The business model is a description of how the business creates different types of value. The foundation of a business model lies in the company’s business concept. The business model includes parts such as a revenue model that describes how revenue is received and distributed, a production model that describes how goods and services are produced, and a delivery/customer model that describes how goods or services benefit the customer.
The Business Model Canvas has become a standard for how to work with business models and business model innovation. This tool describes the business in an overall way based on nine building blocks.
- Customer Segment – Defines the different groups of people or businesses a business aims to reach and serve.
- Value proposition – Describes the combination of services and products that create value for a specific customer segment.
- Channels – Describes how an organization communicates with and reaches the selected customer segments to deliver the value proposition.
- Customer Relationships – Describes the type of relationship the organization establishes with the various customer segments
- Revenue Streams – Describes the revenue streams an organization generates from each customer segment
- Key Resources – They describe which assets and resources are required for the business model to work
- Key Activities – Describes the activities the organization must perform for the business model to work
- Partners – Describes the network of suppliers and partners that enable the business model to work
- Cost Structure – Describes the costs that the business model creates for the organization
It is important to understand that Business models tend to be of a dynamic nature and that ever changing prerequisites demand that businesses continuously follow up on and revisit their business models.
Needs arise from problem situations
Needs arise from problems! Internal as well as external. With this insight we can define a strong Value proposition.
- “The problem with [problem setting]. . . “:
- What are the stakeholder’s goals or needs; What is the cause of what the target market is trying to solve? What do stakeholders struggle with; what concerns do they have? What detailed, lower-level problems lie within larger problems? Are the important questions being asked?
- “. . . affect [stakeholders]. . . ”
- Who is specifically affected? This is not just limited to the problem owner; it includes others who are also affected directly or indirectly. In which environment (eco-system) does the problem live?
- “. . . whose impact is [statement of impact, costs or other effects]. ”
- If there is no solution (preferably own), what are the consequences and how have results been affected by the problem? (In other words, what is business driving, why can the company be forced to solve the problem?)
Strategic problem solving
- Define the strategic problems, the problem situations – A problem is strategic in nature if it prevents the organization from achieving the desired business results and benefits.
- Formulate the ecosystem of the problems – Once the problems are defined, the next step is to map their ecosystem. The ecosystem is the world in which the problem lives and can include the organization’s value chain (departments), or more broadly cover the market, partners, customers, competitors and other entities.
- Think Critically – A major element of strategic thinking is critical thinking. Many of us fall into the trap of conventional thinking, often due to a lack of formal education but also because we have never bothered to think beyond the conventional. But thinking critically requires us to acquire information and then tie the threads together through analytical skills and tools such as prioritization, industry analysis, PESTLE and SWOT analysis, etc.
- Prioritize – Narrow down by assessing our ability to address the problem/need, the potential of the problem/need, impact and duration.
- Make strategic decisions – The strategic thinking process cannot be considered complete unless the potential alternatives are rigorously analyzed for the practical and potential benefits they bring to the organization.
- Begin the development of a strategic plan – The strategic plan provides which elements need to be addressed to realize the organization’s strategic decisions.
Visualize the flow of revenue and cost
With a block chart where all stakeholders, assets and other resources are visible, the flow of revenue and cost will help visualize the business structure.