Chapter 4 BUILDING BUSINESS MODELS

Chapter 4
BUILDING BUSINESS
MODELS
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0 ANGELITA C. SERRANO, PhD-

Unlimited Books Library Services and Publishing Inc
BM
OBJECTIVES
The learners shall be able to:
1. Understand the concept of a business model.
2. Design a business model canvas for a startup.
3. Select the network of key partners.
4. Choose key activities essential to the value proposition.
5. Formulate a good customer value proposition.
6. Recommend the relationship the startup should form with the

customer segments.
7. Select the customer segment/s to serve.
8. Propose for the channels to use to communicates with customer

segments.
9. Prepare a lean canvas for a startup.

ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
INTRODUCTION
 good product and/or service does not automatically turn
into a commercial success
 business model makes the difference between success
in the laboratory and success in the marketplace
 business model involves:
1. the product or service offering
2. the targeted customers
3. the economic engine for profitability and growth
objectives
WHAT IS A BUSINESS MODEL?
“how does it plan to generate

money”
who your what value how you can
customer is you can do that at
create/add for reasonable
the customer costs

Traditional business models
Manufacturer-
Franchise-Jollibee
Ajinomoto Philippines, Retailer-Best Buy,
Distributor-Auto dealers McDonald’s and
Alaska Milk and Century Wal- Mart and Pizza Hut
Pacific Foods Target
Brick-and-mortar-
Bricks-and-clicks-
Grocery stores, dentists, Direct Sales-Avon,
businesses selling High Touch-Hair
gas stations, local Boardwalk, Dakki, Fern
apparel and shoes items salons and auto
grocery and walk-in and Forever Living
in Divisoria dealers
banks
Family-owned-National
Bookstore, ShoeMart,
Jollibee and Robinsons

Modern business models Aggregator-Airbnb,
E-Commerce- Subscription-Netflix, Zillow and Oyo for
Nickel-and-dime-Cebu Freemium-Zoom, Amazon, Flipkart, LinkedIn, Amazon Hotels; Uber for taxi
Pacific Spotify and Dropbox Shopify, Myntra, Prime, Dollar Shave service; and Yodlee
Ebay, Quikr, Olx and Club for financial service
Alibaba
Agency-Based-Leo Affiliate Marketing-

Hidden Revenue- Data Licensing / Data Burnett Company is NerdWallet, Capterra,
Online Marketplace- Selling-Twitter sells an agency that MoneySavingExpert.c
Google, Facebook,
Amazon and Alibaba real-time data to services United o mand and the
Instagram and
Twitter third party users Airlines, McDonald’s, Wirecutter
Kellogg’s
Dropshipping-Doba, Crowdsourcing-
Oberlo, Dropship Network Marketing- Wikipedia, YouTube, Blockchain-Bitcoin, Low Touch-Ikea
Direct, and Avon, H and Mary Kay Kickstarter, LEGO Ethereum, and and
Wholesale 2B ideas, Unilever, Coca Litecoin SurveyMonkey
Cola
Social Enterprise-
Consulting-
Bayani Brew, Coffee
Razor and Blade-Razor Deloitte, Mckinsey,
for Peace, First
BCG, software
Harvest and Liter of
Light
THE BUSINESS MODEL CANVAS
•“Business Model Ontology” Alexander

Osterwalder, the Business Model Canvas
consisting of nine segments for its building
blocks
focus on every
When one
segment or a block
business model block is change,
blocks of the describes the modify
can be written the other
business model factor that a each block
in a one-page blocks are
systematically startup as the need
canvas required to be
until the gaps business needs arises
revisited and
close to study
changed
Key Partners Key Activities Value Propositions Customer Relationships Customer Segments
1. vendors of 1. introduce organically 1. freshly baked breads 1. Hotline number 1. neighborhood
organic raw produced bread 2. specialized in organic bread 2. E-mail for questions communities
materials 2. marketing and sales 3. breads of constant quality 3. Facebook page 2. healthy life
2. packaging 3. branding 4. breads are served quickly 4. Loyalty discounts stylist
suppliers 4. consumer 5. competitive priced breads 3. neighborhood
3. retail education 6. Halal certified supermarkets
partners 7. The “Finsbury bread” of Channels 4. neighborhood
Key Resources bakeries
1. team cooperation Manila 1. social media
2. raw materials 2. rider delivery
3. social media 3. on call delivery
4. retail network 4. direct selling using own
website
5. physical store
6. events planner
Cost Structure Revenue Streams

1. equipment and facilities 1. volume sales from supermarkets
2. staff salaries 2. sales to customers
3. product ingredients 3. sales to events such as weddings, birthdays, anniversaries, etc.
Sample Business ANGELITA C. SERRANO, PhD-BM
Canvass Model For A

ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-
0
Small Bakery
template of the business model canvas of Osterwalder
Key Partners Key Activities Value Propositions Identify the core Customer Relationships What type Customer Segmen Identify
Identify your company’s key partners. What specific key activities are value of the company provides to of relationships do you have with who is your value
This can consist of necessary to deliver customers. What exactly is the your customers? How do you proposition targets. Who
important suppliers in your supply your value proposition? What company trying to give to customers? interact with customers and how are yo creating value for?
chain. What key activities set your What problem is your company trying does this differ amongst customer What are they like? What
to solve and what needs are your segments? Do you communicate do they need? What do
resources does the company receive company apart from others? Consider
company satisfying? How do you offer with your customers? How much they enjoy What is the
from these partners? What key activities how your company’s unique something different that satisfies the support does your company custom market like? Are yo
are differences in its revenue streams, demands of your customer provide? targeting a small niche ?
performed by these partners? Think about distribution channels, or customer segments (like price, quality, design, community or small market?e
why your company works with these key relationships. Do you need to procure status)? u
partners and the motivations behind them. specific niche
resources? Do you need to keep
costs and prices low?
Key Resources Channels

What specific key resources or assets How do you deliver your value
are necessary to deliver your value proposition? How do you reach
propositions? Consider what resources your customer segments? What
your distribution channels and revenue channels are used? Consider your
streams may require to function. supply, distribution, marketing and
Additionally, think about what resources communication channels. Are they
are needed to maintain customer well-integrated and cost efficient? Are
relationships. Does your company they being utilized effectively?
require a lot of capital or human
resources?
Cost Structure Revenue Streams

Identify they key costs in your company’s business model. What are the major drivers of costs? How do Identify the ways your
your key activities and key resources contribute to the cost structure? How do your costs relate to your value proposition
revenue streams? Are generates money for your
you properly utilizing economies of scale? What proportion of costs are fixed and variable? Is your business. Does your
company focused on cost optimization or value? company have multiple
methods of generating
revenue? What is the
pricing strategy for the ANGELITA C. SERRANO, PhD-BM
products offered by yo ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
company? Through what channels do your Unlimited
customerBooks
pay?Library
Does Services
yo company offer multiple
and Publishing Inc
forms of payment?
KEY PARTNERS
Key partners are the network of suppliers and

partners
Partner with other Partnerships Partnering can be
business, for optimizing the
governmental, or non- could be a tool to
a business success use of resources,
consumer entities forming new
resource streams
or lessening risks

types of partnerships
• between non- • agreement • two • the most

Strategic alliances
Coopetition
Joint-ventures
Buyer-supplier relationship
competitors between businesses usual type of
to help each competitors because of partnerships
other do an to help share • dependable
equally the risk their mutual
spring of
advantageous • to gain new interest supplies
task • for a coming in
users
• but retaining completely
their different
independence company

KEY ACTIVITIES
Key activities are the most essential activities in

achieving a company’s value proposition
a bridge between the consider channels reliant on business
value proposition and and customer
the customer model type
segment
relationships

categories of key activities
Marketing Sales Design Development
Customer
Operations Distribution
Experience

KEY resources
Key resources describes the most important assets

required to make a business model work
resources that resources to resources that can
allow an enterprise maintain good
to create and offer reach target
a value proposition markets relationships with
customer
segments, and gain
revenues

four categories of resources
Physical-tangible Intellectual – Human – Financial – All

resources that a These are non- Employees are businesses have
company make physical, the biggest and key resources
use of to form intangible most vital in finance
its value resources resources
proposition

CUSTOMER VALUE PROPOSITION
Customer value proposition (CVP) is a business’s way of generating

value in their product or service when targeting potential customers
value proposition is a value proposition CVP is a description

statement consisting computed of the user’s
of the reason/s through adding all experiences
someone should do
business with the the benefits that
company the product

factors considered in the development of the
customer value proposition
Functional value-product
and or service offers the Emotional value-
solution to a particular sentimental reasons
problem (phone competence (purchasing locally
offered by an iPhone) produced or organic brands)
Symbolic value-a certain

type of status given to the
Economic value-offers a
customer (Italian Ducati
financial advantage motorcycle /a cup of
Starbucks coffee)

Different Types of CVPs
Value proposition All Benefits Favorable point of difference Resonating focus
Consists of All benefits customers All favorable points of The key point of difference whose
receive from a market difference a market offering has improvement will deliver the
offering relative to the next best greatest value to the customer
alternative for the foreseeable future
Answers the “why should our firm “why should our form purchase “What is the most worthwhile for
customer question purchase your offering?” your offering instead of your our firm to keep in mind about
competitors?” your offering?’
Requires Knowledge of own market Knowledge of our own market Knowledge of how own market
offering offering and next best offering delivers superior value
alternative to customers compared with
next bet alternative
Has the potential Benefit assertion Value presumption Requires customer value research
pitfall
Table 7: Types of CVPs
Source: https://en.wikipedia.org/wiki/Customer_value_proposition
CUSTOMER RELATIONSHIPS
Customer relationships are the types of relationship a
company forms with its particular customer
segments
To gain To keep To grow
customers them sales with
them

types of customer relationships
Dedicated personal
Personal assistance-
assistance-assigning a Self-service-no direct
communicate with a real
salesperson to an relationship
salesperson
individual customer
Co-creation-customers
Automated services-a have the chance to co-
Communities-online
combination of customer create value with the
communities to
self-service and automated company such as in
exchange information
processes designing and innovating
products
CUSTOMER SEGMENTS
Shared needs, behaviors and other traits can be

the bases for customer segmentation
customer segment company may select a
refers to demographics single group or
such as age, ethnicity, several groups
profession and/or
gender, etc.

types of customer segments
Niche-a customer Segmented-customer

segment with very segments that have
Mass- an unsegmented distinct characteristics very small differences
market and extremely specific in their need
needs requirements
Diversified- Multi-sided platforms-

differentiated customer segments are
customer segments reliant with each other

CHANNELS
Channels are the touch points through which a

company communicates with its target
customers
entrepreneur should
play a big role in
understand which
defining the customer
channel is appropriate to
experience and
reach his target
providing value
consumers
five phases that a channel may pass
through
Evaluation-
Delivery- when
customer After Sales-
Awareness- the promised
evaluates, Purchase-the giving customer
marketing and value
read about or actual sales care and
advertising proposition has
uses the process support after
phase reached the
product or purchase
customers
avail of the
service

channel types
• Direct channels • Indirect channel
• the entrepreneur owns • use of intermediary

or has control over • wholesalers are
• could mean added costs considered
• provide a direct and • partner channels
strong relationship
• quick to reach the
market and less
investment in ANGELITA C. SERRANO, PhD-BM
infrastructureENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0

VALUE PROPOSITION CANVAS
Value proposition canvas aims is to guarantee proper fit
of the product and the market-Alexander Osterwalder
takes into a detailed tool also to
consideration relationship of the upgrade a
the values and customer product and/or
needs of the segments and service offering
customers value propositions

two building blocks-value proposition canvas
Value proposition is a statement
•The customer profile points to
consisting of the reason/s
the customer segment that the
someone should do business
company shall serve
with the company
• created for each customer • reflect on the gain creators,
segment, as each segment pain relievers and the products
has distinct gains, pains and and/or services to offer them
jobs
• before making a customer
profile, the various
archetypes customers
typically fall into must be
evaluated ANGELITA C. SERRANO, PhD-BM
Value
Proposition ANGELITA C. SERRANO, PhD-BM
Canvas-Diagram ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0

CUSTOMER PROFILE
• all the expectations • either avoid the • functional, social

Customer Gains
and needs of customer from and emotional tasks

customers getting a job done customers are
Customer Jobs/Jobs-to-be-
• things that may or the negative trying to do
Customer
delight them and experiences • challenges they are
other stuffs that • emotions and risks attempting to
Pains
may intensify the that the customer resolve and needs
possibility of these experiences before, they desire to
customers during or after a job satisfy in their
embracing a value personal and
proposition professional lives
done
Customer Gains
Required gains- the very
Expected gains- beyond
basic expectations by the
the basic ones
customers (Smartphone
(Smartphone expected to
to make and receive
be visually attractive and
phone calls)
fashionable)
Unexpected gains-potential
Desired gains-sought-
benefits of the product
after and cherished gains
and/or service for which
by the customer
the customer is unaware
(Smartphone, having no
(touch screen capability of a
trouble in the synching
Smartphone)
the phone)
Customer Pains
Productivity pains- Support pains – felt by a

include the inefficiency customer when he is
of the businesses that a not assisted when
customer experiences buying
Financial pains- Process pains-create

customer spends too friction to buyers like
much substandard
processes
types of Jobs-to-be-done
Functional jobs – regular and particular jobs that a customer
is trying to do and is working towards
Social jobs -the manners a customer desires to reflect his

image
in a social environment
Personal/ emotional jobs –how a customer works

towards feeling a certain way
Supporting jobs – customers also purchase value, hence

doing a
supporting task ANGELITA C. SERRANO, PhD-BM
three roles of customers that may assist in
supporting jobs
Co-creator of value-has a
Buyer of value-from
direct hand in the
evaluating choices at hand up
manufacture of the product
to paying for the product
with the company
Transferor of value-the end of

the product use such as
disposal of product trash or
giving the ownership of the
product to another person

Value Proposition
• how the products • how the products • products and/or

Gain Creators
Products and Services

and services may and/or services services which
create customer lighten, avoid or create gain and
gains and offer solve the particular relieve pain and
Relievers
customer added customer pains built around the
value value proposition
Pain
• functional utility,
social gains, positive
emotions, and cost
savings

The Value Proposition Canvas of the Bakery

THE LEAN CANVAS: A BUSINESS MODEL CANVAS
ALTERNATIVE
more problem-
a developed focused approach
proposed by Ash
version of the and appropriate to
Maurya
Business Model use by small
entrepreneurs
more on customers’ offer a fast idea-

needs, on actionable to- product
metrics transformation

The Lean Canvas

elements of the Lean Canvas Model
Unfair Key Metrics-

Value Advantage- Customer the
Solution-look Cost
Proposition-a the segments- Revenue assortment
Problem- for the Channels- structure- the
marketable competitive problem and streams-the of products
problems effective ways to operational
promise that advantage the money and/or
that require solution by reach the costs that the
the business that cannot customer matter of the services the
solving “getting out customer business
will solve be copied segments business business
of the segments needs to pay
their and cannot must be wants to
building”
problem be bought connected deliver

THANK
YOU
• ANGELITA C. SERRANO, PhD-BM

• ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
• Unlimited Books Library Services and Publishing Inc

Chapter 4 BUILDING BUSINESS MODELS

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Chapter 4

ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0 ANGELITA C. SERRANO, PhD-

2. Design a business model canvas for a startup.

3. Select the network of key partners.

4. Choose key activities essential to the value proposition.

5. Formulate a good customer value proposition.

6. Recommend the relationship the startup should form with the

7. Select the customer segment/s to serve.

8. Propose for the channels to use to communicates with customer

9. Prepare a lean canvas for a startup.

“how does it plan to generate

ANGELITA C. SERRANO, PhD-BM

ANGELITA C. SERRANO, PhD-BM

Agency-Based-Leo Affiliate Marketing-

•“Business Model Ontology” Alexander

Cost Structure Revenue Streams

Sample Business ANGELITA C. SERRANO, PhD-BM

Canvass Model For A

Key Resources Channels

Cost Structure Revenue Streams

Key partners are the network of suppliers and

ANGELITA C. SERRANO, PhD-BM

• between non- • agreement • two • the most

ANGELITA C. SERRANO, PhD-BM

Key activities are the most essential activities in

ANGELITA C. SERRANO, PhD-BM

Marketing Sales Design Development

ANGELITA C. SERRANO, PhD-BM

Key resources describes the most important assets

ANGELITA C. SERRANO, PhD-BM

Physical-tangible Intellectual – Human – Financial – All

ANGELITA C. SERRANO, PhD-BM

Customer value proposition (CVP) is a business’s way of generating

value proposition is a value proposition CVP is a description

ANGELITA C. SERRANO, PhD-BM

Symbolic value-a certain

ANGELITA C. SERRANO, PhD-BM

ANGELITA C. SERRANO, PhD-BM

Shared needs, behaviors and other traits can be

ANGELITA C. SERRANO, PhD-BM

Niche-a customer Segmented-customer

Diversified- Multi-sided platforms-

ANGELITA C. SERRANO, PhD-BM

Channels are the touch points through which a

ANGELITA C. SERRANO, PhD-BM

• Direct channels • Indirect channel

• the entrepreneur owns • use of intermediary

infrastructureENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0

ANGELITA C. SERRANO, PhD-BM

Canvas-Diagram ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0

• all the expectations • either avoid the • functional, social

and needs of customer from and emotional tasks

Productivity pains- Support pains – felt by a

Financial pains- Process pains-create

Social jobs -the manners a customer desires to reflect his

Personal/ emotional jobs –how a customer works

Supporting jobs – customers also purchase value, hence

Transferor of value-the end of

ANGELITA C. SERRANO, PhD-BM

• how the products • how the products • products and/or

Products and Services

ANGELITA C. SERRANO, PhD-BM

ANGELITA C. SERRANO, PhD-BM

more on customers’ offer a fast idea-