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You probably already know what a business model is, and how important it is to define and validate it when developing an enterprise. The business model is all the logic behind of how a company creates, delivers, and captures value from its stakeholders.
Thus, the definition of the market segments in which you are planning to operate, the channels of interaction with your customers, and the ways to distribute the products are some of the factors that compose it.
However, in an increasingly global market, where all stakeholders are related to each other, it is not an easy task to immediately visualize the best strategy for a business, given that any decision you make can impact it in a variety of ways.
This is where the Business Model Canvas (BMC) comes in! It is an aid tool in the construction of a business model that:
- Provides a comprehensive and in-depth view of the market;
- Is easy to build;
- Facilitates the presentation and understanding by other actors, such as consumers, investors, partners, etc.
The purpose of this article is to present the tool, explaining the items that compose it and how they are related.
The Business Model Canvas is a strategic management tool capable of describing all the great features that are part of a business. It is based on a pre-visual map composed of nine blocks that cover the four main areas of a business (customers, offering, infrastructure and finances), and show the logic of how the company will generate revenue.
The nine building blocks classified in the four areas mentioned above are:
- Key Activities: This block describes the most important activities to execute the company’s value proposition. Therefore, all the activities that are necessary to deliver value to the customer must be described, considering issues such as distribution channels, customer relationships, sources of income, etc.
- Key Resources: These are the resources necessary for the execution of the Key Activities and for the delivery of the Value Proposition to the client. Resources are the assets the company needs to maintain and support the business, and they may be human, financial, physical or intellectual.
- Key Partners: In this block, the network of partners and suppliers needed to execute the business model is detailed. You should consider who the key partners and suppliers are, as well as what key activities they carry out and what key resources are obtained through them. Check out our infographic: 10 tips for a successful partnership in your business.
- Value Proposition: This block must contain the description of the products and services that generate value for a specific segment of customers. In other words, you should demonstrate how your company differentiates itself from its competitors, and what would lead the consumer to choose your company over another one. Among the questions that must be answered, the following stand out: What value do we provide to our customers? Which of our customer problems do we solve? What mix of products or services do we offer for each segment? Which of our customer needs do we address?
- Customer Segments: In this block, you must define who the target audience of the product or service offered by the company is. It is emphasized that the consumer is a fundamental part of the business and that cases in which the solution developed by the company applies to more than one segment are common. However, especially for startups, which coexist with a reality of scarcity of resources, the prioritization of a segment may be necessary. In this way, you must keep in mind questions such as: To whom do we create value? Who are our most important customers?
- Channels: This block should contain a description of how the company communicates and provides its products and services to its customers, including all channels that have an interface with them (communication, distribution, sales, etc.). Interesting questions: What are the preferred channels of our customer segments? How is our contact with our clients? How do our channels relate to each other? Which ones have brought the greatest return? How do they position themselves in the daily activities of the consumer?
- Customer Relationship: This block establishes the types of connections that the company has with its different market segments. To define the best relationship, you should answer the following questions: What kind of relationship does each segment expect? What forms of relationships are currently in place? How much does each one cost? How do they integrate with the business model of the company?
- Costs: In this block, all costs arising from the implementation of the business model must be included. But do not get scared, because this task is significantly facilitated after defining the resources, activities and key partners. However, finding the answers to the following questions will help you in building your cost structure: What are the most important costs inherent in the business model? What are the most expensive activities and key resources?
- Revenue Streams: It is the best part of the Business Model Canvas! It describes how the company will generate revenue, considering its different market segments and revenue streams. To fill it out correctly you must answer: What value are our customers willing to pay for our product/service? Why do they currently pay? How do they currently pay? How would they like to pay? What is the share of each source of income in the composition of the total value?
Now you already understand the composition of the Business Model Canvas, and that it gives you a comprehensive and interconnected view of the business!
However, contrary to what you may have imagined, the tool does not only apply to nascent businesses, and its differentials are not limited to those cited in this article. In addition, many researchers and companies continue to have difficulties in designing and building a consistent BMC!
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Rafael Lustosa | Consultancy