In this section of the business model canvas building blocks, you’ll learn how to combine your key activities to be unique. Discover what are key activities and how to decide which activities provide the best solution.
Key Activities Overview
Not every activity in the business delivers value even though it may be important. The key activities section focuses on the tasks that need to be done to deliver the value proposition and achieve the overall purpose of the business.
As Simon Sinek lays out in his book Start with Why, a company needs to define its overall long term value and purpose. Key activities depend on the overall business model of the company, its market, customer segments and value proposition.
When looking at different companies it is often easy to understand the core activities that help to sustain and grow their business model. As an example, when analysing Microsoft it is easy to see that they are in the software business and therefore software development is a core activity. Likewise, a car company like BMW needs to be excellent at engineering and production.
What are key activities in a business model canvas?
Overall, key activities are those processes, tasks and activities that clients will identify with your product or service. They will ideally be hard to imitate and for competitors to replicate.
When assessing your business through the Key Activities building block it is important to take an overall view of the business and link to other building blocks such as Key Partners. It might be a good choice at times to use Key Partners to do some of the activities rather than your business. As an example, some activities might take need a heavy investment in infrastructure if they were key activities and therefore would ideally be better as partners.
Questions To Consider
Some of the considerations for key activities are:
- What Key Activities do our value proposition require?
- What Key Activities are needed for our Distribution Channels?
- What Key Activities do we need to deliver our Customer Relationships?
- What Key Activities relate to our Revenue Streams?
1. What key activities do our value propositions require?
If your value proposition is to deliver a high-quality service then a key activity will be the support services you put in place to deliver that promise of value.
If on the other hand you you offered value for money and positioned yourself as no-frills, then you would need to eliminate all activities that were not essential and just focus on those that help to keep costs low. As an example, Aldi has a no-frills retail environment and offers alternatives to branded products.
If you are Apple then design, engineering and branding form the core activities.
2. What core activities are needed for our distribution channels?
Imagine that your core business will be to produce naturally sourced non-leather shoes that are produced from organic materials and you are eco-friendly and carbon neutral. You could sell your shoes through Amazon, on your own website or potentially through retail stores.
If you only sell online then a core activity will be the activities related to online marketing and eCommerce. If you sell through physical stores then you need to have activities related to running stores, training staff…
3. What Key Activities do we need to deliver our Customer Relationships?
The key activities that relate to customer relationships involve activities such as sales, marketing and of course customer service. You need to evaluate what are the activities that you need to deliver against the customer relationships you defined earlier. Of course, any activities you define will have associated costs to them.
A consultancy needs to generate customers and therefore requires business development, lead generation activities.
4. What Key Activities Relate To Our Revenue Streams?
If within your business model you offer subscription services then you need to be able to bill customers on a regular basis and provide the necessary support.
Business Model Key Activities
The Value Proposition determines the types of key activities that will be critical to the business. At the early stages of developing a business, it is important to remember that the business model needs to reach a point where it can be tested. In other words, if the value proposition fits the market. If in designing the process too many activities are added to this block it can delay the overall testing of the value proposition and run the risk of the key activities not necessarily all being needed. This is often referred to as bloat.
Examples of Core Business Activities
These are some of the key activities that fit different types of business models:
Production consists of many different activities.
As an example, Fashion companies like Zara have specialized in spotting trends and being able to be first to market with them. This is because they have a highly efficient process for moving from design to production to then merchandising the products in-store.
Here are a few for you to consider as you develop your business model:
- Selection of product and design: the first step is to design the for the product or services. While product design is more tangible services design can be more complex. In many cases because of the need for digital services both are complementary processes. Choosing the right combination of features for a product and functions is how you match your product to the value proposition. Value engineering and value analysis are parts of this activity.
- Selection of Production Process: this stage consists of deciding what production process the company requires. Key considerations are how and what blend of technologies are right needed, e.g. machines, inventory management system, etc.
- Production Capacity: The production management must have full knowledge of the expected demand for the product and also be able to have room to meet future demand. Break-even analysis is the most popular methods are often used by production managers to predict capacity.
- Production Planning: Production planning is usually based on forecasted sales and predictions. For established products forecasting can often be extremely accurate. However, for new product launches and instances where demand can fluctuate e.g. seasonal demand, forecasting and production planning becomes more difficult. As an example, Toys can be both seasonal and volatile, often the popularity of a toy can outstrip forecasts and/or production capacity. Hence sometimes toys become unavailable over Christmas.
- Production Control: The production manager is also responsible for monitoring and controlling the production process. This is done by comparing planned production with actual production, exploring deviations if any and ultimately correcting these deviations to meet planned production.
- Quality and Cost Control: Customers want the maximum quality for the cheapest price. Moreover, customer expectations of service levels and communications are continually shifting. In essence, customers are becoming more demanding. Quality and costs have to be controlled and new ways of improving quality while lowering costs are constant business pressure.
- Inventory Control: Inventory Control is fundamental a production-driven part of the business which aims to meet demand in the market. Understocking causes lost sales, disappointed customers and leads to poor customer experience. On the other hand, too much stock means that cash is tied up in the business that could be used to generate sales instead.
- Maintenance and Replacement of Machines: The production manager must be on top of the condition of the machines under his function by constantly monitoring them and scheduling regular maintenance like oiling, replacing worn parts, cleaning, etc. This function ensures that there are no unexpected breaks in production.
Marketing is a core activity for many businesses. In fact, some business outsources production and many other parts of the business leaving sales and marketing as sales and marketing. Some of the activities associated with are:
- Strategy: Marketing strategy involves selecting what resources are needed to grow the business in which markets based on the products and services the business creates. As an example, Apple will develop a strategy have chosen to enter a new market with Apple music and to compete with Spotify, likewise, it chose to enter the video streaming business to compete with Netflix. Are these their core activities or do they support the sales of their hardware?
- Market Research: Market research focuses on understanding customers and shift in customer behaviour.
- Product Development: Marketing teams are often the custodians of the customer data, analytics and the overall customer relationship. As a result, marketing teams work closely with R&D and product development teams.
- Communications: The marketing team is responsible for all communication and maintaining consistency with the overall brand. Marketing is thus charged with delivering the overall growth within a business.
- Sales Support: Your business model may rely on Business to Business (B2B) or business to consumer (B2C) relationships. Sales teams are more dominant in B2B companies that usually are selling higher-value products and services.
- Events: Marketing is also responsible for organizing and executing events such as seminars, product launches, exhibitions, etc. they will typically call key or prospective customers to such events as well.
Types Of Key Activities Used In the Business Model
In the business model three types of activities are highlighted:
These activities are generally a characteristic of manufacturing firms and entail the design, creation and delivery of products. However, with the development of sensors and also digital systems products are becoming entwined with services. Car manufacturers, consumer electronics and drug companies are just a few examples of companies that rely on production as a key activity.
2. Problem Solving
Consultancies, hospitals, wellness clinics, spas and many other service companies typically aim to solve customer problems uniquely. These organizations are characterized by knowledge management, continuous learning and reliance on people with the necessary talent. In the digital era systems are learning to capture knowledge and use it to diagnose problems and present solutions. Though far from perfect this is an ongoing era of development with AI.
Have you noticed how many of the top valued businesses rely on a platform business model? Facebook, Alibaba, eBay and many other billion-dollar companies are platforms. But platforms also offer Software as a Service such as Salesforce.
Essentially, platforms and networks are easy to scale because of low or zero marginal costs.
Example of a Platform Business Model
Auction house D.Art (“platform business”) organises its yearly modern art-painting auction in Zürich. The auction (“infrastructure”) is a well-known event that will help to make the paintings of young talented artists (“producers”) and art collectors (“consumers”) more accessible to each on an as-need basis. Experts (“agents”) are present to advise groups of collectors on relevant artists (“trust”).
As D.Art does not own the paintings, it simply lays out the rules of interactions (“eliminate friction”) to enable the information exchanges (“value creation”) between the artists and collectors followed by compensation through money, goods and/or services, and fees for D.Art (“monetising strategy”).