Business Fundamentals
Chapter 1: Business Model
Business Model Canvas
o A business model describes the rationale of how an organisation creates,
delivers and captures value.
1. Customer Segments
o An organisation serves one or several Customer Segments
o The different groups of people/organisations you want to reach and serve
o There are different types of Customer Segments:
Mass Market: focus on one large group of customers with similar
needs and problems
Niche Market: targeting specific, specialized Customer Segments
Segmented: focus on the slightly different needs and problems
Diversified: serves two unrelated Customer Segments
Multi-sided platforms: bring two or more distinct but
interdependent groups of customer, they can only exist if the two
groups are present
2. Value Propositions
o An organisation seeks to solve customer problems and satisfy customer
needs with value propositions
o Describes the bundle of products and services that create value for a
specific Customer Segment
o Creates value through a distinct mix of elements catering to that
segment’s need. Values may be quantitative or qualitative.
o Elements from following list can contribute to customer value creation:
Newness, Performance, Customization, ‘Getting the job done’,
Design, Brand/Status, Price, Cost reduction, Risk reduction,
accessibility and convenience/usability
,3. Channels
o Value propositions are delivered to customers through communication,
distribution and sales channels.
o Describes how a company communicates with and reaches its Customer
Segments to deliver a Value Proposition
o Channels have five distinct phases. We can distinguish between direct
channels and indirect ones, as well as between owned channels and
partner channels.
o Phases:
1. Awareness: how do we raise awareness about our company’s
products and services?
2. Evaluation: How do we help customers evaluate our organization’s
Value Proposition?
3. Purchase: How do we allow customers to purchase specific products
and services?
4. Delivery: How do we deliver a Value Proposition to customers?
5. After sales: How do we provide post-purchase support?
o Different channels:
Own channels: sales force, web sales and own stores
Partner channels: partners stores and wholesaler
Direct channels: sales force and web sales
Indirect channels: own stores, partner stores and wholesaler
4. Customer Relationships
o Customer relationships are established and maintained with each
Customer Segment.
o We can distinguish between several categories of Customer Relationships,
which may co-exist in a company’s relationships with a particular
Customer Segment:
Personal assistance: This is based on human interaction, the
customer can communicate with a real customer presentative. This
can happen at the point of sale, through call-centrum, by e-mail or
through other means
Dedicated personal assistance: A customer representative will be
dedicating to an individual client. This relationship usually develops
over a long period of time.
Self-service: This is a direct relationship with customers. It provides
necessary means for customers to help themselves.
Automated services: This is a self-service with an automated
process. Automated services can recognize individual customers
and their characteristics, and offer information related to orders or
transactions.
Communities: This is used to get more involved with customers and
to facilitate connections between community members.
Co-creation: ex. Amazon invites customers to write reviews and
thus create value for other book lovers.
,
, 5. Revenue Streams
o Revenue streams result from value propositions successfully offered to
customers.
o Represents the cash a company generates from each customer Segment
(costs must be subtracted from revenues to create earnings).
o There are several ways to generate Revenue Streams:
Asset Sale: Derives from selling ownerships rights to a physical
product.
Usage Fee: This stream is generated by the use of a particular
service. The more a service is used, the more the customer pays.
Subscription fees: This stream is generated by selling continuous
access to a service.
Lending/Renting/Leasing: Here they create the stream by
temporally granting someone the exclusive right to use a particular
asset for a fixed period in return for a fee.
Licensing: The Revenue Stream is generated by giving customers
permission to use protected intellectual property in exchange for
licensing fees. Licensing allows rightsholders to generate revenues
from their property without having to manufacture a product or
commercialize a service.
Brokerage fees: Derives from intermediation services performed on
behalf of two of more parties.
Advertising: This Revenue Stream results form fees for advertising
a particular product, service or brand.
o Each revenue stream might have different pricing mechanisms:
Fixed Menu Pricing: Predefined prices are based on static variables.
Dynamic Pricing: Prices change based on market conditions.
6. Key Resources
o Key Resources are the assets required to offer and deliver the previously
described elements.
o Which ley resources do our value propositions, distribution channels,
customer relationships and revenue streams require?
o Key resources can be categorized as follows:
Physical: includes physical assets such as manufacturing facilities,
building, vehicles, machines, systems, point-of-sales and
distribution networks.
Intellectual: these resources such as brands, proprietary
knowledge, patents and copyrights, partnerships and customer
database are important components of a strong business model.
These are difficult to develop but when successfully created may
offer substantial value.
Human: Every enterprise requires human resources, but people are
particularly prominent in certain business models.
Financial: Some business models call for financial resources and/or
financial guarantees, such as cash, lines of credit or a stock option
pool for hiring key employees.
Chapter 1: Business Model
Business Model Canvas
o A business model describes the rationale of how an organisation creates,
delivers and captures value.
1. Customer Segments
o An organisation serves one or several Customer Segments
o The different groups of people/organisations you want to reach and serve
o There are different types of Customer Segments:
Mass Market: focus on one large group of customers with similar
needs and problems
Niche Market: targeting specific, specialized Customer Segments
Segmented: focus on the slightly different needs and problems
Diversified: serves two unrelated Customer Segments
Multi-sided platforms: bring two or more distinct but
interdependent groups of customer, they can only exist if the two
groups are present
2. Value Propositions
o An organisation seeks to solve customer problems and satisfy customer
needs with value propositions
o Describes the bundle of products and services that create value for a
specific Customer Segment
o Creates value through a distinct mix of elements catering to that
segment’s need. Values may be quantitative or qualitative.
o Elements from following list can contribute to customer value creation:
Newness, Performance, Customization, ‘Getting the job done’,
Design, Brand/Status, Price, Cost reduction, Risk reduction,
accessibility and convenience/usability
,3. Channels
o Value propositions are delivered to customers through communication,
distribution and sales channels.
o Describes how a company communicates with and reaches its Customer
Segments to deliver a Value Proposition
o Channels have five distinct phases. We can distinguish between direct
channels and indirect ones, as well as between owned channels and
partner channels.
o Phases:
1. Awareness: how do we raise awareness about our company’s
products and services?
2. Evaluation: How do we help customers evaluate our organization’s
Value Proposition?
3. Purchase: How do we allow customers to purchase specific products
and services?
4. Delivery: How do we deliver a Value Proposition to customers?
5. After sales: How do we provide post-purchase support?
o Different channels:
Own channels: sales force, web sales and own stores
Partner channels: partners stores and wholesaler
Direct channels: sales force and web sales
Indirect channels: own stores, partner stores and wholesaler
4. Customer Relationships
o Customer relationships are established and maintained with each
Customer Segment.
o We can distinguish between several categories of Customer Relationships,
which may co-exist in a company’s relationships with a particular
Customer Segment:
Personal assistance: This is based on human interaction, the
customer can communicate with a real customer presentative. This
can happen at the point of sale, through call-centrum, by e-mail or
through other means
Dedicated personal assistance: A customer representative will be
dedicating to an individual client. This relationship usually develops
over a long period of time.
Self-service: This is a direct relationship with customers. It provides
necessary means for customers to help themselves.
Automated services: This is a self-service with an automated
process. Automated services can recognize individual customers
and their characteristics, and offer information related to orders or
transactions.
Communities: This is used to get more involved with customers and
to facilitate connections between community members.
Co-creation: ex. Amazon invites customers to write reviews and
thus create value for other book lovers.
,
, 5. Revenue Streams
o Revenue streams result from value propositions successfully offered to
customers.
o Represents the cash a company generates from each customer Segment
(costs must be subtracted from revenues to create earnings).
o There are several ways to generate Revenue Streams:
Asset Sale: Derives from selling ownerships rights to a physical
product.
Usage Fee: This stream is generated by the use of a particular
service. The more a service is used, the more the customer pays.
Subscription fees: This stream is generated by selling continuous
access to a service.
Lending/Renting/Leasing: Here they create the stream by
temporally granting someone the exclusive right to use a particular
asset for a fixed period in return for a fee.
Licensing: The Revenue Stream is generated by giving customers
permission to use protected intellectual property in exchange for
licensing fees. Licensing allows rightsholders to generate revenues
from their property without having to manufacture a product or
commercialize a service.
Brokerage fees: Derives from intermediation services performed on
behalf of two of more parties.
Advertising: This Revenue Stream results form fees for advertising
a particular product, service or brand.
o Each revenue stream might have different pricing mechanisms:
Fixed Menu Pricing: Predefined prices are based on static variables.
Dynamic Pricing: Prices change based on market conditions.
6. Key Resources
o Key Resources are the assets required to offer and deliver the previously
described elements.
o Which ley resources do our value propositions, distribution channels,
customer relationships and revenue streams require?
o Key resources can be categorized as follows:
Physical: includes physical assets such as manufacturing facilities,
building, vehicles, machines, systems, point-of-sales and
distribution networks.
Intellectual: these resources such as brands, proprietary
knowledge, patents and copyrights, partnerships and customer
database are important components of a strong business model.
These are difficult to develop but when successfully created may
offer substantial value.
Human: Every enterprise requires human resources, but people are
particularly prominent in certain business models.
Financial: Some business models call for financial resources and/or
financial guarantees, such as cash, lines of credit or a stock option
pool for hiring key employees.
