© Flickr marcfonteijnIn this article we will look at 1) what is a business model canvas?, 2) the traditional approach to a business model, 3) the 9 building blocks, 4) why to use the business model canvas, and 5) applying the business model canvas. WHAT IS A BUSINESS MODEL CANVAS?The, developed by Alexander Osterwalder, is a visual representation of current or new business models, generally used by strategic managers. The Canvas provides a holistic view of the business as a whole and is especially useful in running a comparative analysis on the impact of an increase in investment may have on any of the contributing factors.The gives people a common language through which they can evaluate traditional processes and bring innovation into their business models. THE TRADITIONAL APPROACH TO A BUSINESS MODELMost startups fail because entrepreneurs put all their faith in the idea of the product the organization exists to create. In their loyalty to this product or service, they fail to give in depth consideration to the business model their organization will follow. Usually the is either a one-size-fits-all model, common in the industry or it is a random amalgamation of systems and processes, created at the spur of the moment to further the main goal; sell the product or service.Successful new ventures do not go to market with their first idea; instead, the product/ service has usually gone through several iterations before arriving at the final version.
Similarly, organizations are more sustainable if they have considered several business models before deciding on a particular one.THE 9 BUILDING BLOCKSThe Business Model Canvas categorizes the processes and internal activities of a business into, each representing a building block in the creation of the product or service. These categories represent the four major aspects of a business; customers, offer, infrastructure, as well as financial viability. All 9 categories are listed and explained below. 1.The total customer pie is divided into segments based on the manner in which an organization’s products or services address a specific need for the segment. The customer segment 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.To carry out an effective customer segmentation, a company must first know its customers, both through their current and future needs. Then the organization must list its customers in terms of priority, including a list of potential future customers. Finally, the company should do a thorough assessment of its customers by understanding their strengths and weaknesses and exploring other kinds of customers who may benefit the company more if they are to focus on them.Various customer segments are as below;.
A business model is a great tool to execute a business strategy. Yet while achieving a long-term goal a business strategy set a vision, mission and value proposition that can be executed through several possible business models, when one of the drafted business models encounter the favor of the market that is when a business strategy becomes successful. A business strategy is a set of competitive moves and actions that business uses to attract customers, compete successfully, strengthening performance, and achieve organisational goals. It outlines how business should be carried out to reach the desired ends.
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.: 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 model2.An organization’s value proposition is the combination of products and services it provides to its customers. Stated that these offerings need to be unique and easily differentiated from competition. Even though Apple was in no way the first entrant into the mp3 player market, its unique and well-executed business model ensured lasting success. This business model was in essence the seamless coming together of the key components of the business model canvas to leverage its distinctive value proposition. Apple has lasting partnerships through the deals it negotiated with music producers so it could sell their music through its store.Apple revenue stream comes from the sale of its iPods.
However, the added benefit of the online store creates a package that competitors have been hard pressed to match.
UPDATED POST- Some Models I use for Business Strategy- to analyze the huge reams of qualitative and uncertain data that business generates. I have added a bonus the Business canvas Model (number 2). Porters 5 forces Model-To analyze industries. Business Canvas. BCG Matrix- To analyze Product Portfolios. Porters Diamond Model- To analyze locations.
McKinsey 7 S Model-To analyze teams. Gernier Theory- To analyze growth of organization.
Herzberg Hygiene Theory- To analyze soft aspects of individuals. Marketing Mix Model- To analyze marketing mix.1. A Model to Analyze IndustriesIt draws upon to derive five forces that determine the competitive intensity and therefore attractiveness of a. Attractiveness in this context refers to the overall industry profitability.
An “unattractive” industry is one in which the combination of these five forces acts to drive down overall profitability. A very unattractive industry would be one approaching “pure competition”, in which available profits for all firms are driven to.2.Business CanvasThe Business Model Canvas is a template for developing new or documenting existing. It is a visual chart with elements describing a firm’s value proposition, infrastructure, customers, and finances. It assists firms in aligning their activities by illustrating potential trade-offs.The Business Model Canvas was initially proposed by3. BCG Matrix is best used to analyze your own or target organization’s product portfolio- applicable for companies with multiple productsTo help with analyzing their units.
This helps the company allocate resources4. To Analyze Countries for both customers ot vendors you can use the modified Diamond Model again by M Porteran economical model developed by in his book The Competitive Advantage of Nations, where he published his theory of why particular industries become competitive in particular locations.5. To check which teams work and which teams done (within an organization) usea strategic vision for groups, to include, and teams. The 7S are structure, strategy, systems, skills, style, staff and shared values.The model is most often used as a tool to assess and monitor changes in the internal situation of an organization.Related-Also by Tom PetersThe expected benefit is that a manager, by of events or employee discussions, is more likely to facilitate the productivity and of the organization, as compared to remaining in a specific office area and waiting for employees, or the delivery of, to arrive there, as events warrant in the workplace6. Stages in Organizational Growthdeveloped by Larry E. Greiner is helpful when examining the problems associated with growth on organizations and the impact of change on employees. It can be argued that growing organizations move through five relatively calm periods of evolution, each of which ends with a period of crisis and revolution.
Each evolutionary period is characterized by the dominant management style used to achieve growth, while. Each revolutionary period is characterized by the dominant management problem that must be solved before growth will continue.7.
Stages in Individuals- MotivationWhat motivates people to contribute (or fail to contribute) to teams, products, organizations, nations.From-andThe following table presents the top seven factors causing dissatisfaction and the top six factors causing satisfaction, listed in the order of higher to lower importance. Leading to dissatisfaction.
Company policy. Supervision. Relationship with boss.
Work conditions. Salary. Relationship with peers. SecurityBONUS-This is more of a marketing and less of strategy model but still added hereWhat to sell and how to sell- Marketing Mix ModelSource-Classification CategoryDefinitionA product is seen as an item that satisfies what a consumer needs or wants. It is a tangible good or an intangible service. Intangible products are service based like the, the and the.
Tangible products are those that have an independent physical existence. Typical examples of mass-produced, tangible objects are the and the disposable. A less obvious but ubiquitous mass-produced service is a. Every product is subject to a including a growth phase followed by a maturity phase and finally an eventual period of decline as sales falls. Marketers must do careful research on how long the life cycle of the product they are marketing is likely to be and focus their attention on different challenges that arise as the product moves through each stage. The marketer must also consider the. Marketers can expand the current product mix by increasing a certain product line’s depth or by increasing the number of product lines.
Marketers should consider how to position the product, how to exploit the brand, how to exploit the company’s resources and how to configure the product mix so that each product complements the other. The marketer must also consider product development strategies.the amount a customer pays for the product.
The price is very important as it determines the company’s profit and hence, survival. Adjusting the price has a profound impact on the marketing strategy, and depending on the of the product, often it will affect the and sales as well.
The marketer should set a price that complements the other elements of the marketing mix. When setting a price, the marketer must be aware of the for the product. Three basic pricing strategies are: pricing, market and neutral pricing. The ‘reference value’ (where the consumer refers to the prices of competing products) and the ‘differential value’ (the consumer’s view of this product’s attributes versus the attributes of other products) must be taken into account.all of the methods of communication that a marketer may use to provide information to different parties about the product. Promotion comprises elements such as:,.
Advertising covers any communication that is paid for, from cinema commercials, radio and Internet advertisements through print media and billboards. Public relations is where the communication is not directly paid for and includes press releases, sponsorship deals, exhibitions, conferences, seminars or trade fairs and events. Is any apparently informal communication about the product by ordinary individuals, satisfied customers or people specifically engaged to create word of mouth momentum. Sales staff often plays an important role in word of mouth and public relations (see ‘product’ above).( Place)refers to providing the product at a place which is convenient for consumers to access.
Various such as intensive distribution, selective distribution, exclusive distribution and can be used by the marketer to complement the other aspects of the marketing mix.and a reworked version at “P” category“C” category“C” definitionshifting the focus to satisfying the consumer needs. By defining offerings as individual capabilities that are combined and focused to a specific industry, the result is a custom solution rather than the pigeon-holing of a customer into a product.reflecting the total cost of ownership. Many factors affect Cost, including but not limited to the customer’s cost to change or implement the new product or service and the customer’s cost for not selecting a competitor’s product or service.represents a broader focus. Communications can include advertising, public relations, personal selling, and any form of communication between the organization and the consumer.( Place)With the rise of Internet and hybrid models of purchasing, Place is becoming less relevant. Convenience takes into account the ease of buying the product, finding the product, finding information about the product, and several other factors.