YOUR BUSINESS MODEL Describes How your Business Creates, Delivers and Captures Value. As such it reflects your view on what customers want, how they want it, and how your business is organised to best meet these needs, get paid for doing so, and make a profit. Those who need to know about your business model: You Your staff A potential investor A bank lending you money A potential purchaser An established and proven method of representing your Business Model is the Business Model Canvas. Prepared by Neil Tuckwell & Associates

USING THE BUSINESS MODEL CANVAS STARTUP Get a clear picture of the Business and test its veracity. ESTABLISHED If the Business is faltering or not sustainable. To identify shortcomings which are limiting business performance. Where the market is changing. Growing the Business – explore possibilities for development. Part of your business planning process. Do you want your business to be best, better or different?

CUSTOMER SEGMENTS The Customer Segments Building Block defines the different groups of people or organisations the business aims to reach and serve. Some examples are the following. Mass Market: No distinction between customer segments. Niche Market: Catering to specialised customer segments Segmented: Distinguishing between market segments with slightly different needs and problems (e.g. a bank – retail and business). Diversified: Serving two unrelated customer segments with very different needs and problems (e.g. amazon - retail and web services). Multi-sided Markets: Serving two or more interdependent customer segments (e.g. credit cards – card holders and merchants).

VALUE PROPOSITIONS The Value Propositions Building Block describes the bundle of products and services that create value for a specific Customer Segment. Values may be quantitative (e.g. price) or qualitative (e.g. design). The following elements contribute to customer value creation. Newness: Satisfying an entirely new set of needs that customers previously didn’t perceive because there was no similar offering. Often technology related (e.g. tablet) but not necessarily (e.g. ethical investments). Performance: Improving product or service performance. However, improved performance may have its limits. Customisation: Tailoring products and services to the specific needs of individual needs of customers or customer segments. In recent years the concept of mass customization has gained importance (e.g. Skype).

CHANNELS Value Propositions are delivered to customers through communication, distribution, and sales channels. The Channels Building Block describes how a business communicates with and reaches its Customer Segments to deliver a Value Proposition. Channels have five distinct phases. Each channel can cover some or all of these phases. We can distinguish between direct channels and indirect ones, as well as between owned channels and partner channels. 1.Awareness: How do we raise awareness? 2.Evaluation: How do we help customers evaluate our value proposition? 3.Purchase: How do we allow customers to purchase our products and services? 4.Delivery: How do we deliver a value proposition? 5.After Sales: How do we provide post-purchase customer support?

CUSTOMER RELATIONSHIPS The Customer Relationships Building Block describes the types of relationships the business establishes with specific Customer Segments. Several categories may co-exist. Personal Assistance: The customer can communicate with a real customer service representative to get help during the sales process or after the purchase is complete. Dedicated Personal Assistance: This relationship involves dedicating a customer representative specifically to an individual client. Self-service: No direct relationship with customers. Provide all necessary means for customers to help themselves. Automated Service: A sophisticated form of customer self-service with automated processes. Communities: User communities facilitating connections between clients. Co-creation: Going beyond the traditional customer/vendor relationship (e.g. amazon inviting customers to write reviews).

REVENUE STREAMS Revenue Streams result from Value Propositions successfully offered to customers. The Revenue Streams Building Block represents the cash the business generates from each Customer Segment. There are several ways to generate Revenue Streams and each stream may have a different pricing mechanism. Asset Sale: Selling ownership rights to a physical product. Usage Fee: Use of a particular service. The more a service is used the more the customer pays. Subscription Fees: Selling continuous access to a service (e.g. a gym) Lending/Renting/Leasing: Temporarily granting someone the exclusive right to use a particular asset for a fixed period in return for a fee. Licensing: Giving customers permission to use protected IP in exchange for a fee. Pricing Mechanisms: Fixed Menu (e.g. list price, product feature dependent) or Dynamic (e.g. negotiation, real-time market, auction).

KEY RESOURCES Key Resources are the assets required to offer and deliver the previously described elements. Key resources can be categorised as follows. Physical: Physical assets such as manufacturing facilities, buildings, vehicles, machines, systems, point-of-sale systems, and distribution networks. Intellectual: Resources such as brands, proprietary knowledge, patents and copyrights, partnerships, and customer databases. Human: Every enterprise requires human resources, but people are particularly prominent in certain businesses. For example, human resources are crucial in knowledge-intensive and creative industries. Financial: Some business models call for financial resources and/or financial guarantees such as cash, lines of credit, or a stock option pool for key employees.

KEY ACTIVITIES The Key Activities Building Block describes the most important things the business must do to make its business model work. These can be categorised as follows. Production: Relates to designing, making and delivering a product or service. Problem Solving: Key activities relate to coming up with new solutions to individual customer problems. Consultancies, hospitals and other such service organisations are typically dominated by problem solving activities. Platform/Network: Where the key resources are platform or network related (e.g. networks, matchmaking platforms, software, etc.)

KEY PARTNERSHIPS The Key Partnerships Building Block describes the network of suppliers and partners that make the business model work. Some activities are outsourced and some resources are acquired outside the enterprise. It can be useful to distinguish three motivations for creating partnerships. Optimisation and Economy of Scale: It is illogical for a company to perform every activity by itself. These partnerships are usually formed to reduce costs, and often involve outsourcing or sharing infrastructure. Reduction of Risk and Uncertainty: Partnerships can reduce risk in a competitive environment characterised by uncertainty. Not unusual for competitors to form an alliance in one area while competing in another. Acquisition of Particular Resources and Activities: Firms can extend their own capabilities by relying on other firms to furnish particular resources or perform certain activities (economy of scope).

COST STRUCTURE The Cost Structure describes all costs incurred to operate a business model. It can be useful to distinguish between two broad classes of cost structure: cost driven and value driven (many business models fall between these extremes). Cost Driven: Focus on minimising costs wherever possible. Value Driven: Premium value propositions and a high degree of personalised service. Cost structures can have the following characteristics: Fixed Costs: Costs that remain the same regardless of volume. Variable Costs: Costs that vary proportionally with volume Economies of Scale: Cost advantages as output expands. Economies of Scope: Cost advantages due to a larger scope of operations.

POST SESSION Review Your Business Model Canvas from today. You may use a whiteboard and stick-on notes to facilitate this review. Discuss with staff and maybe someone outside the business. Determine what changes, if any, you need to make to your current business model. Give consideration to a desirable business model 2-3 years out from now. This will be your vision for developing and growing your business. Would you like to workshop Your Business Model at Session 3?