A business model describes the rationale of how an organization creates, delivers, and captures value. This is the definition of Business Model according to economic experts. "What actually is your business model?" This question is can be the starting point of several discussions, meetings and workshops.
Alexander Osterwalder and Yves Pigneur, authors of Business Model Generation, believe a business model can best described through nine basic building blocks that show the logic of how a company intends to make money. Here an abstract to better understand the Business Model developed by Osterwalder and his nine blocks.
Customer Segments - an organization serves one or several Customer Segments. This block defines the different groups of people or organizations an enterprise aims to reach and serve. For whom are we creating value? Who are pur most important customers?
Value Proposition - it seeks to solve customer problems and satisfy customer needs with value propositions. It describes the bundle of products and services that create value for a specific customer segment. What value do you deliver to the customer? Which one of our customer's problems are we helping to solve? Which customer needs are we satisfying? What bundles of products and services are we offering to each Customer Segment?
Channels - value propositions are delivered to customers through communication, distribution, and sales Channels. This block describes how a company communicates with and reaches its customer segments to deliver a value proposition. Through which channels do our Customer Segments want to be reached? How are reaching them now? How are our Channels integrated? Which ones work best? Which ones are most cost-efficient? How are we integrating them with customer routines?
Customer relationships - a company should clarify the type of relationship it wants to establish with each customer segment. Customer relationships may be driven by: customer acquisition, customer retention, boosting sales. What type of relationship does each of our customer segments 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 - they result from value propositions successfully offered to customers. This block represents the cash a company generates from each Customer Segment. For what value are pur customers really willing to pay? For what do they currently pay? How are the currently paying? How would they prefer to pay? How much dose each Revenue Stream contribute to overall revenues?
Key Resources - they are the assets required to offer and deliver the previously described elements. It describes the most important assets required to make a business model work. What Key Resources do you Value Proposition require? Our Distribution Channels? Customer Relationships? Revenue Streams?
Key Activities - they are the most important actions a company must take to operate successfully. This block describes the key activities a company must to make its business model work. What Key Activities do our Value Propositions require? Our Distribution Channels? Customer Relationships? Revenue Streams?
Key partnerships - some activities are outsourced and some resources are acquired outside the enterprise. It describes the network of suppliers and partners that make the business model work. 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 - the business model elements result in the cost structure. All 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?
These nine business model building blocks form the basis for a handy tool, which Osterwalder calls the Business Canvas Model. Download and print the tool. Enjoy it!