Business model is describes how a company creates and distributes a compelling value proposition that customers are willing to pay for at a price that yields an acceptable profit for the company.
1. Choose a particular target segment and describe it. A segment is a group of customers with similar needs, behaviors or other attributes that the company chooses to serve.
2. Next, what channels are used to market to, sell to, distribute to and support this segment? Are there any partners we need to establish or maintain relationships with?
3. What products and/or services are offered to this segment, and are there any differences by channel? If so, make that clear.
4. What are the revenue streams? How are prices set? How are customers charged for products and services? How is revenue collected?
5. Now, what is the value proposition delivered by each product. Think not only of value propositions for the customer (including the end-customer and any intermediaries), but also partners. Remember that the value proposition is from the perspective of the customer and can vary by customer segment; that is why we focus on one segment at a time.
6. What are the key activities the company must perform to ensure the value proposition is delivered? This can include activities supporting partners and channels that are key to the value proposition. This may also involve outsourcing.
7. What are key inputs and resources that must be acquired and maintained? This can include human, physical, financial and intellectual assets, as well as suppliers and vendors.
8. Next, what implications do the elements defined so far have for the infrastructure of the business? They may not have been captured already. Is there significant investment required in maintaining certain technologies, skills or branding, for example?
9. The cost structure includes the fixed costs of maintaining the value chain, as well as variable costs. Where are the biggest or most volatile costs?
10. Finally, have you adequately identified what the company does differently to deliver on the competitive strategy. If it’s not evident in the activities or resources identified you’ll need to take another pass at it. It may take several iterations to get something you are comfortable with.
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