In this section you will find information about business models, especially the Canvas model.
A business model describes the logic through which an organization creates, distributes and delivers value. From: Creating business models of Alexander Osterwalder and Yves Pigneur
The Business Model Canvas or the BMC model is a graphic representation of a number of variables that show the values of an organization. The Business Model Canvas can be deployed as a strategy tool for the development of a new organization. Furthermore, it also analyses the (business) situation of an existing business.
The Business Model Canvas was developed by the Swiss business model guru Alexander Osterwalder and professor of management information systems Yves Pigneur. They defined nine categories for the Business Model Canvas to which they refer as the building blocks of an organization.
The building blocks are:
Performance of an existing organization can be easily improved using the Business Model Canvas. All company aspects are made clear at a glance because of visualisation. By looking at the developments per category, an organization can fine-tune its value proposition and improve its strategy. When setting up a new company clear decisions can be made in advance using the Business Model Canvas.
For both the start-up organizations and existing organizations it may be important to create alliances with partners. For instance when fighting the competition and combining knowledge and specialization.
Essential information may be acquired by knowing in advance which partners may constitute a valuable relationship.
In section 5 of the Module you will see some ways of segmenting the market; in this section we introduce a first mode of division of the market: the one that distinguishes the sales in two big categories, the B2B sector and the B2C sector. There are some essential differences between the B2B buyers and the B2C consumers, in terms of complexity and continuity in online transactions.
Simply said: B2B, indicates the set of relationships and business transactions between companies, while the B2C indicates the set of relationships and commercial transactions between a company and a final consumer. The marketing actions addressed to the two sectors follow different marketing strategies, summarized in the infographic. However, despite the diversity of dynamics of the B2C and B2B worlds, it is the people who make choices, and it is the people we address, whether they are final consumers or large company buyers.
So our proposal is to follow the approach of Bryan Kramer, social business strategist and CEO of Pure Matter and author of the book “There is No B2B or B2C: It’s Human to Human: # H2H”. According to Kramer we must think as the consumer, intercept the needs of people, be they housewives or business managers of a company. This opens the door to an effective and sincere communication, consisting of needs and answers to these needs.
In addition to this “classic” division, with expansion of the Internet, other models have also developed, such as, for example, C2C (Consumer to Consumer) – a business model that allows process of buying and selling between users; or the Consumer to Business (C2B), Business to Government (B2G), Government to Business (G2B), Government to Citizen (G2C). In the Case stories section of this Module you can find some detailed examples.
Having a good knowledge of the core activities of a company, a good understanding of the value proposition of the organization will be obtained. It is not just about production, but also about a problem-solving approach, networking and the quality of the product and/or service. When an organization knows what the added value for the customer is, a better relationship may develop with the existing customers. This may help to attract new customers and makes it easier to keep the competition at bay.
Resources are the means that a company needs to function. They can be categorized as physical, intellectual, financial or human resources. Physical resources may include assets such as business equipment. Intellectual resources include, among other things, knowledge, brands and patents. The financial resources are related to funds flow and sources of income. The human resources include staffing.
The value proposition is about the core of a company’s right to exist, it meets the customer’s need.
How does an organization distinguish itself from the competition? This distinction focuses on quantity such as price, service, speed and delivery conditions on one hand, and on the other hand it also focuses on quality including design, brand status and customer experience and satisfaction.
It is essential to interact with customers. The broader the customer base the more important it is to divide your customers into different target groups. Each customer group has specific needs. Anticipating the customer needs, the organization invests in different customers. Good service will ensure good and stable customer relationships in future.
An organization deals with communications, distribution and sales channels. It is not just about customer contact and the way in which an organization communicates with their customers. The purchase location and the delivery of the product and/or services provided are decisive elements in this. Channels to customers have five different stages: awareness of the product, purchase, delivery, evaluation& satisfaction and repeated sales. In order to make good use of the channels and to reach as many customers as possible, it is advisable to combine off-line (shops) and online (web shops) channels.
As organizations often provide services to more than one customer group, it is sensible to divide them into customer segments. By identifying the specific needs and requirements of each group and what value they attach to this, products and services can be directed towards these needs and requirements. This will lead to greater customer satisfaction, which in turn will contribute to a good value proposition.
By gaining an insight into cost structure, an organization will know what the minimum turnover must be to make a profit. The cost structure takes into account economies of scale, constant and variable costs and profit advantages. When it is obvious that more investments must be made than the organization is generating in revenue, the costs will have to be adjusted. Often an organization will opt for deleting a number of key resources.
In addition to the cost structure, the revenue streams will provide a clear insight into the revenue model of an organization. For example, how many customers does an organization need on an annual basis to generate a profit? How much revenue does it need to break even? The revenue streams are cost drivers. In addition to the revenue from the sale of goods, subscription fees, lease income, licensing, sponsoring and advertising may also be an option.