Building Business Models PDF

Building
Business Models
Lecturer: Ms. Kate Andrea L. Cawaling
Business Model
describes the rationale of how a new venture creates, delivers,
and captures value.
Market Entry Strategies
The Four Parts of a
Business Model
The Offering
what you are offering to a particular customer segment, the
value generated for those customers, and how you will reach
and communicate with them.
Customer value proposition
(CVP)
a statement that describes why a customer should buy and use
your product or service
Customer
people who populate the segments of a market served by the
offering.
Infrastructure
the resources (people, technology, products, suppliers, partners,
facilities) that an entrepreneur must have in order to deliver the
CVP.
Financial Viability
defines the revenue and cost structures a business needs to
meet its operating expenses and financial obligations.
The Customer Value
Proposition (CVP)
For your CVP to be truly effective, it needs three qualities:
● It must offer better value than the competition.
● It must be measurable in monetary terms (i.e., you must be able
to prove that your CVP is better value than other offerings on the
market).
● It must be sustainable (i.e., you must have the ability to execute it
for a considerable length of time).
Businesses start and survive because they successfully answer
three questions for customers:
What’s in it for me?
Why should I believe you?
Why should I care?
Overt benefit: the one big benefit for your customer.
Real reason to believe: provides evidence to the customer that

you will do as you promise.
Dramatic difference: the uniqueness of your product or service

in relation to other available options.
Different Types of CVPs
and Customer Segments
Types of Value Propositions
All-benefits:
a type of value proposition that involves identifying and promoting
all the benefits of a product or service to customer segments, with
little regard for the competition or any real insight into what the
customer really wants or needs.
Points-of-difference:
a type of value proposition that focuses on the product or service
relative to the competition and how the offering is different from
others on the market.
Resonating-focus:
a type of value proposition that describes why people will really like
your product and focuses on the customers and what they really
need and value.
Three Types of Value Propositions
Types of Customer Segments
Mass market:
a large group of customers with very similar needs and problems.
Niche market:
a small market segment that consists of customers with specific
needs and requirements.
Segmented market:
a market divided into groups according to customers’ different needs
and problems.
Diversified market:
two or more customer segments with different needs and problems that
bear no relationship to each other.
Multisided markets:
markets with two or more customer segments that are mutually
independent of each other.
The Business Model
Canvas (BMC)
Business Model Canvas (BMC)
a one-page plan that divides the business model into nine
components in order to provide a more thorough overview.
The offering constitutes the (1) value proposition.
Customers relate to (2) customer segments, (3) channels,
and (4) customer relationships.
Infrastructure includes (5) key activities, (6) key resources,
and (7) key partners.
Financial viability includes (8) cost structure and (9) revenue
streams.
1. Customer Value Proposition:
ask yourself the following: What value do we deliver? What bundle of
products and services are we offering? What are we helping customers
achieve by providing a new range of T-shirts?
2. Customer Segments:
The customer segmentation questions for the T-shirt business are
these: Who are your most important customers? What segment of the
market would be most likely to buy your T- shirts?
3. Channels:
What are all the ways in which you can reach your customers? For
example, you could reach your customers online, through a
brick-and-mortar store, and/or through word of mouth.
4. Customer Relationships:
The key here is one of the most important questions an entrepreneur
can answer: How do you establish and maintain relationships with your
customers?
5. Key Activities:
What are the most important activities that the company participates in
to get the job done? When running a T- shirt business, you will need to
consider such activities as stock management, sales management,
and T-shirt design selection.
6. Key Resources:
What resources do you need to accomplish the key activities? You will
also need to calculate how much money you will need to set up, as
well as accumulate the skills,knowledge, and information you need to
start your own business.
7. Key Partners:
Could some activities be outsourced? Do you have a network of
suppliers/buyers you could tap into or negotiate with?
8. Revenue Streams:
Here you need to ask: How much are my customers willing to pay?
How many customers do I need? How much cash can be generated
through T-shirt sales in the store or T-shirt sales online? How much
does each stream contribute to the total?
9. Cost Structure:
What are the most important costs inherent in the business model?
Which resources are the most expensive to get? Which activities are
the most expensive? Store rental, employee salaries, the cost of
purchasing T-shirt materials and designs, and the cost of sales and
marketing are all factors to consider when formulating a cost structure.
The Lean Canvas: A
Business Model Canvas
Alternative
Lean Canvas
an adapted version of the BMC that was created to better address
the needs of startup entrepreneurs.
Unlike the BMC, the Lean Canvas:
● Places less emphasis on customer segments but more
emphasis on likely first adopters
● Begins with a problem rather than value proposition
● Addresses key metrics and suggests focusing on one
key metric to track how your business is doing
● Addresses competitive advantage and uniqueness,
called “unfair advantage”
Problem:
Startups too often build something that doesn’t solve a problem, so
problem understanding and validation is essential.
Solution:
The Solution box is where you note potential solutions to the problems
identified.
Key Metrics:
Key metrics may be the cost of acquiring a new customer, revenue,
activating new users, or retention rate.
Unfair Advantage:
Unfair advantage is the same thing as competitive advantage; it just
sounds a bit more hip for entrepreneurs! This box is important because
as you test solutions, your advantage over the competition is likely to
emerge. If there is no unfair advantage, long-term success is unlikely.
end

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Building

Real reason to believe: provides evidence to the customer that

Dramatic diﬀerence: the uniqueness of your product or service

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