Table of Contents
Business Model Design – The Nine Components (continued)
Using the nine components of the Business Model Canvas allows you to innovate by changing them mix-and-match. Changing more than one component can be a powerful way to create an innovative business model.
Changing three or more modules for an existing business can be complex and require a longer and broader organizational transformation. However, for startups, the opportunities are vast and enable ways to unbundle current market structures – example the Klarna Business Model.
3. Channels
These are the touchpoints between you and your customers. They cover both sales and distribution. Examples include:
- Social networks
- Search engines
- Physical stores
- Mobile apps
- Affiliate programs
Consider how different channels work for different products or services. For instance, Tesla’s direct-to-consumer model revolutionized car sales.
More information about customer channels.
4. Customer Relationships
This defines how you interact with customers throughout their journey. Key points:
- Relationships can range from personal to automated
- Different customer segments may require different relationship types
- Consider loyalty programs, customer service, personalization, and community building
Examples include:
- Personal assistance (common in B2B)
- Self-service
- Automated services
- Communities
- Co-creation
Here is a blog post on customer relationships for further reading.
5. Revenue Streams
This is how your business makes money.
Key points:
- Understand what customers are willing to pay for
- Consider different pricing models
- You can have multiple revenue streams
Examples include:
- Asset sale
- Usage fee
- Subscription fees
- Licensing
- Advertising
Here are more details on the different ways to engineer how to develop revenue streams.
6. Key Activities
Your company must do These most important things to make its business model work. They vary by industry and business model.
Examples include:
- Production
- Problem-solving
- Platform/network management
- Marketing
More information about key activities.
7. Key Resources
These are the assets required to deliver your value proposition.
They can be:
- Physical (e.g., manufacturing facilities)
- Intellectual (e.g., brands, patents)
- Human (e.g., specialist talent)
- Financial (e.g., cash, credit lines)
There are lots more to understanding key resources.
8. Key Partnerships
These are the network of suppliers and partners that make your business model work.
Consider:
- Strategic alliances
- Coopetition (cooperation with competitors) – see this article on coopetition .
- Joint ventures
- Buyer-supplier relationships
Think deeper to understand types of key partnerships and how they relate to being an orchestrator.
9. Cost Structure
This describes all costs incurred to operate your business model.
Key points:
- Identify your most significant costs
- Distinguish between fixed and variable costs
- Consider ways to optimize costs
Details and more information on cost structure.
Remember, business models can be cost-driven (focused on minimizing costs) or value-driven (focused on creating premium value).
As you work through these components, always keep in mind the three key aspects of a successful business model:
- Desirable: Do people want this?
- Viable: Can we be paid for it?
- Feasible: Can we do this?
By thoroughly considering these components and how they interact, you’ll be well on your way to creating a robust and innovative business model. In the next section, we’ll look at how to combine all this and develop your business model.
