What is Business Model and how does Business Model Canva adds value?
The pandemic of 2019 “Covid” has impacted every business and challenged every Business Model. Depending on your company business model the magnitude of the impact varies. Some of the worst-hit industries or Business verticals like Hospitality, Aviation, Fashion, Office Supplies, etc. even after 2 years are still evaluating the way to come back.
The pandemic has taught us some fundamental changes from Human Behaviour, imporatance of Agility and how Resilient are we?
I or for that matter even you will agree, every business value proposition which was attracting customers from B2B or B2C, suddenly shifted and changed 180°. I am not questioning the Value Proposition here, cause no one ever imagined global havoc like this. Does this mean we cannot change is the next question to be answered? And if we agree we can change, which is possible, how fast and how efficiently we can do is paramount.
We are in survival mode and every opportunity is being evaluated to jump back into the business and how can we change the business model is being questioned or being evaluated by many enterprises. With this pandemic, our business representation, especially our Business Strategy or Corporate Strategy, or Business Plan way of representation, also needs to be changed. Some may differ and some may agree.
Gone are the days when a business strategy or corporate strategy described in multiple slides, or a word document was the key. Our mindsets have changed, and we are looking for a concise report and activity. This report must be aligned as per business terminology.
This old method seems not a preferable mode any longer when we are looking for Agility and Lean. We are looking for relevant information which opens the power of thinking. The Corporate strategies or Business Strategy should not be a go-to Document but can play as a thesis.
Before we get on to understand the new model
Let us step back and see what are the definition of business strategy or corporate strategy.
Definition of Corporate Strategy
The definition of a corporate strategy entails a long-term vision that is clearly defined by the organization, to create and enhance value for the organization and motivate the workforce to accomplish the desired results. Businesses that consistently deliver customer value revisit their corporate strategy regularly to correct areas where they are not achieving the envisioned results. Moreover, corporate strategy entails constant interaction with investors to increase investor trust, which results in a higher equity value.
Definition of Business Strategy
Business strategies describe how an organization plans to reach its desired goals. Business strategies are principles that guide decisions in the organization when they are communicated and adopted. A strategy determines how resources should be allocated and decisions should be made across the organization to accomplish strategic goals. As a result of a solid strategy, the business has a clear roadmap that outlines the actions it can take, the priorities it should focus on, and the actions it should take to achieve its goals.
I don’t disconnect with these methodologies. Have been playing always and will play going forward. Of course, there are subheads under both strategies models, which leads me to get disconnected — I must always refer to two sets of strategies. Some key elements are missing in these strategies method.
Considering the way, the world has changed, our business models also have changed, and this also requires very intensive thoughts about how we should define our strategies for the organization.
We have seen many organizations which are the pillars of our or global economy have pivoted over the period in their business model and what they are presented today. There’s also a huge growth of the start-up ecosystem evolving tremendously fast and becoming unicorns.
The similarity between these organizations is — they are here to solve a problem of a consumer or a customer. Be it a business to business or business to consumer, it’s all about the customer, the human touch, and having your customer or consumer aligned with your business story.
The business story is around the value proposition we are defining while we are architecting our business or starting a new initiative. The business story is around the value proposition we are defining while we are architecting our business or starting a new initiative.
Let’s give it a new perspective
The same businesses have adopted design thinking methodologies. We now have a successful marriage of Design thinking with Corporate Strategies. Design Strategies are the outcome of this marriage and are a new word here for business/corporate strategies.
When we adopt Design Strategies to move forward, we also need to adopt a new model for our Strategies.
BUSINESS MODEL CANVAS
In business modeling, you use a framework for understanding, designing, and testing your business ideas. A systematic approach to identifying how to incorporate revenue generation while creating value for customers and ensuring it is profitable.
The business model transformation has been applied to large organizations, governments, and other organizations to reframe how they serve customers.
The attributes of Business Model Canvas
For every business to survive and to be disruptive, the business model will fall under 3 buckets
- Bucket number 1 is the business model Desirable Or Advisable, Or Sensible
- Bucket number 2 is the business model Feasible Or Workable, Or Doable
- Bucket number 3 is the business model Profitable Or Viable
This canvas can define and reflect your organization Goal’s, Mission, Values, etc under the 9 core heads. The best part is — A SINGLE PAGE VISIBILITY. Is that not amazing?
Introduced by Mr Alexandra Osterwalder, it is a modern way of thinking. Adopted and is dynamically changing the world on how we approach our businesses. Used by many global organizations and has helped even during these pandemic times to Pivot businesses.
Lets us understand the Business Model Canvas.
We start with the first bucket which is the Desirable Or Advisable, Or Sensible, which has 4 subheads
Value Proposition- are arguably the most important element of the business model. You will define all the possible value propositions you plan to offer for your products or services. This value proposition is your unique offering. It is not a must to start offering all your value proposition from immediate but can be gradually added. This also gives you scope to pivot when required. Keep in mind, the value proposition is also a segment that will define the problem you are solving and how you will offer and satisfy your customer segment.
Customer Segment- Who is your different customers and what is the customer persona will be your target here. Please keep answering the why. Why your customer segment will look at your value proposition and buy it.What value you are creating or offering. What is the addressable market size of your customer also needed to be defined here?
Channel- This is your delivery method. How will you deliver your product or services to your customer segment who will experience your value proposition? This segment will define all possible channels which you will use. In this, you also capture your marketing and communication method.
Customer Relationship- This segment will define what is the relationship you will hold with your customer segment and delivery your value proposition. The different value propositions will require different customer relationships. These relationships will also define how you will grow your business and retain your existing. Examples like will you have a self-service or personalized, will you have dedicated or automation will be used. I am sure you are getting the big picture here.
Bucket number 2 is the business model Feasible Or Workable, Or Doable, which had 3 subheads
Key Partners- Key partners in the alliance or partnership you will establish to offer the value proposition to your customer segment. This is the factor of collaboration. Depending on the product or services your partner will also change. An example, do you want to hire a software development team or will you partner with some company, if you are in a business offering delivery as a value, who is your logistics partner. The same is valid for your marketing section or in some cases this point also opens up for joint venture too.
Key Activities- In this section you will define all the activities you are going to do to make money. You need to define the important activities you will do to be in business. The approach needs to be very subjective and for every activity, there should be an answer to why. For example- if you are a bakery, possibly your main activity will be the procurement of all raw material and delivered at a given time, and similarly, if you are a software company, always research and up-gradation your existing software version.
Key resources- Each value proposition would need a different resource you need to define here which will help you to deliver. Do cover all sections and to achieve each section what all resources you need, include your human resources too. If your channel is to reach through a facility, then that is the key resource and similarly, if your product or services need post-sales support, then possibly you will consider a support team and all setup you need to have this support centre.
Bucket number 3 is the business model Profitable or Viable which had 2 subheads
Cost structure- You will define all the cost heads to ensure you run your operation smoothly. Have your all key points and cost heads. Depending on your product or services, you have to define if your offering costs heavy and if so what is your pricing point for the customer. Helps you relook on how to reduce cost. Alternatively, if your business is niche and brings more value, possibly your cost factor will not be a concern here as your customer segment will also be niche. Define all heads in detail and separate them as fixed and variable.
Revenue Streams- This is your cash flow. You model to generate revenue. This is the final element of the Model. It will help you to create a separate revenue stream for each of your value proposition offerings. This also helps you create every revenue source. Is there any option of revenue generation from your key partners, your indirect revenue model? This also opens up an option of what you will start with as a revenue generation point and may add or pivot as you start your journey.
Why should you opt for this model?
Do you remember Kodak? Yes, Kodak is the leader in camera films. They held 90% of the market globally, and did face and were forced to file bankruptcy. The Digital camera was an invention from the Kodak team itself, but Kodak overlooked and competitors quickly seized market share and that history now.
Failure to innovate business models occurs in many cases due to attempts to follow opportunities that fit into a firm’s current business model.
Considering how your goals will be met, and what will be necessary to achieve them can be a great starting point for the business model canvas of existing organizations. It may make sense to target another segment of the customer base to increase revenue, which will require more resources.
If you look at this Model, every 9 elements are linked with each other and help you define every objective keeping your customer as the core focus. The beauty is, with so many value propositions or customer segments, you have the flexibility to change your model at any given point. The model helps you to be agile and also scalable. Want to have a conversation, connect with me here.