The Canvas Business Model Flashcards
Canvas Business Model:
extremely useful entrepreneurial tool to design the strategy of a company. It provides a holistic view of the business!
It has 9 components:
Consumer segments;
Value Proposition;
Customer Relationships;
Distribution channels;
Key resources;
Key activities;
Key partnerships;
Revenues;
Cost structure.
Consumer segments:
is an essential part of an organization’s business model and is key to ensuring that the product features are aligned with the segments characteristics and needs.
Mass Market (no specific segmentation). Business models focused on mass markets don’t distinguish between different Customer Segments. The Value Propositions, Distribution Channels, and Customer Relationships all focus on one large group of customers with broadly similar needs and problems. This type of business model is often found in the consumer electronics sector.
Niche Market (based on specialized needs and characteristics of its clients). Business models targeting niche markets cater to specific, specialized Customer Segments. The Value Propositions, Distribution Channels, and Customer Relationships are all tailored to the specific requirements of a niche market. Such business models are often found in supplier-buyer relationships. For example, many car part manufacturers depend heavily on purchases from major automobile manufacturers.
Segmented (additional segmentation based on age, education, income etc.). Some business models distinguish between market segments with slightly different needs and problems.
Diversified Market Segment (serves multiple customer segments with different needs and characteristics). An organization with a diversified customer business model serves two unrelated Customer Segments with very different needs and problems. For example, in 2006 Amazon.com decided to diversify its retail business by selling “cloud computing” services: online storage space and on-demand server usage. Thus it started catering to a totally different Customer Segment—Web companies—with a totally different Value Proposition.
Multi-sided platforms/ markets (serve mutually dependent customer segment). Some organizations serve two or more interdependent Customer Segments. A credit card company, for example, needs a large base of credit card holders and a large base of merchants who accept those credit cards. Similarly, an enterprise offering a free newspaper needs a large reader base to attract advertisers. On the other hand, it also needs advertisers to finance production and distribution. Both segments are required to make the business model work.
Value proposition
describes the bundle of products and services that create value for a specific Customer Segment.
The VP is the reason why customers turn to one company over another. It solves a customer problem or satisfies a customer need.
Each VP consists of a selected bundle of products and/or services that caters to the requirements of a specific Customer Segment.
It is about:
the outcomes that an individual or an organization can realize from using your product, service or solution;
A good reason for potential costumers to take action.
VP = “Tell me why should I buy from you?”
Some Value Propositions may be innovative and represent a new or disruptive offer. Others may be similar to existing market offers, but with added features and attributes.
VP reflects previously identified unique value to the consumer in terms of:
Quantitative aspects:
price, in exchange for which consumers can access proposed value;
reduced costs;
reduced risks - something of great importance to any consumer, as each seeks to enhance comfort and minimize effort and the risks they are subject to;
availability, in terms of place, time of use and other factors that influence positive or negative consumer access to the proposed value of the company;
ease of use;
Qualitative aspects:
novelty;
performance of our products or services;
personalized;
higher utility
improved design.
Types of value:
Functional – save time/ money/ effort; (Avoids Hassles; Connects; Informs; Integrates; Makes Money; Organizes; Quality; Reduces Cost; Reduces Effort; Reduces Risk; Saves Time; Sensory Appeal; Simplifies; Variety)
Personal – feel better/ safe;
Social – look good/ professional;
Entertainment – smile/ laugh/ amaze/ fun.
Customer relationships:
sum of relationships inorder to create financial success and sustainability.
Customer Relationship Management (CRM) is a business strategy that is designed to improve how you manage to focus on the right customers to generate profits: GET CUSTOMERS! KEEP CUSTOMERS! GROW CUSTOMERS!
Customer Relationships can be categorized as follows:
Personal Assistance (employee-customer interaction)
Dedicated Personal Assistance; it is often used within B2B environment that involve complex services and products as well as high-value contracts. The representative develops a long-term relationship with a customer to help tailor services to its need and secure the business over the long-term.
Self-Service (indirect interaction); it has become more popular as new digital technologies are enabling a greater degree of personalization. Methods used include forums, AI Chatbots, knowledge bases and FAQ’s.
Automated Services (more personalized/ Amazon); They may help customers to perform services themselves. These kinds of services usually offer more customized experiences (ex.:, Amazon uses a customer’s online and buying behavior to provide suggestions to the customer to enhance his/ her shopping experience).
Communities of clients; It is an effective way to understand the consumers, get insights into their habits, perspectives and create a platform in which customers can get together and share knowledge and experiences.
Co-creation. More companies are going beyond the traditional customer-vendor relationship to co-create value with customers.
Distribution Channels:
how the product is (physically or digitally) delivered (distributed) to the market and ultimately to the customer.
how to create a plan and how to decide taking your product to the market.
There are both:
Physical channel;
Digital channel.
However, for physical products distribution and sales channels can be very different (e.g. order online and then pick up in-store).
Examples of distribution channels:
Wholesaler
Marketplace
Retailer
eTailer (online retailer)
Affiliate
Website.
Online affects offline purchases!!!
Sometimes the buyer isn’t the consumer. Distribution channels are not always the same as communication channels.
Key Resources:
the fundamental assets needed to provides value to the targeted customers.
Categories of resources:
Physical (↗↘);
Intellectual (↗↘); ;
Human (↗↘); ;
Financial (↗↘).
Key Activities:
activities that are key to producing the company’s value proposition.
An entrepreneur must start by listing the key activities relevant to his/her business. These activities are the most important processes that need to occur for the business model to be effective. They are required to create and offer a Value Proposition, reach markets, maintain Customer Relationships and earn revenues.
Key Partnerships:
the network of suppliers and partners who complement each other in helping the company create its value proposition.
Partnerships can be categorized as follows;
Strategic alliance between competitors (also known as coo-petition),
Joint ventures;
Relationships between buyers and suppliers.
Cost Structure:
the cost of running a business according to a particular model. Businesses can either be cost driven i.e. focused on minimizing investment into the business, or value driven i.e. focused on providing maximum value to the customer.
Cost-Driven – the focus is on minimizing all costs (Low cost airlines)
Value-Driven – Less concerned with cost, focus is on creating value for their products and services. (Louis Vuitton, Rolex)
Fixed Costs: costs that remain the same over a period of time.
Variable Costs: as the name suggests, these costs vary according to a variance in production.
Economies of Scale: average cost/unit decrease as production increases.
Revenue Stream/s:
is the methodology a company follows to get its customer segments to buy its product or service.
Ways to create it:
Asset Sale: the company sells the right of ownership over the good to the customer.
Usage Fee: the company charges the customer for the use of its product or service.
Subscription Fee: the company charges the customer for the regular and consistent use of its product or service.
Lending/ Leasing/ Renting: the customer pays to get exclusive access to the product for a time-bound period.
Licensing; the company charges for the use of its intellectual property.
Brokerage Fees: companies or individuals that act as an intermediary between two parties charge a brokerage fee for their services.
Advertising; a company charges for others to advertise their products using their mediums.
