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Creating A Business Model
The best approach I have found to creating a business model comes from Business Model Generation, written by Alexander Osterwalder and Yves Pigneur in 2010, published by John Wiley and Sons.
It takes a Business Model Canvas approach that addresses 9 building blocks. It looks like this.
Central to the business is the Value Proposition. Essentially, the exercise is about designing, testing and then delivering what customers want in a way they value your way of getting it to them.
In order to achieve this, you need to have a real clear understanding of who your customer is and what it is about your class of product or service you believe they value.
This is a starting point. Direct discussions and testing your assumptions will clarify this and allow you to design exactly what they want and value. Note it could already be a feature of your product or service. The insight will then help you hone your key messages in advertising and other means of communication.
Blocks 3 and 4 look at where, how and when you actually interact with the customer. It is part of the value proposition, but deals more with the logistics of getting your product or service in their hands.
Blocks 5, 6 and 7 organize how exactly you deliver the goods in terms of key resources, activities, and partnerships.
In action, it all looks like this. You want to answer these important questions
You can then also use the Business Model Canvas to ensure you have appropriate Key Performance Indicators and Key Predictive Indicators for each building block of the business. You could also extend this out to look at your competition, your customers and your suppliers in the same way. Each analysis will undoubtedly uncover valuable insights and ideas. Another use is in planning growth and organizing new ideas.
Note too that the canvas should be used for one customer segment at a time. This makes sense because each segment values what they feel is important to them, and this value proposition is the heart of the canvas.
I have only scratched the surface of what is in this excellent book, so I highly recommend you get it from your favourite book store or go to Strategyzer (see link below). The book describes the model and provides lots of examples, questions and ideas that will help you put the Business Model canvas to good use. For the modest investment, you will learn how to build a successful business.
While you're at it, you should also get their 2014 book, Value Proposition Design. Together they form a formidable methodology to creating a successful business model.
The blank Business Model Canvas can be downloaded from here. It is licensed under the Creative Commons Attribution-Share Alike 3.0 License. If you want to know more about co-author Alexander Osterwalder, follow him on Twitter, sign up for his newsletter, or hire him as a speaker, you can do so here. The canvas is also available for IOS and Android platforms.
Finally, to get really immersed and gain the most value, this web site, Strategyzer, commercializes all of Alexander's ideas and those of his co authors. If you want to join a growing group of serious users of this model around the world, then you have to sign up for their on line education and tools.
© 2015 John B Voorpostel CPA, CA, CMB
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