When should you design your Business Model Canvas?

Business Model Canvas: 

The Business Model His canvas was first developed by Swiss entrepreneur and economic theorist Alexander His Osterwalder. Handbook Business Model Generation of Yves Pigneur, a Belgian computer scientist. Designing a business model for a startup is difficult, but creating a business model canvas makes the model easier to understand and implement.

With the Business Model Canvas, companies can get a bird’s eye view of their market position and gain insights to create a strategic vision for development. It helps startups understand how their products should be implemented and promoted to achieve their desired business goals and deliver maximum value to their customers.

 

 

How to use Canvas to design a successful business model?

1. We need to focus visually on the most important elements of our business. For example, we need to design a successful business model for our digital startup. 
2. We have to understand our competitors. The business model canvas allows us to outline our competitor’s business model. 
3. We need to identify changing customer needs, find ways to win and improve our existing business.

Step 1: Define Customer Segments:

Completing the Business Model Canvas begins with a list of customer segments. Your characteristics and needs influence every decision you need to make to build a profitable business. First, you need to understand the market you are developing your product for. 

 

There are different types of customer segments.

• Mass Market:  Companies serve many customers with similar needs and problems without segmenting target groups. 
• Niche Industry: Companies serve specific customer segments. Each requires its own value proposition, customer relationships, and distribution channels (primarily in supplier-buyer relationships, such as between auto parts manufacturers and automakers). 
• Segmented: A single company serves two or more market segments with slightly different needs, but there are related issues (e.g. bank customers with different asset levels). 
• Diversification: A single company serves two or more completely independent customer segments (e.g. Amazon is a retail company that not only supplies goods to consumers but also provides cloud computing services to web companies).
• Multifaceted Market: A business serves two or more interdependent customer segments (that is, a credit card company serves cardholders and the merchants that accept those credit cards).

 

After defining your market type, define your target customer categories. For start-up products, segment customers based on similarity in behavior, interests, problems, demographics, and other criteria important to your product. It’s important to create an ideal customer profile (ICP) for each segment you choose. ICP represents the perfect prospect who gets the most value from purchasing your product.

Next, for each ICP, you need to identify a buyer persona. This is the exact portrait you are purchasing from. Based on your ICPs and buyer personas, you can build customer-centric communications across your business model and make the right decisions about the remaining components. Below is an example of creating an ICP and a buyer persona.

 

Step 2 Outline your value proposition:

 A value proposition describes why guests choose your product among others — in other words, it describes the unique value guests can not find in indispensable results. Thus, you should define the right value proposition for each client member.

Values can be quantitative( price, service speed, delivery terms) or qualitative( usability, design). Then are some of the implicit rudiments that form the value for a client:

•  Freshness
•  Performance
•  Convenience
•  Personalization
•  Getting the job done
•  Design
•  Price
•  Threat reduction
•  Cost reduction
•  Simplicity
•  Status
•  Brand

To insure a fit between the product and target guests, use a value proposition oil grounded on information about client parts

• Figure three client profile factors

• Earnings: The benefits that guests want to get.
• Pains: Negative gusts, feelings, and risks the client wants to avoid.
• Client jobs: problems guests are trying to break, tasks they’re trying to do, and needs they’d like to satisfy with your product.

 

• Fill in the value chart that contains

• Gain generators: How your product creates client earnings
• Pain relievers: How the product eases client pains
• Products and services: The products and services( or their particular features) that help guests get their jobs done, relieve their pains, and bring the asked earnings. 

 

After listing all the below rudiments, try to rank them in terms of value for your guests. A product is fit for its target request if the product and service offered address the client’s primary pain points and triumphs.

 

Step 3: Identify Your Channel:

Channels represent how you communicate and reach customer segments to offer your value proposition. On the other hand, these are how customers find your product on the market and enter the sales cycle. You can choose from direct channels (his own website or internal sales representatives), indirect channels (his own retailers), and partner channels (wholesalers, third-party suppliers, partner websites). 

Partner channels allow you to extend the reach of your product, but at the cost of lower profit margins. Owned channels, on the other hand, are more profitable, but more expensive to organize and operate. Affiliate channels help increase brand and product awareness. This is essential for startups after the initial launch.

 

Step 4: Map Customer Relationships:

Define customer relationships for each customer segment according to customer expectations, product nature, and unique goals. Evaluate how much it costs your business to maintain a customer relationship in order to select the best relationship for each category of users. 

 

The main types of relationships are:

 

• Personal secretary: Customers interact with human representatives during and after the sales process through call centers, email, or other means (iTunes). 
• A dedicated personal assistant: Each customer is assigned its own contact person (banking service). self service. The customer receives all necessary means for individual use of the product.
• Automatic Service: Personalized content and services are delivered through a combination of self-service and automated processes (Pandora). 
• Community: Develop a community of customers and company representatives to share knowledge and help solve problems. Community relationships also help us better understand our product’s target audience. (GlaxoSmithKline). 
• Co-creation: Customer involvement in product design and development (YouTube). 
• Transaction: There is no real relationship between the customer and the company.For some digital products, it makes sense to offer customers choice. For example, a banking application can operate entirely as a self-service product. 

 

However, if a customer needs human help or advice, they can contact a bank representative. Also, don’t forget to define a relationship type for each customer segment.

 

Step 5: Choose your revenue stream:

At this stage, you define how you will generate revenue from each customer segment.

Three factors to consider are:

• What are your customers willing to pay?
• How do you like to pay?
• What percentage of the company’s total revenue does each revenue stream contribute?

 

Step 6: Identify Key Resources:

Critical resources are the assets required to make the business model work. These are the resources you need to build, market, promote, nurture customer relationships, deliver value, and generate revenue. 

We have four main types of resources. They are as follows:

 

• Physical (production facilities, machines, POS systems)
• Intellectual (brands, knowledge, patents, copyrights, partnerships)
• Humans (the team behind the product)
• Financials (cash balances, lines of credit, stock option pools, etc.)

 

 Step 7: Plan Important Activities:

Critical activities are the most important actions a company must take to make its business successful. 

They can include:

 

• Manufacturing: Design, develop and deliver products in required quantity and sufficient quality
• Problem Solving: find solutions to specific customer problems
• Platform/Network: If the company operates as a platform, its main activities include platform management, maintenance, advertising, etc.

 

For example, Microsoft’s main activities include software development, while Dell focuses on supply chain management. McKinsey’s consulting business revolves around problem solving.

 

Step 8: Identify Key Partnerships:

If your startup relies on suppliers and partners, you should define all these connections in key partnerships.

 

• Strategic partnerships with non-competitors
• Cooperation (partnership between competitors)
• Joint Venture
• Buyer-Supplier Relationship

 

 To design a start-up business model, consider partnerships to optimize profitability, achieve economies of scale, reduce risk and uncertainty, and acquire specific resources and activities. Tesla’s most important partners are, for example, battery manufacturers and his suppliers of components. Facebook’s main partners are its content providers (creators and distributors of movies, music, TV shows, news, etc.). Spotify itself is a music platform that does not produce music. Therefore, Spotify’s most important partners are record labels and publishers. 

 

Step 9: Build your cost structure:

This is where you need to understand your startup’s fixed and variable costs and define your financial trade-offs and business decisions. There are two main categories of cost structure: value-based and cost-based. Our value-based cost structure is designed to maximize the value of our products. A cost-oriented cost structure focuses on minimizing product costs.

 

Consider all fixed and variable costs that are important to your startup and hypothesize about your future cost structure. Fixed costs are those costs which remain constant even if there is a change in the production volume. These include, for example, wages, rent and costs of production equipment. Variable costs, on the other hand, change in proportion to production volume.

 

Start with an overview of your cost structure, including key spending categories. For example, Airbnb’s cost structure includes the cost of developing, maintaining, and marketing its advanced platform. You can then categorize your cost structure by listing all significant expenses under high-level categories. 

 

Finally, developing a successful business model requires adjusting your cost structure so that your estimated revenue exceeds your estimated total starting cost.