Def_Business Model

A business model describes

the rationale of how an organization
creates, delivers, and captures value
The 9 Building Blocks

1: Customer
Segments

An organization serves
one or several Customer
Segments.
The 9 Building Blocks

1: Customer 2: Value
Segments Propositions

An organization serves It seeks to solve customer

one or several Customer problems
Segments. and satisfy customer needs
with value propositions.
The 9 Building Blocks

1: Customer 2: Value 3: Channels

Segments Propositions

An organization serves It seeks to solve customer Value propositions

one or several Customer problems are delivered to customers
Segments. and satisfy customer needs through communication,
with value propositions. distribution, and
sales Channels.
The 9 Building Blocks

1: Customer 2: Value 3: Channels 4: Customer

Segments Propositions Relationships

An organization serves It seeks to solve customer Value propositions Customer relationships

one or several Customer problems are delivered to customers are established and
Segments. and satisfy customer needs through communication, maintained with each
with value propositions. distribution, and Customer Segment.
sales Channels.
The 9 Building Blocks

5: Revenue
Streams

Revenue streams
result from value
propositions
successfully offered
to customers.
The 9 Building Blocks

5: Revenue 6: Key
Streams Resources

Revenue streams Key resources

result from value are the assets
propositions required to offer and
successfully offered deliver the previously
to customers. described elements…
The 9 Building Blocks

5: Revenue 6: Key 7: Key

Streams Resources Activities

Revenue streams Key resources …by performing

result from value are the assets a number
propositions required to offer and of Key Activities.
successfully offered deliver the previously
to customers. described elements…
The 9 Building Blocks

5: Revenue 6: Key 7: Key 8: Key

Streams Resources Activities Partnerships

Revenue streams Key resources …by performing Some activities

result from value are the assets a number are outsourced
propositions required to offer and of Key Activities. and some
successfully offered deliver the previously resources are
to customers. described elements… acquired
outside the
enterprise.
The 9 Building Blocks

5: Revenue 6: Key 7: Key 8: Key 9: Cost

Streams Resources Activities Partnerships Structure

Revenue streams Key resources …by performing Some activities The business model
result from value are the assets a number are outsourced elements result in the
propositions required to offer and of Key Activities. and some cost structure.
successfully offered deliver the previously resources are
to customers. described elements… acquired
outside the
enterprise.
The 9 Building Blocks
1: Customer Segments

The Customer Segments Building Block defines

the different groups of people or organizations an
enterprise aims to reach and serve.
1: Customer Segments

For whom are we creating value?

Who are our most important customers?
1: Customer Segments

For whom are we creating value?

Who are our most important customers?

There are different types of Customer Segments.

Here are some examples:

Mass market
Niche market
Segmented
Diversified
Multi-sided platforms (or multi-sided markets)
2: Value Propositions

The Value Propositions Building Block describes

the bundle of products and services that create
value for a specific Customer Segment
2: Value Propositions

What value do we deliver to the customer?

Which one of our customer’s problems are we helping
to solve? Which customer needs are we satisfying?
What bundles of products and services are we offering
to each Customer Segment?
2: Value Propositions

What value do we deliver to the customer?

Which one of our customer’s problems are we helping
to solve? Which customer needs are we satisfying?
What bundles of products and services are we offering
to each Customer Segment?

A Value Proposition creates value for a Customer Segment through

a distinct mix of elements catering to that segment’s needs.

Newness Price
Performances Cost reduction
Customization Risk reduction
‘Getting the job done’ Accessibility
Design Convenience/usability
Brand/status
3: Channels

The Channels Building Block describes how a

company communicates with and reaches its
Customer Segments to deliver a Value Proposition
3: Channels

Through which Channels do our Customer Segments

want to be reached? How can we reaching them?
How can our Channels integrate? Which ones will work best?
Which ones are most cost-efficient? How are we integrating
them with customer routines?
3: Channels

Through which Channels do our Customer Segments

want to be reached? How can we reaching them?
How can our Channels integrate? Which ones will work best?
Which ones are most cost-efficient? How are we integrating
them with customer routines?

Channels have five distinct phases. Each channel can cover

some or all of these phases.

Awareness
Evaluation
Purchase
Delivery
After sales
4: Customer Relationships

The Customer Relationships Building Block

describes the types of relationships a company
establishes with specific Customer Segments
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 costly are they?
How can they integrate with our business model?
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 costly are they?
How can they integrate with our business model?

We can distinguish between several categories of Customer Relationships, which may

co-exist in a company’s relationship with a particular
Customer Segment:

Personal assistance
Dedicated personal
assistance
Self-service
Automated services
Communities
Co-creation
5: Revenue Streams

The Revenue Streams Building Block represents

the cash a company generates from each Customer
Segment (costs must be subtracted from revenues to create earnings)
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?
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?

There are several ways to generate Revenue Streams:

Asset sale
Usage fee
Subscription fees
Lending/Renting/Leasing
Licensing
Brokerage fees
Advertising
5: Revenue Streams
6: Key Resources

The Key Resources Building Block describes

the most important assets required to make a
business model work
6: Key Resources

What Key Resources do our Value Propositions require?

Our Distribution Channels? Customer Relationships?
Revenue Streams?
6: Key Resources

What Key Resources do our Value Propositions require?

Our Distribution Channels? Customer Relationships?
Revenue Streams?

Key Resources can be categorized as follows:

Physical
Intellectual
Human
Financial
7: Key Activities

The Key Activities Building Block describes

the most important things a company must do
to make its business model work
7: Key Activities

What Key Activities do our Value Propositions require?

Our Distribution Channels? Customer Relationships?
Revenue streams?
7: Key Activities

What Key Activities do our Value Propositions require?

Our Distribution Channels? Customer Relationships?
Revenue streams?

Key Activities can be categorized as follows:

Production
Problem solving
Platform/network
8: Key Partnerships

The Key Partnerships Building Block describes

the network of suppliers and partners that make
the business model work
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?
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?

It can be useful to distinguish between three

motivations for creating partnerships:

Optimization and economy of scale

Reduction of risk and uncertainty
Acquisition of particular resources and
activities
9: Cost Structure

The Cost Structure describes all costs incurred to

operate a business model
9: Cost Structure

What are the most important costs inherent in your business

model? Which Key Resources are most expensive?
Which Key Activities are most expensive?

Naturally enough, costs should be minimized in every business model. But low Cost Structures are more
important to some business models than to others. Therefore it can be useful to distinguish between two
broad classes of business model

Cost-driven
Value-driven
The nine business model Building Blocks form
the basis for a handy tool, which we call the
Business Model Canvas.
The Business Model Canvas, is a strategic
management and entrepreneurial tool. It
allows you to describe, design, challenge,
invent, and pivot your business model.
Example: Apple iPod/iTunes Business Model
Example: Apple iPod/iTunes Business Model
Example: Apple iPod/iTunes Business Model
Tips

1: Use Sticky Notes

Use a sticky note for each and every one of the

building blocks of your business model. Ideas need
to be mobile.
Tips

2: Draw

Use words AND images to describe

your business model building blocks
to enhance big picture understanding.
Tips

3: Use colours

Increase the clarity of your business model

by color-coding all elements related to a specific
client segment.
Tips

4: Sketch Alternatives

Don't fall in love with your first idea.

Sketch out alternative business models
for the same product, service, or technology.
Tips

5: Tell a story

Start from a blank Canvas when you

explain your business model. Tell your business
model story one sticky note
at a time.
Tips

6: Learn from the best

Map out every new and innovative

business model you come across. Understand,
learn and try to apply
to your model.
Disruptive new business models
are emblematic of our generation.
Yet they remain poorly understood,
even as they transform competitive landscapes
across industries.
Business Model Generation offers
you powerful, simple, tested tools
for understanding, designing, re-working,
and implementing your business model.