Business model

“Skate to where the money will be, not

where it is now” - Christiansen
What is a Business Model?
• A business model describes the rationale of how an
organization creates, delivers, and captures value.
• The business model is like a blueprint for a strategy to
be implemented through organizational structures,
processes, and systems.
The four main areas of a business
• Whom
• What
• How
• What is the outcome/Returns
The Business Model Canvas
• Book on Business Model Generation
• Alex Osterwalder and Yves Pigneur
• The Business Model Canvas
The building blocks …
• Customer Segments

An organization needs to understand who is their target

customer. They may serve one or several Customer Segments.

– For whom are we creating value?

The building blocks …
• Value Propositions

It seeks to solve customer problems and satisfy customer

needs with a bundle of benefits.

– What value do we deliver to the customer?

– Which one of our customer’s problems are we helping
to solve?
– Which customer needs are we satisfying?
– What bundles of products and services are we offering
to each Customer Segment?
The building blocks …
• Channels

Value propositions are delivered to customers

through communication, distribution, and sales channels.

– Through which Channels are Customer Segments

to be reached?
– Can the Channels be integrated?
– Which ones work best?
– Which ones are the most cost-efficient?
The building blocks …

• Customer Relationships

Customer relationships are established and maintained with

each Customer Segment. They deeply influence the overall
customer experience.

– What type of relationship does each of our customers want?

– Segments expect us to establish and maintain with them?
– Which ones have we established?
– How are they integrated with the rest of our business model?
– How costly are they?
The building blocks …
• Key Resources

Key resources are the assets required to offer and deliver

the previously described elements.

– What key resources are required for the value

proposition?
– Does it depend on distribution channel, customer
relationship
or revenue streams?
The building blocks …
• Key Activities

Key activities are the most important actions a company

must take to operate successfully.

– What Key Activities do our Value Propositions require?

– Our Distribution Channels?
– Customer Relationships?
– Revenue streams?
The building blocks …
• Key Partnerships

The key partnerships describes the network of suppliers

and partners (to acquire resource or reduce risk) that make
the business model work.

– Who are our Key Partners?

– Who are our key suppliers?
– Which Key Resources are we acquiring from partners?
– Which Key Activities do partners perform?
The building blocks …
• Cost structure

The Cost Structure describes all costs incurred to operate a

business model- right from creating value proposition to
delivering and maintaining customer relationships.

– What are the most important costs inherent in the

business model?
– Which Key Resources are most expensive?
– Which Key Activities are most expensive?
– Are fixed costs high or variable costs?
The building blocks …
• Revenue Streams

Revenue streams result from value propositions successfully

offered to customers.
– For what value are our customers really willing to pay?
– For what do they currently pay?
– How are they currently paying?
– How would they prefer to pay?
– How much does each Revenue Stream contribute
to overall revenues?
The Business Model Canvas
Key Key Value Customer Customer
Partners Activities Proposition Relationships Segments

Key Resources Channels

Cost Revenue
Structure Streams

Source: Business Model Generation,

Alex Osterwalder and Yves Pigneur
 “There’s not a single business model…
There are really a lot of opportunities and a
lot of options and we just have to discover all
of them.”
- Tim O’Reilly
CEO, O’Reilly
All materials used in this session are available in
the NEN CD Kick-Starting the Entrepreneurial
Campus under Inside the Classroom –
section “Entrepreneurship Concepts”,
subsection “What is a business model?”