Business Model Generation

A Handbook for Visionaries, Game-Changers and

Challengers striving to defy outmoded business models
and design tomorrow’s enterprises

WRITTEN BY
Alexander Osterwalder & Yves Pigneur

CO-CREATED BY
An amazing crowd of 470 practitioners from 45 countries

DESIGNED BY
Alan Smith, The Movement
1
Business
Model
Generatio
n
2
 1. The Senior Executive
Jean- Pierre Cuoni
Chairman / EFG International
Focus: Establish a new business
Seven faces of model in an old industry
Business Model
Innovation

2. The Intrapreneur
Dagfinn Myhre
Head of R&I Business Models/Telenor
Focus: Help exploit the latest technological
developments with the right business
models

3
 Contd…

3. The Entrepreneur 4. The Investor

Marielle Sijgers, Gert Steens,
Entrepreneur / CDEF Holding BV President & investment Analyst /
Oblonski BV
Focus: Address unsatisfied customer needs Focus: Invest in companies with the
and build new business models around most competitive business models.
them

5. The Consultant
Bas van Oosterhout,
Senior Consultant / Capgemini Consulting
Focus: Help clients question their business
models, and envision and build new ones

6. The Designer 7. The Conscientious Entrepreneur

Trish papadakos, Iqbal Quadir,
Sole Proprietor / The Institute of You Social Entrepreneur/
Focus: Find the right business model to Founder of Grameen Phone
launch an innovative product Focus: Bring about positive social and
economic change through innovative
business models 4
T 1. The Business Model Canvas
A A tool for describing, analyzing, and designing business models
B
L 2. Business Model Patterns
E It based on concepts from leading business thinkers

O 3. Techniques to Design
F To help you design business models

C 4. Strategy
O Re-interpreting strategy through the business model lens
N
T 5. A generic process
E To help you design innovative business models, tying together all the concepts,
N techniques, and tools in Business Model Generation
T
S 6. An Outlook
On five business model topics for future exploration

7. The afterword
This provides a peek into “the making of” Business Model Generation.
5
T 1. The Business Model Canvas
A A tool for describing, analyzing, and designing business models
B
L 2. Business Model Patterns
E It based on concepts from leading business thinkers

O 3. Techniques to Design
F To help you design business models

C 4. Strategy
O Re-interpreting strategy through the business model lens
N
T 5. A generic process
E To help you design innovative business models, tying together all the concepts,
N techniques, and tools in Business Model Generation
T
S 6. An Outlook
On five business model topics for future exploration

7. The afterword
This provides a peek into “the making of” Business Model Generation
6
The Business Model Canvas
A tool for describing, analyzing, and designing business models

Meaning: A shared Language for describing, visualizing,

assessing and changing business models

Definition of a Business Model

The 9 Building Blocks

The Business Model

Canvas

7
The Business Model Canvas
A tool for describing, analyzing, and designing business models

Meaning: A shared Language for describing, visualizing,

assessing and changing business models

Definition of a Business Model

The 9 Building Blocks

The Business Model Canvas

8
Definition of a Business Model

A Business Model describes the rationale

of how an organization creates, delivers
and captures value

9
The Business Model Canvas
A tool for describing, analyzing, and designing business models

Meaning: A shared Language for describing, visualizing,

assessing and changing business models

Definition of a Business Model

The Nine Building Blocks

The Business Model Canvas

10
NINE BUILDING BLOCKS

Business Key Key

Model Partnerships Activities

Customer Key
Cost
Resources
Segments Structure

Value Customer Revenue

Propositions Channels Relationships Streams

11
NINE BUILDING BLOCKS

Business Key Key

Model Partnerships Activities

Customer Key
Cost
Segments Resources
Structure

Value Customer Revenue

Propositions Channels Relationships Streams

12
Customer
Segments

Meaning

Eligibility for a Customer group to represent separate Segment

Types Of Customer Segments

13
Customer
Segments

Meaning

Eligibility for a Customer group to Represent separate Segment

Types Of Customer Segments

14
Meaning

The Customer Segments building block

defines the different groups of people or
organizations an enterprise aims to reach
and serve

15
Customer
Segments

Meaning

Eligibility for a Customer group to Represent separate Segment

Types Of Customer Segments

16
Eligibility for a Customer group to Represent separate Segment

 Their needs require and justify a distinct offer

 They are reached through different Distribution Channels

 They require different types of relationships

 They have substantially different profitability's

 They are willing to pay for different aspects of the offer

17
Customer
Segments

Meaning

Eligibility for a Customer group to Represent separate Segment

Types Of Customer Segments

18
Types Of Customer Segments

Mass Market

Niche Market

Segmented Market

Diversified Market

Multi- Sided platforms/Multi-Sided Markets

19
Types Of Customer Segments

Mass Market

Niche Market

Segmented Market

Diversified Market

Multi- Sided platforms/Multi-Sided Markets

20
Mass Market

 Business Models focused on Mass Markets don’t

distinguish between different Customer Segment

 The Value Propositions, Distribution Channels and

Customer Relationships all focus on one large group
with broadly similar needs and problems

 This type of Business Model is often found in the

Consumer Electronic Sector

21
Types Of Customer Segments

Mass Market

Niche Market

Segmented Market

Diversified Market

Multi- Sided platforms/Multi-Sided Markets

22
Niche Market

 Business Models targeting Niche Markets cater

to specific, specialized Customer Segments

 The Value Propositions, Distribution Channels

and Customer Relationships are tailored to the
specific requirement

23
Types Of Customer Segments

Mass Market

Niche Market
Segmented Markets
Diversified Market

Multi- Sided platforms/Multi-Sided Markets

24
Segmented Markets

 These Business Models between market

segments with slightly different needs
and problems

 This type of segmentation has

implications on other building blocks of
the Business Model

25
Types Of Customer Segments

Mass Market

Niche Market

Segmented Market

Diversified Market

Multi- Sided platforms/Multi-Sided Markets

26
Diversified Market

 Diversified customer Business Model serves two

unrelated Customer Segments

 Caters to a totally different Customer Segment

 Provides a Totally different Value Proposition

27
Types Of Customer Segments

Mass Market

Niche Market

Segmented Market

Diversified Market

Multi- Sided platforms/Multi-Sided Markets

28
Multi- Sided platforms/Multi-Sided Markets

 A company with such a Business Model serves

two or more independent Customer Segments

 The Product/Service provided with this

Business Model needs to have a large base of
Consumers and Suppliers

 Both the segments are required to make the

Business Model work

29
NINE BUILDING BLOCKS

Business Key Key

Model Partnerships Activities

Customer Key
Cost
Resources
Segments Structure

Value Customer Revenue

Propositions Channels Relationships Streams

30
 Value Company’s vision must be driven by the aspirations of its customers...
Propositions

Meaning

What Does Value Proposition Create for a Customer?

Key elements for Customer Value Creation

Figuring out what service is to be provided to which

Customer Segment

31
 Value
Propositions

Meaning

What Does Value Proposition Create for a Customer?

Key elements for Customer Value Creation

Figuring out what service is to be provided to which
Customer Segment

32
Meaning

The Value Proposition Building Block

describes the bundle of products and services
that create value for a specific Customer
Segment

33
 Value
Propositions

Meaning

What Does Value Proposition Create for a Customer?

Key elements for Customer Value Creation

Figuring out what service is to be provided to which

Customer Segment

34
What Does Value Proposition Create for a Customer?

 A Value Proposition creates value for a

Customer Segment through a distinct mix of
elements catering to that segment’s need

 Value may be quantitative (e.g. price, speed

of service) or qualitative (e.g. design,
customer experience)

35
 Value
Propositions

Meaning

What Does Value Proposition Create for a Customer?

Key elements for Customer Value Creation

Figuring out what service is to be provided to which

Customer Segment

36
Key elements for Customer Value Creation

1. Newness 2. Performance

3. Customization 4. Getting the job done

5. Design 6. Brand/status

7. Price 8. Cost Reduction

9. Risk Reduction 10. Accessibility

11. Convenience/usability

37
Key elements for Customer Value Creation

1. Newness 2. Performance

3. Customization 4. Getting the job done

5. Design 6. Brand/status

7. Price 8. Cost Reduction

9. Risk Reduction 10. Accessibility

11. Convenience/usability

38
1. Newness

 The Value Proposition satisfies an entirely new

set of needs that customers previously didn’t
perceive because there were no similar
offerings
 Often but not always technology related

 Cell phones, for instance, created a whole new industry

around mobile telecommunication

39
Key elements for Customer Value Creation

1. Newness 2. Performance
3. Customization 4. Getting the job done

5. Design 6. Brand/status

7. Price 8. Cost Reduction

9. Risk Reduction 10. Accessibility

11. Convenience/usability

40
2. Performance

 Improving a product or service performance has traditionally

been a common way t create value

 The PC sector has traditionally relied on this factor by bring

more powerful machines to market

 Improved performance has its limit

 Faster PCs, more disk storage space and better graphics have
failed to produce corresponding growth in customer demand

41
Key elements for Customer Value Creation

1. Newness 2. Performance

3. Customization 4. Getting the job done

5. Design 6. Brand/status

7. Price 8. Cost Reduction

9. Risk Reduction 10. Accessibility

11. Convenience/usability

42
3. Customization

Tailoring products and services to the specific needs of

individual customers or Customer Segments creates value

In recent years, the concepts of mass customization and

customer co- creation have gained importance

This approach allows for customized products and services,

while still taking advantage of economies of scale

43
Key elements for Customer Value Creation

1.Newness 2. Performance

3. Customization 4. Getting the job done

5. Design 6. Brand/status

7. Price 8. Cost Reduction

9. Risk Reduction 10. Accessibility

11. Convenience/usability

44
4. Getting the job done

Value can be created simply by helping a

customer get certain jobs done

A good example of this is Rolls-Royce’s service to

the aviation industry

45
Key elements for Customer Value Creation

1. Newness 2. Performance

3. Customization 4. Getting the job done

5. Design 6. Brand/status

7. Price 8. Cost Reduction

9. Risk Reduction 10. Accessibility

11. Convenience/usability

46
5. Design

Design is an important but difficult element to

measure

A product may stand out due to superior design

For instance, in the fashion and consumer

electronics industries, design can be particularly
important part of the value proposition

47
Key elements for Customer Value Creation

1. Newness 2. Performance

3. Customization 4. Getting the job done

5. Design 6. Brand/status

7. Price 8. Cost Reduction

9. Risk Reduction 10. Accessibility

11. Convenience/usability

48
6. Brand/status

Customers may find value in the simple act

of using and displaying a specific brand.

49
Key elements for Customer Value Creation

1. Newness 2. Performance

3. Customization 4. Getting the job done

5. Design 6. Brand/status

7. Price 8. Cost Reduction

9. Risk Reduction 10. Accessibility

11. Convenience/usability

50
7. Price

 Offering similar value at a lower price is a common way to

satisfy the needs of price-sensitive Customer Segments

 Low-price value Proposition have important for the rest of

the Model

 Example of this can be seen in the Nano, a new car

designed and Indian manufactured by the Indian
conglomerate Tata.

51
Key elements for Customer Value Creation

1. Newness 2. Performance

3. Customization 4. Getting the job done

5. Design 6. Brand/status

7. Price 8. Cost Reduction

9. Risk Reduction 10. Accessibility

11. Convenience/usability

52
8. Cost Reduction

 It helps reduce costs in an important way to

create value

 It relieves the buyer from the expense and

trouble of having to buy , install and manage
the product themselves

 A good example of this is Salesforce.com.

53
Key elements for Customer Value Creation

1. Newness 2. Performance

3. Customization 4. Getting the job done

5. Design 6. Brand/status

7. Price 8. Cost Reduction

9. Risk Reduction 10. Accessibility

11. Convenience/usability

54
9. Risk Reduction

 Customers value reducing the risks they incur

when purchasing products or services

 Example is the risk reduced for a used car buy

who is given a one-year service-level
guarantee which reduces the risk of post-
purchase breakdowns and repairs.

55
Key elements for Customer Value Creation

1. Newness 2. Performance

3. Customization 4. Getting the job done

5. Design 6. Brand/status

7. Price 8. Cost Reduction

9. Risk Reduction 10. Accessibility

11. Convenience/usability

56
10. Accessibility

 Making products and services available to customers

who previously lacked access to them is another way
to create value

 This key can result from business model innovation,

new technologies or a combination of both

 Accessibility as an innovative financial product makes it

even for those with modest wealth to build diversified
investment portfolios

57
Key elements for Customer Value Creation

1. Newness 2. Performance

3. Customization 4. Getting the job done

5. Design 6. Brand/status

7. Price 8. Cost Reduction

9. Risk Reduction 10. Accessibility

11. Convenience/usability

58
11. Convenience/usability

 Making things more convenient or easier to use

creates substantial value.

 For example with iPod and iTunes, Apple

offered customers unprecedented convenience
searching, buying, downloading and listening to
digital music.

59
NINE BUILDING BLOCKS

Business Key Key

Model Partnerships Activities

Customer Key
Cost
Resources
Segments Structure

Value Customer Revenue

Propositions Channels Relationships Streams

60
Channels

Meaning

Several functions undertaken by Channels for Value

Proposition

Table Showing Direct and Indirect Types of Channels

Five distinct phases of a Channel
-Direct
(a)Sales force Own
(b)Web sales
(c)Own stores

-Indirect
(a) Partner stores Partner
(b) Wholesaler 61
Channels

Meaning
Several functions undertaken by Channels for Value
Proposition

Table Showing Direct and Indirect Types of Channels

Five distinct phases of a Channel
-Direct
(a)Sales force Own
(b)Web sales
(c)Own stores

-Indirect
(a) Partner stores Partner
(b) Wholesaler 62
Meaning

The Channels Building Block describes how a

company communicates with and reaches its
Customer Segments to deliver a Value
Proposition

63
Channels

Meaning

Several functions undertaken by Channels for Value Proposition

Table Showing Direct and Indirect Types of Channels

Five distinct phases of a Channel
-Direct
(a)Sales force
(b)Web sales Own
(c)Own stores

-Indirect
(a) Partner stores
Partner
(b) Wholesaler
64
Several functions undertaken by Channels for Value Proposition

 Raising awareness among customers about a company’s products and services

 Helping customers evaluate a company’s Value proposition

 Allowing customers to purchase specific products and services

 Delivering a Value Proposition to customers

 Providing post-purchase customer support

65
Channels

Meaning

Several functions undertaken by Channels for Value

Proposition
Table Showing Direct and Indirect Types of Channels

Five distinct phases of a Channel

-Direct
(a)Sales force Own
(b)Web sales
(c)Own stores

-Indirect
Partner
(a) Partner stores
(b) Wholesaler 66
Table Showing Direct and Indirect Types of Channels

Channel Types Channel Phases

Sales force
Direct
Own

1. Awareness 2. Evaluation 3. Purchase 4. Delivery 5. After Sales

Web sales How do we raise How do we How do we How do we How do we
awareness help customers allow customers deliver a Value provide post-
Own stores about our evaluate our to purchase Proposition to purchase
company’s organization’s specific customers?
r Indire

customer
Partne

Partner stores products and value products and

support?
Proposition? services
ct

services?
Wholesaler

67
NINE BUILDING BLOCKS

Business Key Key

Model Partnerships Activities

Customer Key
Cost
Resources
Segments Structure

Value Customer Revenue

Propositions Channels Relationships Streams

68
 Customer
Relationships

Meaning

Motivation driving Customer Relationships

Various categories of Customer Relationships

69
 Customer
Relationships

Meaning
Motivation driving Customer Relationships

Various categories of Customer Relationships

70
Meaning

The Customer Relationships Building Block

describes the types of relationships a
company establishes with specific
customer Segments

71
 Customer
Relationships

Meaning

Motivation driving Customer Relationships

Various categories of Customer Relationships

72
Motivation driving Customer Relationships

 Customer acquisition

 Customer retention

 Boosting sales (upselling)

73
 Customer
Relationships

Meaning

Motivation driving Customer Relationships

Various categories of Customer Relationships

74
Various categories of Customer Relationships

1. Personal Assistance

2. Dedicated personal assistance

3. Self-service

4. Automated service

5. Communities

6. Co-creation

75
Various categories of Customer Relationships

Personal Assistance
Dedicated personal assistance

Self-service

Automated service

Communities

Co-creation

76
Personal Assistance

 This relationship is based on human interaction.

 The customer can communicate with a real customer

representative to get help during the sales process or
after the purchase is complete.

 This may happen onsite at the point of sale, through

call centers, by e-mail, or through other means.

77
Various categories of Customer Relationships

Personal Assistance

Dedicated personal assistance

Self-Service

Automated service

Communities

Co-creation

78
Dedicated personal assistance

 This relationship involves dedicating a customer

representative specifically to an individual client.

 It represents the deepest and most intimate type of

relationship and normally develops over a long period
of time.

 In private banking services, for example, dedicated

bankers serve high net worth individuals.

 Similar relationships can be found in other businesses in

the form of key account managers who maintain
personal relationships with important customers.
79
Various categories of Customer Relationships

Personal Assistance

Dedicated personal assistance

Self-Service

Automated service

Communities

Co-creation

80
Self-Service

 In this type of relationship, a company

maintains no direct relationship with
customers.

 It provides all the necessary means for

customers to help themselves.

81
Various categories of Customer Relationships

Personal Assistance

Dedicated personal assistance

Self-service

Automated service

Communities

Co-creation

82
Automated service

 This type of relationship mixes a more sophisticated

form of customer self-service with automated
processes.

For Eg: Personal online profiles give customers access to customized services.
Automated services can recognize individual customers and their
characteristics, and offer information related to orders or transactions.

At their best, automated services can simulate a personal relationship (e.g.

offering book or movie recommendations).

83
Various categories of Customer Relationships

Personal Assistance

Dedicated personal assistance

Self-service

Automated service

Communities

Co-creation

84
Communities

 Utilizing user communities to become more involved with

customers/prospects and to facilitate connections between
community
members.

 Maintain online communities that allow users to exchange

knowledge and solve each other’s problems.

 Communities can also help companies better understand their

customers.

Eg. Pharmaceutical giant GlaxoSmithKline launched a

private online community when it introduced alli, a
new prescription-free weight-loss product. 85
Various categories of Customer Relationships

Personal Assistance

Dedicated personal assistance

Self-service

Automated service

Communities

Co-creation

86
Co-creation

Going beyond the traditional customer-vendor

relationship to co-create value with
customers.

Some companies engage customers to assist with the

design of new and innovative products. Others, such
as YouTube.com, solicit customers to create content
for public consumption.

Eg: Amazon.com invites customers to write reviews and thus create

value for other book lovers.

87
NINE BUILDING BLOCKS

Business Key Key

Model Partnerships Activities

Customer Key
Cost
Resources
Segments Structure

Value Customer Revenue

Propositions Channels Relationships Streams

88
Revenue
Streams

Meaning

Revenue Streams different Pricing Mechanisms

Two types of pricing mechanism

Two types of Revenue streams a Business Model

can involve

Several ways to generate Revenue Streams

89
Revenue
Streams

Meaning

Revenue Streams different Pricing Mechanisms

Two types of pricing mechanism

Two types of Revenue streams a Business Model

can involve

Several ways to generate Revenue Streams

90
Meaning

The Revenue Streams Building Block represents

the cash a company generates from each Customer
Segment

*(costs must be subtracted from revenues to create earnings)

91
Revenue
Streams

Meaning

Revenue Streams different Pricing Mechanisms

Two types of pricing mechanism

Two types of Revenue streams a Business Model

can involve

Several ways to generate Revenue Streams

92
Revenue Streams different Pricing Mechanisms

 Fixed list prices

 Bargaining

 Auctioning

 Market dependent

 Volume dependent

 Yield management

93
Revenue
Streams

Meaning

Revenue Streams different Pricing Mechanisms

Two types of pricing mechanism

Two types of Revenue streams a Business Model

can involve

Several ways to generate Revenue Streams

94
Two types of pricing mechanism

Fixed Menu Pricing Dynamic Pricing

Predefined prices are based on static Prices change based on market
variables conditions
Fixed prices for individual products, Negotiation Price negotiated between two or more
List Price services, or other Value Propositions (bargaining) partners depending on negotiation
power and/or negotiation skills

Product feature Price depends on the number or Yield Price depends on inventory and time of
dependent quality of Value Proposition management purchase
features (normally used for perishable resources
such as hotel rooms or airline seats)

Customer segment Price depends on the type and Real-time- Price is established dynamically
dependent characteristic of a Customer market based on supply and demand
Segment

Volume Price as a function of the quantity Price determined by outcome of

Auctions
dependent purchased competitive bidding

95
Revenue
Streams

Meaning

Revenue Streams different Pricing Mechanisms

Two types of pricing mechanism

Two types of Revenue streams a Business Model can involve

Several ways to generate Revenue Streams

96
Two types of Revenue streams a Business Model can involve

1. Transaction revenues resulting from one-time customer

payments

2. Recurring revenues resulting from ongoing payments to

either deliver a Value Proposition to customers or provide post-
purchase customer support

97
Revenue
Streams

Meaning

Revenue Streams different Pricing Mechanisms

Two types of pricing mechanism

Two types of Revenue streams a Business Model

can involve

Several ways to generate Revenue Streams

98
Several ways to generate Revenue Streams

1. Asset sale

2. Usage fee

3. Subscription fees

4. Lending/Renting/Leasing

5. Licensing

6. Brokerage fees

7. Advertising
99
Several ways to generate Revenue Streams

1. Asset Value

2. Usage fee

3. Subscription fees

4. Lending/Renting/Leasing

5. Licensing

6. Brokerage fees

7. Advertising
100
1. Asset Value

Meaning:
The net market value of a corporation’s assets on
a per-share basis, not the market value of
the shares.

A company is undervalued if the market asset

value exceeds market value

101
Several ways to generate Revenue Streams

1. Asset sale

2. Usage fees

3. Subscription fees

4. Lending/Renting/Leasing

5. Licensing

6. Brokerage fees

7. Advertising
102
2. Usage fees

Meaning:
The more a service is used, the more the
customer pays.

Example:

A Telecom Operator

A Hotel

A Package delivery Service

103
Several ways to generate Revenue Streams

1. Asset sale

2. Usage fee

3. Subscription fees

4. Lending/Renting/Leasing

5. Licensing

6. Brokerage fees

7. Advertising
104
3. Subscription fees

Meaning:
This Revenue Stream is generated by selling continuous
access to a service

Example:
 A Gym

 World of Warcraft Online (a Web-based computer game)

 Nokia

105
Several ways to generate Revenue Streams

1. Asset sale

2. Usage fee

3. Subscription fees

4. Lending/ Renting/ Leasing

5. Licensing

6. Brokerage fees

7. Advertising
106
4. Lending/ Renting/ Leasing

Meaning:
This Revenue Stream is created by temporarily
granting someone the exclusive right to use a
particular asset for a fixed period in return for a
fee.
Advantage For:

Lender Renter/ Leaser

Provides the advantage of Enjoy the benefits of

recurring revenues incurring expenses for
only a limited time
rather than bearing the
full costs of ownership

107
Several ways to generate Revenue Streams

1. Asset sale

2. Usage fee

3. Subscription fees

4. Lending/Renting/Leasing

5. Licensing

6. Brokerage fees

7. Advertising
108
5. Licensing

Meaning:
This Revenue Stream is generated by giving customers
permission to use protected intellectual property in
exchange for licensing fees

109
Several ways to generate Revenue Streams

1. Asset sale

2. Usage fee

3. Subscription fees

4. Lending/Renting/Leasing

5. Licensing

6. Brokerage fees

7. Advertising
110
6. Brokerage fees

Meaning:
This Revenue Stream derives from intermediation
services performed on behalf of two or more parties

Example:

 Credit Card providers

 Brokers and Real Estate Agents

111
Several ways to generate Revenue Streams

1. Asset sale

2. Usage fee

3. Subscription fees

4. Lending/Renting/Leasing

5. Licensing

6. Brokerage fees

7. Advertising
112
7. Advertising

Meaning:
This Revenue Stream results from fees for advertising
a particular product, service, or brand

Sectors Dependent on Advertisement for its

Revenue:

Traditionally Presently

• Media industry • Software & Services

• Event organizers • Others

113
NINE BUILDING BLOCKS

Business Key Key

Model Partnerships Activities

Customer Key
Cost
Resources
Segments Structure

Value Customer Revenue

Propositions Channels Relationships Streams

114
 Key
Resources

Meaning

What do Key Resources enable an enterprise to do

Categorizing of Key Resources

115
 Key
Resources

Meaning

What do Key Resources enable an enterprise to do

Categorizing of Key Resources

116
Meaning

The Key Resources Building Block describes

the most important assets required to make a
business model work

117
 Key
Resources

Meaning

What do Key Resources enable an enterprise to do

Categorizing of Key Resources

118
What do Key Resources enable an enterprise to do

Key resources allow an enterprise to

create and offer a Value Proposition, reach
markets, maintain relationships with
Customer Segments, and earn revenues.

119
 Key
Resources

Meaning

What do Key Resources enable an enterprise to do

Categorizing of Key Resources

120
Categorizing of Key Resources

1. Physical

2. Intellectual

3. Human

4. Financial

121
Categorizing of Key Resources

1. Physical

2. Intellectual

3. Human

4. Financial

122
1. Physical

This category includes physical assets such as

manufacturing facilities, buildings, vehicles, machines,
systems, point-of-sales systems, and distribution
networks

123
Categorizing of Key Resources

1. Physical

2. Intellectual

3. Human

4. Financial

124
2. Intellectual

Intellectual resources such as brands, proprietary

knowledge, patents and copyrights, partnerships,
and customer databases are important
components of a strong business model

They are difficult to develop but when successfully

created offer substantial value

Organizations Dependent on:

Brands Software & Intellectual Rights

125
Categorizing of Key Resources

1. Physical

2. Intellectual

3. Human

4. Financial

126
3. Human

One of the key resources of an

organization is it’s work force
( Human Resource )
Human resources are crucial in
knowledge-intensive and creative
industries.

Eg: A pharmaceutical company such as Novartis, relies heavily on

human resources: Its business model is predicated on an army of
experienced scientists and a large and skilled sales force.

127
Categorizing of Key Resources

1. Physical

2. Intellectual

3. Human

4. Financial

128
4. Financial

Acquisition of financial resources within the business

model is also adopted by some organizations

Example:
Ericsson

129
NINE BUILDING BLOCKS

Business Key Key

Model Partnerships Activities

Customer Key
Cost
Resources
Segments Structure

Value Customer Revenue

Propositions Channels Relationships Streams

130
 Key
Activities

Meaning

Categorizing of Key Activities

131
 Key
Activities

Meaning
Categorizing of Key Activities

132
Meaning

The Key Activities Building Block describes

the most important things a company must
do to make its business model work

133
 Key
Activities

Meaning

Categorizing of Key Activities

134
Categorizing of Key Activities

1. Production

2. Problem Solving

3. Platform/ Network

135
Categorizing of Key Activities

1. Production

2. Problem Solving

3. Platform/ Network

136
1. Production

These activities relate to designing, making,

and delivering a product in substantial
quantities and/or of superior quality.

Production activity dominates the business

models of manufacturing firms.

137
Categorizing of Key Activities

1. Production

2. Problem Solving

3. Platform/ Network

138
2. Problem Solving

Key Activities of this type relate to coming up

with new solutions to individual customer
problems.

139
Categorizing of Key Activities

1. Production

2. Problem Solving

3. Platform/ Network

140
3. Platform/ Network

Business models designed with a platform as a Key

Resource are dominated by platform or network
related Key Activities.

Networks, matchmaking platforms, software, and

even brands can function as a platform.

141
NINE BUILDING BLOCKS

Business Key Key

Model Partnerships Activities

Customer Key
Cost
Resources
Segments Structure

Value Customer Revenue

Propositions Channels Relationships Streams

142
 Key
Partnerships

Meaning

Four different types of partnerships

Three motivations for creating partnerships

143
 Key
Partnerships

Meaning
Four different types of partnerships

Three motivations for creating partnerships

144
Meaning

The Key Partnerships Building Block describes

the network of suppliers and partners that
make the business model work

145
 Key
Partnerships

Meaning

Four different types of partnerships

Three motivations for creating partnerships

146
Four different types of partnerships

1. Strategic alliances between non competitors

2. Coopetition: strategic partnerships between

competitors

3. Joint ventures to develop new businesses

4. Buyer-supplier relationships to assure reliable

supplies

147
 Key
Partnerships

Meaning

Four different types of partnerships

Three motivations for creating partnerships

148
Three motivations for creating partnerships

1. Optimization and economy of scale

2. Reduction of risk and uncertainty

3. Acquisition of particular resources and activities

149
Three motivations for creating partnerships

1. Optimization and economy of scale

2. Reduction of risk and uncertainty

3. Acquisition of particular resources and activities

150
1. Optimization and economy of scale

The most basic form of partnership or buyer-

supplier relationship is designed to optimize the
allocation of resources and activities

151
Three motivations for creating partnerships

1. Optimization and economy of scale

2. Reduction of risk and uncertainty

3. Acquisition of particular resources and activities

152
2. Reduction of risk and uncertainty

Helps reduce risk in a competitive environment

characterized by uncertainty as it is not unusual
for competitors to form a strategic alliance in one
area while competing in another.

153
Three motivations for creating partnerships

1. Optimization and economy of scale

2. Reduction of risk and uncertainty

3. Acquisition of particular resources and activities

154
3. Acquisition of particular resources and activities

155
NINE BUILDING BLOCKS

Business Key Key

Model Partnerships Activities

Customer Key
Cost
Resources
Segments Structure

Value Customer Revenue

Propositions Channels Relationships Streams

156
 Cost
Structure

Meaning

Two types of cost structures

Characteristics of cost structures

157
 Cost
Structure

Meaning

Two types of cost structures

Characteristics of cost structures

158
Meaning

The Cost Structure describes all costs incurred to

operate a business model adopted by an
organization

159
 Cost
Structure

Meaning

Two types of cost structures

Characteristics of cost structures

160
Two types of cost structures

1. Cost- Driven

2. Value- Driven

161
Two types of cost structures

1. Cost- Driven
2. Value- Driven

162
1. Cost- Driven

Cost-driven business models focus on minimizing

costs wherever possible

This approach aims at creating and maintaining

the leanest possible Cost Structure, using low price
Value Propositions, maximum automation, and
extensive outsourcing

163
Two types of cost structures

1. Cost- Driven

2. Value- Driven

164
2. Value- Driven

Premium Value Propositions and a high

degree of personalized service usually
characterize value-driven business models.

165
 Cost
Structure

Meaning

Two types of cost structures

Characteristics of cost structures

166
Characteristics of cost structures

Fixed Costs
Variable Cost
Economies of
Costs that remain the Scale
same despite the Costs that vary
Economies of
volume of goods or proportionally with
services produced. the volume of
Cost advantages scope
goods or services
produced. that a business
Cost advantages
enjoys as its
that a business
output expands.
enjoys due to a
larger scope of
operations.

167
The Business Model Canvas

Key Key Value Customer Customer

Partners Activities Proposition Relationships Segments

Key Channels
Resources

Cost Structure Revenue Streams

168
 1. The Business Model Canvas
T A tool for describing, analyzing, and designing business models
A
B 2. Business Model Patterns
L It based on concepts from leading business thinkers
E

O 3. Techniques to Design
F To help you design business models

C 4. Strategy
O Re-interpreting strategy through the business model lens
N
T 5. A generic process
E To help you design innovative business models, tying together all the concepts,
N techniques, and tools in Business Model Generation
T
S 6. An Outlook
On five business model topics for future exploration

7. The afterword
This provides a peek into “the making of” Business Model Generation.
169
2. Business Model Patterns
It based on concepts from leading business thinkers

“Pattern in architecture
is the idea of capturing
architectural design ideas
as archetypal and reusable
descriptions.”

- Christopher Alexander
Architect

170
Patterns

Unbundling Business Models

The Long Tail

Multi-Sided Platforms

FREE as a Business Model

Open Business Models

171
Patterns

Unbundling Business Models

The Long Tail

Multi-Sided Platforms

FREE as a Business Model

Open Business Models

172
Unbundling Business Models

The concept of the “unbundled” corporation holds that there

are three fundamentally different types of businesses:

Customer Relationship businesses

Product innovation businesses

Infrastructure businesses.

173
Customer relationship Business

Finding and acquiring customers and

building relationships with them

174
Product Innovation Business

Product innovation businesses is to

develop new and attractive products and
services

175
Infrastructure businesses

Infrastructure businesses is to build

and manage platforms for high volume,
repetitive tasks

176
Three Core Business Types

Product Customer Infrastructure

Innovation Relationship Management
Management
Economics

Early market entry enables High cost of customer High fixed costs make
charging premium prices and acquisition makes it large volumes
acquiring large market share; imperative to gain large wallet essential to achieve low
speed is key share; economies of scope unit costs; economies of
are key scale are key

Battle for talent; Battle for scope; Battle for scale; rapid
Culture

low barriers to rapid consolidation; consolidation;

entry; many small a few big players a few big players
players thrive dominate dominate
Competition

Employee centered; Highly service Cost focused; stresses

coddling the creative stars oriented; standardization,
customer-comes- predictability, and
first mentality efficiency

177