The Business Model Canvas - 9 Steps to Creating a Successful Business Model - Startup Tips
Summary
TLDRThis video script delves into the concept of a business model, emphasizing its importance for startups. It outlines nine key components crucial for any company's success, from value proposition to cost structure. The script highlights the shift from traditional functional organization to a model-centric approach, guiding entrepreneurs to focus on solving customer problems and fulfilling needs. It also touches on the modern dynamics of distribution channels, customer relationships, revenue streams, key resources, partnerships, activities, and costs, advocating for a hands-on approach to validate hypotheses and understand the market deeply.
Takeaways
- 📊 A business model is the most efficient way to organize a company, detailing how it creates value while delivering products or services.
- 🏗️ Traditionally, companies were organized around functional departments, but now it's more effective to think of the company in terms of its business model components.
- 📦 The value proposition defines what the company is building and for whom, focusing on solving a customer's problem or fulfilling a need rather than just the product itself.
- 👥 Understanding customer segments is crucial, as it helps to identify who the customers are and why they would buy the product or service.
- 📡 Distribution channels describe how the product gets from the company to the customers, which can be physical, virtual, or a combination of both.
- 💬 Customer relationships involve strategies to acquire, retain, and grow customers, differing for web/mobile channels compared to physical ones.
- 💰 Revenue streams outline how the company makes money from its products or services, considering different revenue models and pricing strategies.
- 🔑 Key resources are the necessary assets to make the business model work, including finance, physical assets, intellectual property, and human capital.
- 🤝 Key partners and suppliers are essential for acquiring necessary resources and performing activities that support the business model, with partnerships evolving as the company grows.
- ⚙️ Key activities are the most important tasks the company must perform to make the business model work, such as production, problem-solving, or supply chain management.
- 💵 Costs and expenses include all the financial outlays required to operate the business model, taking into account fixed and variable costs, and economies of scale.
Q & A
What is a business model and why is it important for a startup?
-A business model is a framework that outlines how a company creates value for itself while delivering products or services to its customers. It's important for a startup because it helps in organizing the company's approach to the market, identifying value propositions, and understanding the dynamics of customer relationships, revenue generation, and cost management.
What is the significance of the value proposition in a business model?
-The value proposition is crucial as it defines what problem or need the company's product or service is solving for its customers. It's not just about the features of the product but about the benefits it provides and the pain points it addresses for the target customer.
How has the concept of organizing a company changed from the past to the present?
-In the past, companies were organized around functional departments like sales or engineering. However, the modern approach focuses on the business model, which involves understanding the interplay between value proposition, customer segments, channels, customer relationships, revenue streams, key resources, key activities, and costs.
What are the different types of customer archetypes or personas that a startup might have?
-A startup might have multiple customer archetypes or personas, each with distinct geographic, social, and demographic characteristics. Understanding these in detail helps tailor the product or service to meet the specific needs and preferences of each segment.
How have distribution channels evolved over the years?
-Before the 1990s, distribution channels were primarily physical, such as stores and salespeople. Since the mid-1990s, with the advent of the internet and mobile technology, virtual channels have become prevalent, including web, mobile apps, and cloud services.
What is the relationship between customer relationships and other elements of the business model?
-Customer relationships interact with other elements like channels, value proposition, and revenue streams. It involves strategies for acquiring, retaining, and growing customers, which can differ significantly between physical and virtual channels.
Can you explain the concept of revenue streams in a business model?
-Revenue streams refer to the ways in which a company makes money from its products or services. It involves understanding what value customers are willing to pay for and the strategy for capturing that value, which could include direct sales, premium models, licensing, or subscription models.
What are key resources and why are they important for a business model?
-Key resources are the assets and capabilities necessary for the business model to work effectively. They can include financial capital, physical assets, intellectual property, and human capital. Identifying and managing these resources is essential for the success and sustainability of the business.
What role do key partners and suppliers play in a business model?
-Key partners and suppliers are crucial for providing necessary inputs, services, and support to the business. They can influence the company's operations, strategy, and competitive advantage, and their relationships often evolve as the startup grows.
Why are key activities important in the context of a business model?
-Key activities are the core actions that a company must excel at to deliver its value proposition and maintain a competitive edge. They could include production, problem-solving, or supply chain management, and understanding these activities helps in optimizing operations and costs.
How should a startup approach understanding and managing costs within its business model?
-A startup should consider all costs associated with operating its business model, including both obvious and hidden costs. It's important to differentiate between fixed and variable costs, understand economies of scale, and manage cost efficiency to ensure profitability.
Outlines
🚀 Understanding the Business Model
This paragraph introduces the concept of a business model as the framework for organizing a startup. It emphasizes the shift from traditional functional organization to a model that focuses on value creation for the company while delivering products or services. The speaker outlines the nine essential components of a business model, starting with the value proposition, which is about solving a customer's problem or fulfilling a need, rather than just listing product features. The importance of understanding the difference between solving problems and fulfilling needs is highlighted, as it affects the total available market. The paragraph also touches on the importance of identifying customer archetypes and personas to deeply understand the customer base.
🛍 Channels, Customer Relationships, and Revenue Streams
The second paragraph delves into the specifics of distribution channels, which have evolved from physical to include web, mobile, and cloud-based options. It discusses the importance of understanding how products reach customers and the relationship between channels and customer relationships. The paragraph also addresses the concept of customer acquisition, activation, retention, and growth, highlighting the differences in strategies for web-based versus physical channels. Revenue streams are explored, questioning how the company will capture value from customers, whether through direct sales, premium models, licensing, or subscriptions. The paragraph concludes with the necessity of testing hypotheses about customer relationships and revenue models through customer interaction.
Mindmap
Keywords
💡Business Model
💡Value Proposition
💡Customer Archetypes
💡Channels
💡Customer Relationships
💡Revenue Streams
💡Key Resources
💡Key Partners
💡Key Activities
💡Costs
💡Problem vs. Need
Highlights
A startup's organization is best approached through a business model.
A business model is defined as a company's method of creating value for itself while delivering products or services to customers.
Traditionally, companies were organized around functional departments; modern thinking emphasizes a holistic business model approach.
The business model is broken down into nine key components, applicable to any company size.
The first component is the value proposition, focusing on solving a customer's problem or fulfilling a need rather than just listing product features.
The difference between a 'problem' and a 'need' is crucial for understanding market potential.
Identifying customer archetypes or personas is essential for startups to tailor their offerings effectively.
Channels describe how products reach customers, with a shift from physical to virtual channels since the mid-1990s.
Customer relationships involve acquiring, retaining, and growing customers, with strategies varying between web and physical channels.
Revenue streams are about how a company makes money from its products or services, considering different strategies like direct sales or subscription models.
Key resources encompass the assets and capabilities necessary for the business model to function, including financial, physical, and intellectual resources.
Key partners and suppliers are critical for a startup's success, with the nature of partnerships evolving over time.
Key activities are the core actions a company must excel at to make its business model work, such as production or problem-solving.
Costs include all expenses to operate the business model, with a focus on understanding fixed and variable costs and economies of scale.
Startups must get out of the building to test hypotheses about customers, channels, relationships, revenue, resources, partners, activities, and costs.
The business model framework provides a comprehensive approach to understanding and organizing a startup's strategy and operations.
Transcripts
so one of the interesting things about
thinking about a startup is how is your
company going to be organized and what
we now know is the most efficient way to
think about all the pieces just all the
parts is by a business model and so the
next question is okay Steve you just
told me to think about a business model
but what is a business model what are
all the pieces well let's take a look
and a business model is how a company
creates value for itself while
delivering products or services for its
customers now if you think about it in
the old days we'd think about how to
organize a company around functional
organizations we think no no no a
company is about its sales department or
its engineering department and you would
draw an orc chart but now we're going to
draw a very different diagram we're
going to draw a diagram of how to think
about all the pieces of a business and
so let's take a look at these nine boxes
nine boxes to describe any company from
the world's largest to a two-person
startup starting in your parents garage
let's take a look at the first piece
called the value proposition the value
proposition answers the question what
are you building and for who the value
proposition says hey it's not about your
idea or product it's about solving a
problem or a need for a customer that is
what pain are you solving what gain are
you creating and more importantly who
are your customers now value proposition
is a fancy word for what product or
service are you building this is where
you normally would list all your
features and here's all the speeds and
feeds and benefits and whatever but
you're really going to be asking a
different question than might have been
used to it's not all about your
technology your technology is just part
of the value proposition customers
really don't care about your technology
the customers are trying to solve a
problem or fulfill a need
by the way we'll be talking about this
through multiple lectures the difference
between a problem and a need is a
problem is I have an accounting problem
or I want to use a word processor and
and those types of products solve
problems but there are other things that
human beings do like I want to be
entertained or I want to have a date
those are some basic hardwired social
needs or I want to communicate with my
friends like Facebook or Twitter those
are needs needs are different than
problems and by the way if you could
find products that solve needs your
total available Market as you'll see
later is huge compared to I solve
specific
problems so the next thing is who are my
customers who are they and why would
they buy and as you'll hear a number of
times your customers do not exist to buy
you exist for them and what you're going
to do by getting out of the building is
figuring in out all their Geographic
social characteristics demographics such
that you actually could draw and put up
a picture of on your wall of who the
archetype is or who the Persona is of
your customer and it turns out that in
most startups you might have more than
one or two or three types of customer
archetypes and personas but you need to
understand them in detail and there is
no possible way you could have anything
but a hypothesis on day one of who they
are the next is channels how does your
product over here get to your customers
over here and we use distribution
channels to do that now what's really
interesting is
pre-1990s the only channels to get to a
customer was a physical channel that is
you went to a store you had salespeople
there was physical distribution but
since the the mid1 1990s in the last
couple of decades we now have virtual
channels the web mobile cloud and so
distribution channels the first question
you want to ask is how will I be selling
and how will I be Distributing my
products are they through physical
channels or are they web mobile or given
today almost every physical Channel also
has a web presence what is the
relationship of how your product gets
from your company to the
customers customer relationships it's
kind of the fourth piece and customer
relationships has a really interesting
interaction with these other three
pieces it basically says how do I get
customers how do I keep them and how do
I grow them and just like thinking about
distribution channels these are very
different for web mobile than they are
for physical channels but visually they
kind of look like this double-sided
funnel so let's just take a look at
quickly a web example and getting
customers you're going to be worrying
about how do I acquire them that is how
do I get them even to my website how do
I activate them that is how do I make
them do something and then later on
we'll see after I got them how do I keep
them around that is how do I not lose
them through attrition and churn and
then what can I do once I have customers
to make them spend more money or use my
product even more and so one of the
things we'll be thinking about is how do
I get keep and grow customers and just
like every other step you might have
hypothesis on day one but you're only
going to figure this out when you're out
of the
building the next thing is revenue
streams how do you actually make money
from your product and service being sold
to customer segments you know revenue
streams basically ask the question what
value is the customer paying for and it
actually has you think about what's the
strategy of how I'm going to capture
that value is it I'm going to just have
a direct sale and it's a transaction
based on Price is it a premium model
where I'm going to give away the product
for free and hope that some portion
convert later is it a license or
subscription model that Revenue model is
different than the pricing tactics that
is what is the dollar or pound amount or
Euro amount that I'm going to be
charging again the only way to figure
this out is being able to interact with
tens or hundreds or thousands of
customers till you finally understand
what the right Revenue stream and
revenue model
is next piece you want to think about is
what are the key resources what do you
need to make the business model work
what assets are important and what's an
example of an asset in a key resource
Well Finance do you need Capital do you
need a line of credit some assets are
and resources are physical do you need
physical plant like a manufacturing line
do you need specialized machines do you
need Vans and for delivery do you need
cars is there something else you need is
there intellectual property you need is
there patents you need to acquire or
protect do you need to acquire customer
lists or is it just that you need to get
great people great software programmers
in a specific area or great Hardware
designers or great manufacturing people
and then finally again the interaction
between intellectual and human capital
is that's another key resource what
specifically do you need to do to keep
these people and who are they
the next piece is who are your key
partners and suppliers and Partnerships
are kind of interesting is we need to
ask ourselves before what's the deal is
what exactly are we acquiring from
partners and also what activities are
they going to perform and when and this
is where startup sometimes make a
mistake of thinking well large companies
do Partnerships I guess I need those too
on day one turns out the type typ of
Partnerships you need in year one are
certainly not the ones you're going to
need in year three or 5 or 10 and the
types of Partnerships could be strategic
alliances joint ventures just regular
suppliers and buyers and so you need to
be thinking through who who they are and
actually getting out of the building and
testing
them next are Key activities what's the
most important things you need to do for
the business to make the business model
work are are you in the production
business you know are you making
something or are you in the problem
solving business like you're doing
consulting or engineering or you
managing Supply chains what what are the
key activities you need to become expert
at and then finally all this adds up on
the leftand side over here to costs what
are the cost and expenses to operate the
business model one of the interesting
things about cost is it's not just the
obvious ones like people or buildings or
materials what you're really going to be
asking or what are the entire costs to
operate our business model and so you
want to think about our what are the
most important costs you need to worry
about what are the most expensive
resources you're going to need to pay
for and what Key activities are the most
expensive and then you want to ask the
typical accounting things what are fixed
costs what are variable costs are there
economies of scale and you want to start
getting a good handle on what it is that
will end up costing you money to run
your
business
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