Business Model Design
Edit on GitHubA Business Model is a visualization of how a company plans to operate, create value and make money. The Business Model Canvas consists of nine cells that capture different aspects of a business. It can be used to describe different companies from a startup to a large enterprise.
Why
To initiate a new business or operate an existing business, it’s important to understand the complete picture, including the market offering and internal workings of the business. This understanding helps fine-tune your offerings, to maximize corporate objectives such as profitability. If you are at the startup stage, this is important to evaluate the viability of the business idea.
Every business operates with various touchpoints with multiple stakeholders, which is complex. The business model canvas serves as a simple format that summarizes how the business plans to achieve its goals through its services and products. It also serves as a base document to explain how the company plans to create revenue/profit/company-value, thus attracting employees, partners and investors. In a nutshell, the business model canvas is a one-page document summarising the business.
How
To build a Business Model Canvas, fill in each cell on the canvas in the predefined order. Content in each cell must answer some important questions as explained below.
Value Proposition
Why would your customers buy the product? What pain are you solving for them and what gain are you creating? What is unique about you that makes you stand out from your competitors? List the benefits of your products or services.
Customer Segments
Who are your customers? What are their geographic and social characteristics, and demographics? List down the personas of your customers.
Channels
How do you get your product or service to customers? In the product development context, channels could be a web application, mobile app, etc.
Customer Relationships
How do you GET, KEEP and GROW customers? This differs based on the channel adopted and level of engagement required.
Revenue Stream
How do you make money by selling your services or products to your customer segments? What is the strategy/revenue model adopted to make money?
Once the right side of the canvas is defined, it gives answers to what the company plans to produce, how it plans to deliver and to whom. This half is the outward-facing side of the business, which focuses on the customer needs and explains how the revenue streams are created. Now, it's time to elaborate on the internal workings of the company to produce the expected outcomes.
Key Resources
What key assets and resources are required to run the business? From a software product perspective, some of the key resources could be people, intellectual property rights, platforms, licenses, etc.
Key Partners
Who do we need to collaborate with outside the organization to help us operate the business?
Key Activities
What are the most important things to do to make the business model work and generate value?
Cost Structure
What are the primary costs and expenses required to operate the business?
Now the left side of the business model is defined. The left section is inward-facing and focuses on how the company plans to create products or services, and who the key resources and partners are in this journey. This helps visualize the required internal workings of a business.