Session 3
- 1. BUSINESS MODEL CANVAS Speaker : heba Eldaly
- 2. THE 9 BULDING BLOCKS Customer Segments Value Propositions Channels Customer Relationships Revenue Streams key resources key activities key partnerships cost structure
- 3. 1) THE CUSTOMER SEGMENT The Customer Segments Building Block defines the different groups of people or organizations an enterprise aims to reach and serve.
- 4. Customers comprise the heart of any business model. Without(profitable) customers, no company can survive for long. In order to better satisfy customers, a company may group them into distinct segments with common needs, common behaviors, or other attributes. A business model may define one or several large or small Customer Segments. An organization must make a conscious decision about which segments to serve and which segments to ignore. Once this decision is made, a business model can be carefully designed around a strong understanding of specific customer needs. Customer groups represent separate 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 profit abilities. • They are willing to pay for different aspects of the offer.
- 5. FOR WHOM ARE WE CREATING VALUE? WHO ARE OUR MOST IMPORTANT CUSTOMERS? There are different types of Customer Segments. Here are some examples: mass market niche market segmented Diversified Multi-sided platforms (or multi-sided markets)
- 6. Mass market 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.
- 7. Niche market 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.
- 8. Segmented Some business models distinguish between market segments with slightly different needs and problems. The retail arm of a bank like Credit Suisse, for example, may distinguish between a large group of customers, each possessing assets of up to U.S. $100,000, and a smaller group of affluent clients, each of whose net worth exceeds U.S. $500,000. Both segments have similar but varying needs and problems. This has implications for the other building blocks of Credit Suisse’s business model, such as the Value Proposition, Distribution Channels, Customer Relationships, and Revenue streams. Consider Micro Precision Systems, which specializes in providing outsourced micromechanical design and manufacturing solutions. It serves three different Customer Segments — the watch industry, the medical industry, and the industrial automation sector — and offers each slightly different Value Propositions.
- 9. Diversified 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. The strategic rationale behind this diversification can be found in Amazon .com’s powerful IT infrastructure, which can be shared through its retail sales operations and the new cloud computing service unit.
- 10. Multi-sided platforms (or multi-sided markets) 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 (read more about multi-sided platforms on p. 76).
- 11. 2)VALUE PROPOSITIONS The Value Propositions Building Block describes the bundle of products and services that create value for a specific Customer Segment
- 12. -What value do we 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?
- 13. A Value Proposition creates value for a Customer Segment through a distinct mix of elements catering to that segment’s needs. Values may be quantitative (e.g. price, speed of service) or qualitative (e.g. design, customer experience). Elements from the following non-exhaustive list can contribute to customer value creation. newness performance customization getting the job done design brand / status price
- 14. cost reduction risk reduction Accessibility Convenience Use ability
- 15. 3) CHANNELS The Channels Building Block describes how a company communicates with and reaches its Customer Segments to deliver a Value Proposition
- 16. Through which Channels do our Customer Segments want to be reached? How are we 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?
- 17. 4) CUSTOMER RELATIONSHIP The Customer Relationships Building Block describes the types of relationships a company establishes with specific Customer Segments A company should clarify the type of relationship it wants to establish with each Customer Segment. Relationships can range from personal to automated. Customer relationships may be driven by the following motivations: • Customer acquisition • Customer retention • Boosting sales (up selling)
- 18. 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?
- 19. We can distinguish between several categories of Customer Relationships, which may co-exist in a company’s relationship with a particular Customer Segment: Personal assistance Dedicated personal assistance Self – service Automated service Communities Co creation
- 20. 5)REVENUE STREAM The Revenue Streams Building Block represents the cash a company generates from each Customer Segment (costs must be subtracted from revenues to create earnings)
- 21. For what value are our customers really willing to pay? For what do they currently pay? How are they currently paying? How would they prefer to pay? How much does each Revenue Stream contribute to overall revenues?
- 22. 6) KEY RESOURCES What Key Resources do our Value Propositions require? Our Distribution Channels? Customer Relationships? Revenue Streams? Key Resources can be categorized as follows: physical intellectual Human Financial
- 23. 7) KEY ACTIVITIES The Key Activities Building Block describes the most important things a company must do to make its business model work.
- 24. What Key Activities do our Value Proposition require? Our Distribution Channels? Customer Relationships? Revenue streams? production problem solving Platform/ network
- 25. 8) KEY PARTNERSHIP The Key Partnerships Building Block describes the network of suppliers and partners that make the business model work.
- 26. Who are our Key Partners? Who are our key suppliers? Which Key Resources are we acquiring from partners? Which Key Activities do partners perform? It can be useful to distinguish between three motivations for creating partnerships: Optimization and economy of scale Reduction of risk and uncertainty Acquisition of particular resources and activities
- 27. 9)COST STRUCTURE The Cost Structure describes all costs incurred to operate a business model Naturally enough, costs should be minimized in every business model. But low Cost Structures are more important to some business models than to others. Therefore it can be useful to distinguish between two broad classes of business model Cost Structures: cost-driven and value-driven (many business models fall in between these two extremes): - Cost-driven - value driven - fixed costs - Variable costs - Economies of scale - Economies of scope