2. Business Model
• Business model can make the huge difference between world-leading success and dismal failure.
• Example: Xerox 914, had a drastic fall as their first dry-process, plain-paper copier was six times costly
than price of alternatives.
• This had them big failure.
• With their existing speed and convenience and developing a new business model (they leased it for $95 a
month and few cents per copy for copies in excess of 2000 a month), customers soon were making tens
of thousands of copies in the same period.
• This resulted into huge revenue generator.
3. Business Model Canvas
• To encourage such kind of thinking, “Alexander Osterwalder” developed a Business Model Canvas.
• BMC is a simple graphical template categorising the processes and internal activities of a business
into nine essential categories needed to get a business (or product) successfully to market.
• The categories in a canvas are:
1. Customer segments
2. Value propositions
3. Channels
4. Customer relationships
5. Revenue streams
6. Resources
7. Activities
8. Partnerships
9. Costs
• These categories represent the four major aspects of a business; customers, offer, infrastructure and financial viability.
4. The Nine Categories
1. Value Propositions
• It is the combination of products and services the company provides to its customers.
• Value propositions can be divided into two categories Quantitative and Qualitative.
2. Customer segments
• A company must identify who/which are the customers it tries to serve based on their different needs and
attributes.
• Customers can be segmented Mass Market, Segmented Market, Multi-Sided Market and so.
3. Key Activities
• The steps the team must complete to make it successful.
4. Key Resources
• The resources that are necessary to create value for the customer. These resources could be human, financial,
physical etc.
5. Channels
• Identify through which channel you will reach your customers and vice versa?
• Which channels will work best?
• How much do they cost?
5. The Nine Categories
6. Customer Relationships
• Company must select the kind of relationship it will have with its customer segment.
• Customer Relationships can be Personal Assistance, Dedicated Personal Assistance, Self-Service,Communities
and so
7. Key Partners
• Key partnerships are the network of suppliers and partners who complement each other in helping the company
create its value proposition.
8. Cost structure
• This defines the cost of running a business according to a particular model.
• Businesses can either be cost driven i.e. focused on minimizing investment into the business
• Or value driven i.e. focused on providing maximum value to the customer.
9. Revenue Streams
• The way a company follows to make revenue from each customer segment.
• Several ways includes Usage Fee, Subscription Fees, Lending/Leasing/Renting Brokerage Fees, Advertising and
so.
6. The Business Model Canvas
Revenue Streams
Channels
Customer SegmentsValue PropositionsKey ActivitiesKey Partners
Key Resources
Cost Structure
Customer Relationships
Designed by: Date: Version:Designed for:
designed by: Business Model Foundry AG
The makers of Business Model Generation and Strategyzer
This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit:
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What are the most important costs inherent in our business model?
Which Key Resources are most expensive?
Which Key Activities are most expensive?
is your business more
Cost Driven (leanest cost structure, low price value proposition, maximum automation, extensive outsourcing)
Value Driven (focused on value creation, premium value proposition)
sample characteristics
Fixed Costs (salaries, rents, utilities)
Variable costs
Economies of scale
Economies of scope
Through which Channels do our Customer Segments
want to be reached?
How are we reaching them now?
How are our Channels integrated?
Which ones work best?
Which ones are most cost-efficient?
How are we integrating them with customer routines?
channel phases
1. Awareness
How do we raise awareness about our company’s products and services?
2. Evaluation
How do we help customers evaluate our organization’s Value Proposition?
3. Purchase
How do we allow customers to purchase specific products and services?
4. Delivery
How do we deliver a Value Proposition to customers?
5. After sales
How do we provide post-purchase customer support?
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?
For whom are we creating value?
Who are our most important customers?
Mass Market
Niche Market
Segmented
Diversified
Multi-sided Platform
What type of relationship does each of our
Customer 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?
examples
Personal assistance
Dedicated Personal Assistance
Self-Service
Automated Services
Communities
Co-creation
What Key Activities do our Value Propositions require?
Our Distribution Channels?
Customer Relationships?
Revenue streams?
catergories
Production
Problem Solving
Platform/Network
What Key Resources do our Value Propositions require?
Our Distribution Channels? Customer Relationships?
Revenue Streams?
types of resources
Physical
Intellectual (brand patents, copyrights, data)
Human
Financial
Who are our Key Partners?
Who are our key suppliers?
Which Key Resources are we acquairing from partners?
Which Key Activities do partners perform?
motivations for partnerships
Optimization and economy
Reduction of risk and uncertainty
Acquisition of particular resources and activities
What value do we deliver to the customer?
Which one of our customer’s problems are we
helping to solve?
What bundles of products and services are we
offering to each Customer Segment?
Which customer needs are we satisfying?
characteristics
Newness
Performance
Customization
“Getting the Job Done”
Design
Brand/Status
Price
Cost Reduction
Risk Reduction
Accessibility
Convenience/Usability
types
Asset sale
Usage fee
Subscription Fees
Lending/Renting/Leasing
Licensing
Brokerage fees
Advertising
fixed pricing
List Price
Product feature dependent
Customer segment
dependent
Volume dependent
dynamic pricing
Negotiation (bargaining)
Yield Management
Real-time-Market
strategyzer.com
7. Why use the Business Model Canvas?
• In startup or gaining traction mode, you need real clarity on your business model to make it success.
• Provides a simple, intuitive and flexible tool that can be developed rapidly and applied ongoing to
iterate and refresh the business strategy.
• Provides a neat breakdown of the major considerations impacting the business.
• Gives a clear direction the organization is taking through its business model.
• Evaluate the exact position of where a company is standing.
• Set the target and decide how can we achieve it.
8. Methodology
• Choose your competitors, learn about them and map their business models.
• Uncover the vital information about how other successful businesses have created their own spaces in
the market.
• Armed with this information, you’ll have deep insight into what customers want and what they are willing
to pay for.
• Then we can map a clear picture of how customers’ needs are met in our company.
9. Success Story
• The biggest Business Model success story is Apple.
• Apple was a game changer when it introduced the iPod to the world.
• Through iTunes, Apple integrated device, software and an online store into an experience that set the music industry
on its ear and that competitors have been hard pressed to match.
• Apple has lasting partnerships through the deals it negotiated with music producers so it could sell their music through
its store.
