Training Manual -

Business Model Generation

Business Model A business model describes the rationale of how an organization creates, delivers, and captures value. All the Business Models can be outlined in a unique frame, the Business Model Canvas. The Business Model Canvas

The Business Model Canvas is a tool that allows to map existing business models, improve them, and invent new ones. It is composed by 9 building blocks:

1. Customer Segments 2. Value Proposition 3. Channels

4. Customer relationships 5. Revenue streams 6. Key Resources 7. Key activities 8. Key Partners 9. Cost Structure

1. Customer Segments

• For whom are we creating value?

• Who are our most important customers?

Examples:

o Mass market o Niche market o Segmented o Diversified o Multi-sided platform

2. Value Proposition

• 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?

Examples:

o Newness o Performance o Customization o “Getting the Job Done”

o Design o Brand/Status o Price o Cost Reduction o Risk Reduction o Accessibility o Convenience/Usability

3. Channels

• 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?

Examples:

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 our customers to purchase our services or products? 4. Delivery - How do we deliver a Value Proposition to customers? 5. After sales - How do we provide post-purchase customer support?

4. Customer Relationships

• 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:

o Personal assistance

o Dedicated Personal Assistance o Self-Service o Automated Services o Communities o Co-creation

5. Revenue Streams

• 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?

Examples:

o Asset sale o Usage fee o Subscription Fees o Lending/Renting/Leasing o Licensing o Brokerage fees o Advertising

6. Key Resources

• What Key Resources do our Value

Propositions require?

• Our Distribution Channels? Customer Relationships?

• Revenue Streams?

Examples:

o Physical o Intellectual (brand patents, copyrights, data) o Human

o Financial 7. Key activities

• What Key Activities do our Value

Propositions require?

• Our Distribution Channels?

• Customer Relationships? • Revenue streams?

Examples:

o Production o Problem Solving o Platform/Network

8. Key Partnerships

• Who are our Key Partners?

• Who are our key suppliers?

• Which Key Resources are we acquiring from partners?

• Which Key Activities do partners perform?

Motivations for partnerships:

o Optimization and economy o Reduction of risk and uncertainty o Acquisition of particular resources and activities

9. Cost Structure

o What are the most important costs

inherent in our business model? o Which Key Resources are most

expensive? o Which Key Activities are most

expensive?

Some examples of Business Models:

Long Tail - selling less of more

Offers a large number of niche products;

Low inventory costs and strong platforms to make niche content readily available to interested buyers.

Multi-sided platform

Brings together two or more distinct but interdependent groups of customers;

Generates value to one group of customers only if the other groups of customers are also present;

The platform creates value by facilitating interactions between the different groups.

Blades-and-razor model

Consumer purchases a low-margin item like a razor handle or inkjet printer. Sale of necessary consumables such as replacement blades or ink are sold at a very high markup.

Cheap chic

Marketing of stylish but inexpensive merchandise. Typically allows for high

margins because merchandise sells at low price points but has an expensive feel.

Multilevel marketing

Leverage friends, family, and other personal networks to recommend products and act as a sales force. Works best for products needing recommendation to facilitate purchase.

Franchise

Sell the right to use the business model in exchange for a percentage of revenues.

Software as a

Service

Subscription model

One of the most popular models because of the recurrent revenue. Typically involves creating a significant asset and renting a piece of it.

Freemium

Product is offered for free. Typically 8% of users upgrade to become paying customers of virtual goods or to get expanded access.

How to go:

1. You have an idea; 2. Start structuring it in your Business Model Canvas. Generate several non-refined hypothesis.

Try others Business Models on your idea; 3. Test: Get out of the building and validate each one of your building blocks; 4. Reformulate: The Business Model is not a static tool. Your learnings must be incorporated.

Look for continuous innovation and improvement. Important final notes:

o Sometimes, the innovation is in the Business Model and not in the product or service; o The Business Model might make the difference between failing and succeeding – Remember

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