Nine Building Blocks of The Business Model

The Nine Building Blocks of the Business Model
1. Customer Segment – defines the different groups of people or organisations and enterprise aims
to reach and serve.
a. Mass Market – customers with similar needs and problems
b. Niche Market – customer with specific and specialized needs
c. Segmented – customers with slightly different needs
d. Diversified – serves two unrelated customer segments with very different needs
2. Value Proposition – describes the bundle of products and services that create value for a specific
customer segment. What solves customer problem and satisfy their needs
a. Newness- satisfies a need that customers did not previously perceive
b. Performance – improved product performance
c. Customization – tailoring products to the specific needs of customers
d. Help Customers get a job they want to do get done
e. Superior Design – design better than existing designs
f. Brand/ Status – product showcase a higher status
g. Providing product/ service at a lower Price
h. Cost Reduction- help customers reduce their cost
i. Risk Reduction – purchasing their product/ service reduces the risk customers incur
j. Accessibility – providing product/ services to customers who usually don’t have access
k. Convenience/ Usability – make product easier to us (customer friendly)
3. Channels – how a company communicates and reaches its customers segments to deliver a value
proposition
Channel Phases:
a. Awareness – how do we raise awareness
b. Evaluation – how do we help customers evaluate organisation’s value proposition
c. Purchase – how do we enable customers purchase our product/ service
d. Delivery – how do we deliver a value proposition to our customers
e. After Sales – who do we provide post purchase customer support
Channel Types:
a. Sales force
b. Web Sales
c. Own Shop
d. Partner Stores
e. Wholesaler
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4. Customer Relationship – describes the types of relationships a company establishes with specific
customer segments. Type of relationship our customers expects us to establish and maintain with
them.
a. Personal Assistance – based on human interaction
b. Dedicated Personal Assistance – dedicate an employee to a specific customer
c. Self-service – provides customers with means to help themselves
d. Automated services
e. Communities – user communities
f. C0-creation – organisation and customers co-create new and innovative products.
5. Revenue Streams – represents the cash a company generates from each customer segment. This
may be transaction revenue resulting from one-time customer payment or recurring revenues
resulting from ongoing payments to deliver a value proposition or provide post purchase support
to customers. Sources of revenue includes
a. Asset Sale
b. Usage Fee
c. Subscription fees
d. Lending/Renting/Leasing
e. Licensing
f. Brokerage fees
g. Advertising
6. Key Resources – describes the most important assets required to make a business model work.
a. Physical
b. Intellectual
c. Human
d. Financial
7. Key Activities – the most important things a company must do to make its business model work
a. Production – designing, making and delivery a product of substantial quantity or superior
quality.
b. Problem Solving – that arise from providing value to customers
8. Key Partnership – describes the network of suppliers and partners that make the business model
work.
a. Optimization and economy of scale- to reduce cost
b. Reduction of risk and uncertainty
c. Acquisition of particular resources and activities
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9. Cost Structure – describes all cost incurred to operate a business model. There exist two classes of
Business Model Cost Structure are they are:
a. Cost Driven Business Model: this focus on minimizing cost wherever possible
b. Value Driven Business Model: an orgnaistaion focus more on value creation and less
concern on cost implication.
c. Characteristics of cost structure:
i. Fixed Cost – remains same irrespective of the volume of good or service produced
ii. Variable Cost- cost that varies with volume of good/ service produced
iii. Economies of Scale – cost advantage a firm enjoys as its output expands
iv. Economies of Scope –cost advantage a firm enjoys dues to its large scope of
operation
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