your business.

Using existing models can help lead you to success because the model
has been proven to work. You’ll be innovating in smaller ways within that existing business
model to grow your business.

THE BUSINESS MODEL CANVAS

Business Model Canvas is a lean startup template for developing new or documenting
existing business models. It is a visual chart with elements describing the four major
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aspects of a business; customers, offer, infrastructure, as well as financial viability.

The Business Model Canvas categorizes the processes and internal activities of a
business into nine separate categories initially proposed in 2005 by Alexander
Osterwalder, each representing a building block in the creation of the product or service.

THE 9 BUILDING BLOCKS OF A BUSINESS MODEL CANVAS

1. Customer Segments
The total customer pie is divided into segments based on the way your products
or services address a specific need for the segment. The customer segment is an
essential part of your business model and is key to ensuring that the product features are
aligned with the segments characteristics and needs.
To carry out an effective customer segmentation, you must first know your
customers, both through their current and future needs. You must list your customers in
terms of priority, including a list of potential future customers. Make a thorough
assessment of your customers by understanding their strengths and weaknesses and
exploring other kinds of customers who may benefit the company more if you are to focus
on them.
 Various customer segments are:

Mass Market: An organization opting for this type of customer segment gives itself
a wide pool of potential customers because it feels that its product is a relevant need
amongst the general population. A potential product for such an organization could be
Flour.
Niche Market: This customer segment is based on highly specific needs and
unique traits of its clients. An example of an organization with a niche customer segment
is Louis Vitton
Segmented: Organizations adopting the segmented approach create further
segmentation in their main customer segment based on slight variations in the customer’s
demographics and resultantly, their needs.
Diversify: An organization with a Diversified Market Segment is flexible in the
iterations of its product or service tweaking it to suit the needs of segments with dissimilar
needs or traits.
Multi-Sided Platform/ Market: This kind of segment serves customers who have a
relationship to each other, i.e. blogging sites need a large group of active bloggers to
attract advertisers. And they need advertisers to create cash flow. Hence, only by creating
a pull with both segments will the blogging site be able to have a successful business
model

2. Value Propositions
An organization’s value proposition is the combination of products and services it
provides to its customers. Osterwalder stated that these offerings need to be unique and
easily differentiated from competition. Value propositions can be divided into two
categories:
Quantitative: this stresses the price or efficiency of the product or service
Qualitative: this value proposition highlights the experience and results the product
and its use, produce.
The value proposition provides value through a number of attributes such as
customization, performance, “getting the job done”, brand/ status, design, newness, price,
cost and risk reduction, accessibility, as well as convenience/ usability.
When creating your product’s value proposition, the first question an entrepreneur
must ask himself is, what problem he is solving through his offered product or service.
Then one needs to look into how the product, service or overall experience can be
improved so that it provides greater value than the competition. Finally, it is imperative to
identify the core value that your business provides. One way to identify this value is for
an owner to specify what he/ she wants customers to remember about their interaction
with the company.

3. Channels
The medium through which an organization provides its value proposition to its
customer segment is known as a channel. There are various options for channels
available to an organization, and the selection is based on the channel that is the quickest,
most efficient with the least amount of investment required. There are two basic kinds of
channels; Company owned channels such as store fronts or Partner Channels such as
Distributors. A company can opt to choose either one or employ a combinati
For an entrepreneur, the first step in dealing with channels is to identify the
customer channels. Touch points with customers can be limited or diverse depending on
company strategy. Then he/ she needs to evaluate the strength of the channel by
conducting an SWOT analysis on the channel. Finally, the company can identify and build
new customer channels.

4. Customer Relationships
An organization must select the kind of relationship it will have with its customer
segment in order to create financial success and sustainability. Customer Relationships
can be categorized as follows;
Personal Assistance: In this kind of relationship the company interacts with the
customer directly through an employee who provides the human touch by assisting the
customer presale, during the sale and even may provide after sales services.
Dedicated Personal Assistance: This kind of relationship is characterized by a very
close interaction between the customer and the company through a dedicated
representative who is assigned a set of clients and is personally responsible for the entire
experience the customer has with the company.
Self-Service: Self-Service places the onus of the customer experience on the tools
the company provides for the customer to serve him or herself.
Automated Services: These are customized self-service relationships where the
historical preference of the customer is taken into account to improve the overall
experience.
Communities: In today’s electronic age creating communities of clients allows
organizations to communicate with them directly. This allows for an enhanced client
experience because the community allows clients to share their experiences and come
up with common challenges and solutions.
Co-creation: The customer has a direct hand in the form the company’s product or
service will take.
For an entrepreneur, the priority is to identify the type of relationship he/ she has
with the customer. Then the value of the customer must be evaluated in terms of the
frequency of his expenditure on the firms product and services. Loyal customers are
relationships that the company should aim to invest in as they will yield steady revenue
throughout the year.

5. Revenue Streams
A revenue stream is the methodology a company follows to get its customer
segments to buy its product or service. A revenue stream can be created through the
following ways;
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.
When setting up revenue streams, it is important to recognize that an effective
price for the product and/or service will be arrived at through the process of elimination.
Different iterations of prices should be listed and evaluated. It is important, in the end to
take a break ad to reflect on possible avenues open to you as a business.

6. Key Resources
These are the assets of the organization fundamental to how it provides value to
its customers. Resources can be categorized as human, financial, physical and
intellectual.
For an entrepreneur, it is important to begin with listing your resources. This gives
you a clear idea of what final product or service your company needs to create for the
customer and which resources are dispensable, resulting in cost savings for your
company. Once the final list of resources is available, the company can decide on how
much it needs to invest in these key resources to operate a sustainable business.

7. 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. Key activities will coincide with revenue streams. Now it is important to
evaluate which activities are key by adding or removing some and evaluating their impact.

8. Key Partnerships
To create efficient, streamlined operations and reduce risks associated with any
business model, an organization forms partnerships with its high-quality suppliers. Key
partnerships are 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 coopetition),
Joint ventures and Relationships between buyers and suppliers.
An entrepreneur must begin by identifying its key partners followed by making
future partnership plans. This can be done through an evaluation of the partnership
relationship to judge which characteristics of the relationship need improvement and what
kind of future partnerships will be required.

9. Cost Structure
This defines 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.
Following are some traits of common cost structures;
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: costs decrease as production increases
Economies of Scope: costs are decreased by investing in businesses related to
the core product.
The first step for an entrepreneur is to obviously identify all costs associated with
the business. A realistic understanding of the costs of the business is one of the hallmarks
of a good business model. After identification, it is important to list all the costs on the
canvas, so they are visually present and then create plans for each cost. Some costs may
be decreased through certain measures while others may go up if you decide that an
investment in a particular section will result in future gains.
Below is an example of of Business Model Canvas :

WHY USE THE BUSINESS MODEL CANVAS?

The following are the reasons why your team must use a business model canvas:
Visual Thinking: The tool allows for easy, visual representation for decision makers
to ponder upon. The tool provides a neat breakdown of the major considerations
impacting the business and also makes clear the direction the organization is taking
through its business model.
Iterate Quickly: If a poster sized of the canvas printout is taken, it can be used in
combination with sticky notes for executives to evaluate current and potential tweaks in
the business model and their impact.
Grasp the relationship between the 9 blocks: The Business Model Canvas allows
the executive team to understand how the 9 building blocks relate to each other and the
different ways these relationships can be changed to increase efficiency or effectiveness.
An opportunity or innovation can be spotted through the use of this tool.
Short and Succinct: The tool encourages teams to keep their suggestions short
and simple enough to fit on post-it notes.
Easy to circulate: The tool allows easy access and sharability. Pictures of the
completed canvas or simply physically passing it around so people can grasp its gist as
well as add to it, if need be, make the Canvas a very portable and convenient tool.

GROUP ACTIVITY-Drafting your Business Model Canvas

1. You have five minutes to brainstorm individually.
2. Then, join with your team and work on your business model canvas
(maximum of one hour).
3. Present your team output (5 minutes for each team).
4. You may use the given template.

MARKETING AND SALES

1. Sell the benefit, not a comparison.
How you market yourself is all about highlighting what makes you different. There
are three major ways to do that.
• Cost (you know how to price a product better than the competition)
• Quality (you’re better)
• A combination thereof (you offer the better value)
2. Listen to your customer.
The customer may at times defy logic, but they are always right. Listen to them.
3. Market your product before it’s ready.
It’s better to do preemptive awareness campaigning, even if it’s minimal, to let
potential customers know your product is coming. You can sell the benefit before the
product has arrived. This way, when the product is ready, so are customers.
4. Think outside the box.
Utilize a bevy of free, online marketing techniques that are both creative and
effective. For example, you can use online video marketing, social media, blog
influencers, crowdsourcing, competitions, content marketing, thought leadership, and
more.
[Link] fast. Fail fast.
If you’re going to commit time and money to a marketing campaign, make sure you
can measure the results. Set up ways to track conversions that stem from each marketing
campaign. Also, run multiple types of marketing campaigns in distinct, small batches. This
will allow you to compare marketing channels and see which perform best. Toss out the
ones that don’t work and keep those that do.
6. Advertise from multiple angles.
As mentioned above, it’s good to test multiple marketing channels and ideas to
see what works best. Often, it’s not any one thing but a combination of all of the above.
When your customer hears you on the radio, sees you in a search engine result, and then
finds you mentioned in a blog they like (content marketing), they start to accept your brand
as a solid, dependable, known entity. They may not have the need for your product or
service immediately, but when they do, it will be your name that comes to mind instead
of a competitor’s.
7. It’s always time for PR.
When you do traditional advertising, it’s your marketing material selling your
product. When you do PR, or have a member of the press or a media house that covers
your industry talk about you, it’s brand building and endorsement. Even little PR wins, like
local news or blogs, add up. And, unlike most traditional marketing, PR endures far
beyond the dates of the advertising campaign. Good PR can do a lot for your credibility
and brand awareness.
8. Give customers a place to talk to/about you.
Good or bad, you want to know what your customers are saying. If you don’t
provide your customers with a place to complain or praise you, it makes it look like their
thoughts and opinions don’t matter. Remember, even if a customer comes to you and is
furious, that’s a great opportunity for you to publicly show how willing you are to right a
wrong, or make a customer feel valued -- which is PR gold.
9. We look forward to seeing you again.
Reward loyalty or interest.