When facing a complex problem, it is best to break it down into different, small, simple ideas. This way, you can solve them one by one, and little by little, undo the big problem. This vision can also be extrapolated to the business sector, and sometimes you just need a good template that allows you to graphically and disaggregate your main ideas.
This is precisely what the book is about. Business Model Generation by Alexander Osterwalder and Yves Pigneur, a work that led to the standardization of the creation of business models thanks to the Business Model Canvas and the entire methodology on which it is based.
As an entrepreneur or businessman, it is essential to have a good business plan, simple and concreteHow would you like to do it in 9 steps that you can tackle in just 20 minutes?
What is the Business Model Canvas?
To help you start shaping your business, here we tell you what the Business Model Canvas is.
According to Osterwalder himself: “The best way to describe a business model is to break it down into nine basic modules that reflect the logic a company follows to generate revenue. These nine modules cover the four main areas of a business: customers, supply, infrastructure and economic viability”.
Well, these are the 9 steps that Osterwalder details in his book to carry out the Business Model Plan.
- Customer segments
- Value propositions
- Channels
- Customer Relations
- Revenue streams
- Key Activities
- Key Resources
- Key Partnerships
- Cost structure
Together, these elements provide a fairly coherent view of a company’s key drivers. The BMC will help you answer the following questions::
- Who are the customers? What do they think? Do they see? Do they feel? Do they do?
- What is compelling about the proposition? Why do customers buy and use it?
- How are these offerings promoted, sold and delivered? Why? Does it work?
- How do you interact with the customer throughout their “journey”?
- How does the company generate revenue from value propositions?
- What unique strategic things does the company do to deliver its proposition?
- What unique strategic assets must the company have to compete?
- What can the company stop doing to focus on its core activities?
- What are the company’s main cost drivers? How do they relate to revenue?
These are the weird and unusual questions you’ll have to ask yourself if you want to be the founder of the next Netflix
Why use BMC in your business?
This way of working developed by Osterwalder provides:
- ConcentrationBy eliminating the 40+ pages of “stuff” from a traditional business plan, BMC users improve their clarity and focus on what drives the business.
- Flexibility: It’s much easier to fine-tune the model and test things with something that’s on a single page.
- Transparency: Your team will find it much easier to understand your business model and be much more likely to embrace your vision when it’s laid out on a single page.
These are the 9 steps of the Business Model Canvas (BMC)
1. Customer segments
The customer segments They represent your audience within the market, that is, which groups of people you want to offer your service or product to. To segment the market, it is possible to start by grouping different types of groups.
For example, you can group by different needs to be met, different channels to reach out through, different types of relationships, or different types of offer. These are some of the characteristics that you can analyze in your segments:
1. Segment dimensions
Do you have a single-sided or multi-sided market? If you have a multi-sided market, you will have at least as many segments as you have sides.
2. Segment composition
If segment dimensions are the “macro” analysis of your customer base, then the analysis within each segment of individual customer types like “Personas” is the “micro.”
As with economics, this is where most of the action happens. You need to be able to visualize these people to understand what they think, see, feel and do in the product area.
Be sure to list both buyers and users of your product, including when they are both.
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Experts say that this first step is one of the most time-consuming and also one of the most important.
The BMC template is a tool, not a strategy, and not all nine blocks are created equal. The matching of customer segments and value propositions is really the “independent variable” that should drive everything else in the business model.
2. Value propositions
You may have a lot of value propositions for this list, and that’s fine. Jot them down and rank them to keep the truly important ones. Finish by asking yourself these questions:
- Which of the problems or needs you identified in your customer segments are you satisfying?
- What is unique about your value propositions and why does your customer prefer them?
- The ultimate question is: what does your company do to make a customer choose you over a competitor?
3. Channels
Channels include the entities you use to communicate your proposition to your segments, as well as the entities through which you sell the product and later serve customers.
As Osterwalder explains in his book, different channels can be used and combined: direct and indirect, own and partners.
“Partner channels have lower profit margins, but they allow companies to expand their scope and leverage the strengths of each channel. On owned channels, especially live channels, profit margins are higher, but the cost of setting them up and managing them can be high.”
“The trick is to find the balance between the different types of channels and integrate them in such a way that the customer enjoys an extraordinary experience and revenues increase as much as possible,” the author points out.
4. Customer relations
How does the customer interact throughout the product and sales lifecycle? Do you have a dedicated personal contact for the customer they see? Do they receive telephone support? Is all interaction done via the web?
These are some of the questions you may ask yourself at this point. Normally, the classification is based on these three typologies:
- Personal assistance: evidently based on interaction between people, the client with a representative of the company.
- Self-service: There is no direct relationship with the client, but you offer all the necessary means for the client to solve the problems themselves.
- Automated services: It is a mix between self-service relationship and automated processes.
After completing this step you will get a detailed description of your customer relationships.
5. Revenue channels
As a good entrepreneur or businessman, you surely already know that the essential part of any business is the income, that is why it is so important to analyze your gain channels.
Develop a list of your income sources, their typology and what audiences or segments they involve. Currently the most common are: by sale, pay-per-use or subscription. Once you have analyzed this point, it is time to look at where you are directing income and if it aligns with the rest of your focal points.
Congratulations because you already have half of your BMC plan.
6. Key activities
Key activities or resources are the crucial things the company needs to do to deliver on its promises and make the rest of the business work.
“Software manufacturer Microsoft’s core business is software development, while computer manufacturer Dell’s core business is supply chain management. Consulting firm McKinsey’s core business is problem solving,” the book explains. Business Model Generation by Alexander Osterwalder and Yves Pigneur.
Therefore, at this point you will need to develop a List of key activities linked to your company’s value propositionsas well as questioning whether those activities or resources are truly essential to the business.
7. Key Resources
This point follows the same line of development as the previous one, key resources are the indispensable strategic assets in the company. The BMC proposes three main types of business: product, scope and infrastructure.
- Product-driven companies have a differentiated product of some kind. Key resources for product-driven companies are typically key talent in critical areas of expertise and accumulated intellectual property related to your offering.
- Reach-driven companies create synergy around a specific customer segment.
- Infrastructure-driven companies achieve economies of scale in a specific and highly replicable area. Telecom is traditionally an infrastructure business.
8. Key partnerships
By now, the BMC has probably helped you hone and articulate the core points of your business. It’s not over yet, though:
Entrepreneurs are increasingly interested in establishing collaboration agreements with third parties to share experiences, costs and resources that allow them to design, develop and manage their projects.
What activities and resources are important but not aligned with what is a unique strategy for you? What is outside of your business type? Could partners do some of them? Why? Which ones?
This plan recommends Assign key partners to key activitiesIf an activity is key, it remains part of your business model. This is a way to indicate which specific partners are responsible for various key activities for the project.
9. Cost structure
This point is often forgotten in business plans, however, it remains essential. Ask yourself: how costs are generatedare these costs well aligned with the key value propositions? Are they fixed or variable?
Finally, look to see if there are any significant cost components that are not related to a key activity and take a closer look at those costs.
Yes, that’s it, You already have your business plan ready for the companyThe goal is to have achieved a much clearer idea, which can be explained in a simple way to clients, partners and investors.
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Tags: startups, Entrepreneurship, Business