- Business Model: A business model describes the rationale of how an organization creates, delivers, and captures value (pg 14)
- Four main areas of business: customers, offer, infastructure, and financial viability.
- Nine basic building blocks:
- Customer Segments: An organization serves one or more Customer Segments
- Value Propositions: It seeks to solve customer problesm and satisfy customer needs with value propositions
- Channels: Value propositions are delivered to customers through communication, distribution, and sales Channels
- Customer Relationships: Customer relationships are established and maintained with each Customer Segment
- Revenue Streams: Revenue streams result from value propostions successfully offered to customers
- Key Resources: Key resources are the assets required to offer and deliver the previously described elements
- Key Activited: Key resourced are delivered by performing a number of Key Activities
- Key Partnerships: Some activities are outsourced and some resourced are acquired outside the enterprise
- Cost Structure: The business model elements result in the cost structure
The Customer Segments Building Block defines the different groups of people or organizations an enterprise aims to reach and serve.
- Customers are the heart of any business model.
- A business needs profitable customers.
- Grouped by common needs, behaviors, and other attributes.
- Which segments served is important.
Customers represent different segments if:
- Their needs require and justify a distinct offer
- They are reached through different Distribution Channels
- They require different types of relationships
- They have substantially different profitabilities
- They are willing to pay for different aspects of the offer
There are different types of Customer Segments.
- Mass market - mass market focused business models do not distinguish between different Customer Segments. Often found in the electronics sector.
- Niche market - cater to specific, specialized Customer Segments. Found in supplier-buyer relationships.
- Segmented - distinguish between slightly different needs and problems.
- Diversified - serves two unrelated Customer Segments with very different needs and problems.
- Multi-sided plaforms (aka multi-sided markets) - two or more interdependent Customer Segments.
The Value Proposition Building Block describes the bundle of products and services that create value for a specific Customer Segment.
The Value Proposition is the reason why customers turn to one company over and other.
It olves a customer problem or satisfies a customer need.
Each value proposition has products and/or services that cater to the requirements of a specific Customer Segment.
A Value Proposition creates value for a Customer Segment. Values may be qualitative or quantitative.
- Newness - satisfy an entirely new set of needs that customers did not know they of. Often technology related.
- Performance - improving a product or service.
- Customization - tailoring products and services to specific needs of indivual customers or Customer Segments.
- "Getting the job done" - help customers get certain jobs done.
- Design - stand out due to superior design.
- Brand/status - value from using and displaying a certain brand.
- Price - low price
- Cost Reduction - help customer reduce cost.
- Risk reduction - reduct risks when purchases products or services.
- Accessibility - Making products and services available to customers who lacked access to them.
- Convenience/usability - making things more convenient or easier to use.
The Channels Building Block describes how a company communicates with and reaches its Customer Segments to deliver a Value Proposition.
The following are Channels that interface with Customers:
- Communication
- Distribution
- Sales
Channels serve several functions:
- Raising awareness among customers about a company's products and services.
- Helping customers evaluate a company's Value Proposition.
- Allowing customers to purchase specific products and services
- Delivering a Value Proposition to customers.
- Providing post-purchase customer support.
Channels have 5 distinct phases, each channel can cover some or all of these phases:
- Direct vs indirect channels
- Owned vs Partner channels
Owned channel examples:
- Direct: In-house sales force
- Direct: Website
- Indirect: Retail stores
- Indirect: Organization operated
Partner channel examples (Only Indirect):
- Wholesale distribution
- Retail
- Partner-owned websites
|------|----------------------|----------------------------------|
| Owned | Partner | |
|---|---|---|
| Pros | * Higher margins | * Expand Reach |
| * Benifit from partner strengths | ||
| ------ | ---------------------- | ---------------------------------- |
| Cons | * Costly to put | * Lower margins |
| in place and operate | ||
| ------ | ---------------------- | ---------------------------------- |