What is a business model?

Let us explain: A business model describes how an organization generates, provides, and captures value. The components that display a business model, will cover all important purposes of a business. Commonly speaking, everything that has to do with the daily functionality of a business.

In this blog, the “business model Canvas” will be specified. Alexander Osterwalder created this model, because he believed that the world needed a business model concept that everybody understands, one that facilitated description and discussion. Within this model, 9 components will address all important functions of a business, so you can see how a business is put together in one quick sight.

This model can be used for every individual company, since it brings overview and focus.

When you study a filled in business model canvas, you’ll find out:

  • What products or services the company sells
  • Which customer segment the company aims at
  • Through what channels customers are achieved
  • What activities and resources are important to the business
  • With whom the company interacts and why they do it
  • How the revenue model is put together
  • What major costs the company makes

Create your own business model online (it's free!):

Let's get started! Make your own business model online. You can also print your business model and download business model.  BMCANVAS s a brand new tool to create and archive your business model online, it's free!

create your business model online

More detailed information: the 9 building blocks of the business model

Value proposition:

An organization seeks to solve customer problems and to provide those customers with value propositions to fulfil their needs. The building block value proposition describes the bundle of products and services that create value for a specific customer segment. The value proposition is the reason customers choose one organization over another. It solves a customer problem or provides a customer need.

Customer segments:

An organization serves one or more customer segments. The building block ‘customer segments’ defines the several groups of people or organizations wherefore an organization wants to create value. It is way more easier to respond to the different needs of specific customers by group them in segments, for example on common needs or behaviors.

Channels:

Value propositions are delivered to customers via communication-, distribution- and sales channels. This building block describes how an organization communicates with and reaches its customer segments to deliver value proposition.

Customer relationships:

Customer relationships are each built and maintained with customer segments. This building block describes the types of relations an organisation has with each customer segment. Customer relationships are driven by the following motivations: (a) acquisition, (b) customer retention, and (c) stimulate sales (upselling), increase average revenue per customer.

Revenue Streams:

Value propositions that are offered to customers successfully lead to revenue streams. It’s about the way an organization creates and delivers value for which customers are willing to pay, this is called a revenue model. Within a business model, two types of revenues streams apply: (a) transaction revenues resulting from one-time customer payments, and / or (b) residual income arising from on-going payments to either deliver value proposition to customers or to offer customer support after the purchase.

Key activities:

To make its business model work These are the most important actions a company must take to make sure the business model works successfully., the so-called core competencies. The key activities can be divided into four categories: (a) production: designing, creating and delivering of a product, (b) troubleshooting: presenting new solutions for individual customer problems by service organizations, (c) platform / network: within business models with a platform as a key resource, (d) dominate platform or network related core activities (eBay). Key Activities differ depending on business model type.

Key resources:

Description of the assets needed to ensure that a business model works. The key resources make it possible to create and offer a value proposition, to achieve markets, keep up relationships with customer segments and earn revenue. Resources can be divided into:(a) physical resources (buildings, machinery, vehicles, systems, networks), (b) intellectual resources (exclusive knowledge, copyrights, customer databases, trademarks), (c) human resources, (experienced scientists, engineers, skilled sales) and (d) financial resources (purchasing power, borrowing capacity).

Key Partners:

Some activities are outsourced and some resources are purchased outside the organization. The Key partner’s building block describes the network of suppliers and partners that affect the success of the business model. There are three reasons to choose for partnership: (a) optimization of scale, (b) reduction of risk and uncertainty, (c) acquisition of certain resources and activities.

Cost Structure:

The cost structure describes all costs, which come along with operating a business model. These costs can be relatively easily calculated after the key resources, key activities and key partners are defined.

A handy tool to create your own business model online:

Ofcourse, you can use sticky notes and a big poster on the wall. Some people prefer to make and/ or archive their business models online. BMCANVAS is a handy tool to create and archive your business model online, it's free!

create your business model online

Read more: www.businessmodelgeneration.com or buy the book

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