Building Blocks and Changing Business Models

I’ve got a lot of respect for the ideas presented in author and entrepreneur Alexander Osterwalder’s Stanford University series on the business model canvas. As he points out (and as I try to remind my clients), “great products are becoming a commodity. It’s the combination between great products and a great business model that is going to keep you ahead of the competition in the coming decade.”

The business model canvas approach lets you map out your business plan in a quick, visual way that gives you a better understanding of the entire venture, not just the product. What make up the parts of the business model canvas?

• Customer Segments
• Value Propositions
• Channels to reach customers
• Customer Relationships
• Revenue Streams
• Key Resources
• Key Activities you require to create value
• Key Partnerships
• Cost Structure for the business model

A better business model gives you a competitive advantage. Entrepreneur Steve Blank’s favorite example is Microsoft:

“Anybody ever believe DOS was the world’s best engineering solution to an operating system? Microsoft played a Channel game, on a level that was chess, when everybody else was playing checkers as strategy. Bill Gates’ biggest contribution to business was not technology. It was the ability to use the channel and do distribution and pricing in a way that was superior to a traditional business model of “just look at my features”.

Laying out a business model on a canvas doesn’t just help you understand your own overall business strategy; it helps you to present your business model to potential investors in a way that is clear and persuasive. As Osterwalder notes, simply presenting all of the information you have about your business without organizing it is a recipe for failure when approaching investors. By filling in the blank canvas in front of them, you give a better idea of how it all fits together.

• Watch the video series on Using Business Models to Beat the Competition

Need help with your financial models? Consider these products to enhance Your Capital Edge:

• Financial Model with Sensitivity Analysis – Service Based Revenue
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• Financial Model with Sensitivity Analysis – E-Commerce Based Revenue

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