unclear matters. Managing the platform concerns only those companies whose key resource is an internet service.
- Key partners – network of suppliers and contractors that help the company to develop. If you have an array of important partners, it can enable you to decrease your expenses or widen the group of potential clients. By means of cooperation, having key partners is often beneficial for both sides.
- Cost structure – all of the expenses that the company should make to exist. If you create a value proposition, foster the customer relationships and generate revenue streams, it means that you pay. The costs can be easily counted after defining key resources, key activities and key partnerships. Cost structure can be divided into 2 categories: permanent costs (salaries, office, phones for employees) and variable costs. The most important thing is to pay less than earn.
Before launching your business, it is a wise idea to think thinks through and take advantage of business model canvas. It was created to order ideas, plan your activities and help entrepreneurs build their companies. One of the most effective tools, which can help you deal with business modelling is BPlanner. It leads users through all stages of business planning, and moreover, searches for an investor. The innovative platform works in the form of several modules to which access is moderated depending on the progress of the project. BPlanner provides an enormous amount of support and meets users’ individual needs. Click and learn more: http://www.bplanner.eu
Photo credit: CC via flickr by Epicantus