Business Models

A business model tells you how a company makes money. More formally, a business model describes the rationale of how an organization creates, delivers and captures value. Alexander Osterwalder and Yves Pigneur have proposed a business model canvas, a shared language for describing, visualizing, assessing and changing business models. The canvas identifies nine building blocks of a business model.

Business Model Canvas by Osterwalder & Pigneur

My team used this canvas for analyzing one of our businesses, and found it very useful  in galvanizing a vibrant discussion. I recommend it highly. To know more about the business model canvas, visit their web site.

Here is a quick primer on the 9 building blocks:


1. Customer Segments
Who are the people or organizations that you aim to reach and serve? How would you group them into segments with common needs, behaviors, buying habits, etc.? Different segments may require different offers, channels or relationships. They may have different profitability and willingness-to-pay.

2. Value Propositions
What product-service offerings do you have and why do you think they create value for a specific customer segment? The value proposition is the reason to buy from you, not the company next door. Are your offerings new, better-performing, customized, cost-effective, well designed, status-enhancing,  risk-free, accessible, convenient? What is your value proposition?

3. Channels
How does your company communicate with and reach the customer segments to deliver the value proposition? This includes channels for communication, distribution, sales and support. Channels raise awareness, help customers in evaluating value proposition, allow purchase, deliver value proposition and post-sale support.

4. Customer Relationships
What type of relationship does the company establish with specific customer segments? Answer could vary: dedicated, personal, self-service, automated,  communities, co-creation etc.

5. Revenue Streams
What kind of transactions result in generating net cash for the company from each customer segment? What value are they willing to pay? Though what pricing mechanism?  One time or recurring or both? There are several ways to generate revenue streams: product sale, usage fee, subscription, leasing, licensing, commission, advertising etc.

6. Key Resources
What are the most important assets you must have to make the business model work? This includes physical, intellectual, human and financial resources.

7. Key Activities
What are the most important things a company must do to make its business model work? The answers could vary from technology R&D to supply chain management and from product sales to brand management.

8. Key partnerships
What network of suppliers and partners would be critical to make the business model work? What kind of partnerships would you pursue? Strategic alliances, JV, buyer-supplier relationship or even competition?

9. Cost Structure
What are the costs incurred to operate a business model? Are they largely fixed or variable? Are their economies of scale or scope?

For those of you contemplating start-ups, as well as those responsible for sustaining and growing  existing businesses, I highly recommend asking these questions Osterwalder and Pigneur have proposed.

Tribute to a Man at the Intersection of Art and Technology

Steve Jobs is no more.

'Think Different', proclaimed a proud and defiant campaign inspired by Apple, his tech company, that was struggling while stalwarts like Microsoft were stealing the limelight at the turn of the century. Apple really thought different and came up with one home run after another - first the iPod, then the iTunes store that revolutionized the music industry. Then, a wholly re-written OS that made the Macintosh line of computers compatible with Intel chipsets. This, followed by the iPhone - a revolutionary smart phone that left Blackberry and others in the space running for cover. And yet again the App store which sold millions of apps developed by thousands of third-party developers - generating a huge network effect. An again, the iPad which spawned the tablet computer industry. In a space of ten years, Apple not only surpassed Microsoft, it became the most valuable tech company in the world.

Steve was a designer at heart, and an unreasonable perfectionist. His products were the best-looking gadgets of his times, and sported the best usability amongst all their peers. If you wanted to be proud of your electronic gadget, you had to buy Apple. Such was his fanatic following, that every Apple conference in San Francisco was completely sold out, heavily talked about and widely  publicized. He was a master of publicity. His famous superbowl ad of the Mac is subject of marketing case studies. His product designs and package designs were epitomes of aesthetics - as were the Apple retail stores that he set up to own distribution. The model of Apple's proposed building in Cupertino has been subject of intrigued discussions in architectural circles.

An inspiring speaker, Jobs was a presenter par excellence. He was a great showman. There are pages after pages written on his presentation style. He prepared well, knew his audience and knew his subject only too well. Steve was a vegan, loved calligraphy, had traveled to India and walked through the Himalayas as a youth.

Steve Jobs was a great soul of our times - we've been lucky to have witnessed his stellar decade of achievements as he battled liver disease and pancreatic cancer. He worked till the end, and only resigned when he believed the time had come.

Leonardo Da Vinci was an artist and an engineer - and many other things. So was Steve Jobs. Such multi-faceted  talent is god's gift to mankind, and we must be grateful - even if he lived only 56 years on this planet.

May his soul rest in peace.