Alexander Osterwalder and Yves Pigneur authored a breath-taking book titled “Business Model Generation” in 2010. After defining a business model as “the rationale of how an organization creates, delivers and captures value” they have introduced a canvas consisting nine building blocks that sketch the core elements behind a business model. Let me show you the canvas:
1. Customer Segments: This block defines the different groups of people or organizations an enterprise aims to reach and serve. There are distinct segments and these may be small or large. The business must decide which segments to serve and which ones to ignore. This could result in mass, niche, segmented or diversified markets
2. Value Propositions: This block describes the bundle of products and services that create value for a specific customer segment identified. Each bundle of products/services caters to the requirements of a specific Customer Segment. The proposition could result in new offers, improved ones or customized products
3. Channels: In this block, we see how a company communicates with and reaches its customer segments to deliver value proposition. Communication, distribution, and sales channels comprise a company's interface with customers. Channels encourage customers to move through the process of buying starting with raising awareness of the products. Thereafter channels make them evaluate and buy the products. Delivering and after-sales are the ending part of the process.
4. Customer Relationships: Here the block describes the types of relationships a company establishes with specific customer segments. Customer acquisition, retention and boosting sales are the forces that drive customer relationships and result in develop0ment of types of sales such as personal assistance, self-service or automated service
5. Revenue Streams: This block represents the cash a company generates from each customer segment. A business model can generate two types of revenue stream: one-time sale and recurring sale. It can arise in number of ways, chiefly by asset sale, usage fee, subscription fee, and lending/renting/leasing payment, licensing fee or brokerage
6. Key Resources: This describes the most important assets required to make a business model work. These resources allow an enterprise to create and offer a value proposition, reach markets, maintain relationships with customer segments, and earn revenues. Key resources can be physical, financial, intellectual, or human. Key resources can be owned or leased by the company or acquired from key partners
7. Key Activities: In this block, the most important things a company must do to operate successfully are described. These activities include production, problem solving etc.
8. Key Partnerships: Inside partnerships block we notice how the network of suppliers and partners contribute to the success of a business model. Partnerships include strategic alliance with non-competitors, business alliance with competitors, joint ventures with new parties and buyer-supplier relationship ensuring reliable supplies. Consequently a business experiences reduction of cost, risk and uncertainty and is in a position to acquire specific resources
9. Cost Structure: The Cost Structure describes all costs incurred to operate a business mode. Such a cost schedule Includes fixed cost, variable cost and the manner in which economic scale and scope are to be managed.
Muthu Ashraff
Business Adviser
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