Alexander Osterwalder & Yves Pigneur in their 2010 must-read-book Business Model Generation say, a business model describes the rationale of how an organization creates, delivers and captures value. They go on to identify 9 building blocks of a good business model as;
- Customer Segments-how an organization serves one or several customer segments. For who are we creating value? Who are our most important customers?
- Value propositions-How the business seeks to solve customer problems and satisfy customer needs with value propositions. Through which channels do our customer segments want to be reached? How are we reaching them now? How are our channels integrated? Which ones work best? Which ones are the most cost efficient? How are we integrating them with customer routines?
- Channels- Value propositions are delivered to customers through communication, distribution and sales channels
- Customer relationships- which are established and maintained with each Customer Segment. What type of relationship does our customer segment expect us to establish and maintain with them? Which ones have we established? How costly are they? How are they integrated with the rest of our business model?
- Revenue Streams-resulting from value propositions successfully offered to customers. For what value are our customers willing to pay? For what do they currently pay? How are they currently paying? How would they prefer to pay? How much does each Revenue Stream contribute to overall revenues?
- Key resources-which are the assets required to offer and deliver all the elements described previously. What key resources do our value propositions require? Our distribution channels? Customer relationships? Revenue Streams?
- Key activities-which the the business must engage in to create, propose and deliver value.
What Key Activities do our Value Propositions require? Our Distribution Channels? Customer Relationships? Revenue Streams?
- Key Partnerships-to outsource to and to acquire resources from. Who are our Key Partners? Who are our Key Suppliers? Which Key Resources are we acquiring from partners? Which Key Activities do Partners perform?
- Cost structure- which describes all the costs incurred to operate a business model. What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?
- What business opportunity do you have/what business are you in?
- Take a few minutes to write down a concise statement of exactly what you provide (service or product) in a way that conveys the customer benefit to your target customer. Note the Product/Service, benefit, target customer.
- Now answer all the above questions as honestly as you can. All of them as apply to your type of business or business idea.
How about we do a simple assessment of how far we have come. Where are you on: Business fits life purpose? Good current & future demand for product/service? Attainable market niche? Viable business model for that niche? Competent team to execute business model? Start-up & growth plan with contingency plan to mitigate risk?
As Cathy Truett says, businesses do not succeed or fail. People do.
