Key Resources in the business model canvas are the main inputs and assets the business uses to function effectively. Phrased differently it is what you need. For example,

• Plant and Equipment
• Buildings
• Employees
• Intellectual Property
• Computer Software
• Expert Knowledge
• Political Connections

The key resources overlap to a certain extent with tangible and intangible assets on the balance sheet. However, it goes much further. In the Business Model Canvas, we only state those resources that make you unique compared to your competitors in the market.

Video of the Key Resources in the Business Model Canvas

Examples of Key Resources

Let’s say you have a fashion outlet. You sell large quantities of overcapacity stock outside the city centre. Your key resources are:

• the cheap location with
• good access and
• contracts with fashion producers.

In my analysis of the Google Business Model I identified Google’s key resources as the:

• Index,
• the algorithm, and
• its computing power.

Computer power included – hardware, software and the engineers to write the code and configure the software and hardware.

In all three of these cases, the companies have far more resources than they use. The resources that we focus on are the ones that are absolutely critical to the success of the business model. If you don’t have them you are toast.

• Oil Fields – British Petroleum, Exxon
• Car Factories – Ford, Toyota
• Planning Permission – Property companies
• Patents – GlaxoSmithKline, Bayer
• Monopolies – British East India Company
• Customer Data – Google, Facebook

Physical Key Resources 

These are tangible resources. For example, equipment, buildings, machines, transportation or distribution networks. Dell’s distribution network was a Key Resource, enabling them to deliver PC’s at home – years before others did the same.

One example of key resources in the business model canvas is Tesla. Tesla’s business model includes the Giga Factory which produces a significant proportion of the world’s large batteries. This gives Tesla the advantage of economies of scale in cost in its electric car production.

Physical resources are tangible things that you can touch and feel. For a company distributing beer in rural Kenya, the key resources could be:

• the lorry, and
• the reliable supply of petrol.

In contrast, for a logistics company in the UK the key resources could be:

• the route planning software, and
• the warehouse automation system.

Both companies do something similar but the market and the competitive environment mean that what they see as key resources are quite different.

Human Key Resources

Human resources are the people that you need to do the work. People are often how you transform key resources, through activities into the value proposition. In most cases, human resources are either bodies or knowledge.

When I ran a food delivery operation we needed lots of motorcycle delivery riders. We weren’t really concerned about the quality or the skill set of the people. We just needed enough of them who could ride a bike and had insurance. An even starker example would be the West Indies sugar plantations. Slaves were imported from Africa and put to work on plantations. Output was correlated to the number of slaves on the plantation, not to their willingness, strength or knowledge.

In contrast, knowledge is all about particular domain knowledge or relationships. A consulting company’s key resource may be the lead consultant’s knowledge of economics that he has acquired over 30 years and won a Nobel prize for.

Conversely, it could be a different consultant’s Rolodex of all the property developers he has drunk whisky and played golf with over the same time period.

Financial Key Resources

Many businesses need cash for operations or capital projects. If you are going into chip fabrication or jet engine design you need scads of money to invest in the research, development and plant construction.

As a startup going into a new category, for example like Uber, then money becomes a critical key resource as you can use your wall of money in a land grab as you attempt to build market share ahead of competitors.

Intangible Key Resources

It is also important to remember that key resources may be more intangible. A patent that allows you to have a monopoly on producing a drug or which blocks a competitor’s access into a market are also key resources. Trade secrets and know-how are also important.

A good example of a know-how that is a key resource is the Toyota Production System which has enabled Toyota to consistently increase its productivity and quality over decades through process improvement.

Another example is the Audible business model. In this case, some of Audible’s key resources are the network effects that come from the number of audiobooks on its platforms and the sunk costs of many customers with hundreds of books that they have access to.

How to Determine Your Key Resources

There are four key questions that you need to ask

• what key resources does the value propositions require?
• what are the key resources required by our marketing and distribution channels require?
• which key resources are required to deliver our customer relationships? and,
• How do key resources support our revenue streams?

When you do this exercise it is often useful to talk through the customer’s user journey.

For example, if we look at the Rent- the- Runway business model

• the customer goes to the website – we need a website – and,
• chooses a dress – we need a stock of dresses, then
• has it delivered – do we deliver it ourself or get this outsourced
• wear it out for the night, and
• returns it to be drycleaned – another requirement

So from the user journey, we can see that we need

• website
• dresses
• delivery
• cleaning and repair

The next step is to ask

How do we deliver all these?

When I build a business model there are two or three ways of deciding the key resources.

The first is the simplest. I look at what other similar companies are doing and look at their key resources. Then I tailor the current business model to reflect how other companies in the industry work. This is a safe middle of the road approach. It’s not desperately interesting but you have a reliable outcome.

Working backwards from the Key Activities

Alternatively, you work backwards from the key activities in the business model. Here you have worked out what it is that you need to do in order to deliver the value proposition.

Then you work on what you need to have in order to deliver the key activities. You can think of it as building a bridge. You know you have to design the bridge and construct it. What are you going to need to design it? Engineers and Architects. What are you going to need to construct it? Building materials, planning permission, construction equipment and more engineers.

With startups, you can make this very powerful by looking at very different ways of delivering the key activities. For example, in the Apple business model, all the manufacturing is outsourced and Foxconn is a key partner supplying the manufacturing resource.

Starting from the Value Proposition

The final approach is to look at your value proposition and decide what are the resources that you need in order to make it happen. If I wanted to build a search engine for recruiters then the key resources would be a search engine and a large number of CVs. My key activities would then ask how do I get these and make them accessible to recruiters in order to generate revenue.

Playing with Key Resources In the Business Model Canvas

One of the things that I love about the business model canvas is that it makes it easy to open your eyes to more possibilities. The key resources are great for this. As an entrepreneur, you always have a choice of make, rent or buy. This depends on your appetite for risk, expected returns and available cash. It also has a huge impact on your cost structure

If you were designing the Airbnb business model, you could decide to build your own custom website and have everything just the way that you want.

Alternatively, you could pay another company a monthly fee to white label their commercial product, or you could buy an existing room-sharing website and rebrand it.

Airbnb decided that it would make its website. The Uber business model is based on not making or owning its own cars. Instead, it rents them and the drivers.

You can make this decision with all your key resources. In fact, if you don’t make these decisions then you are missing a trick and could make significant improvements to your business as a result.

You can apply this to all your key resources.

These are your Key Resources. Add these to your canvas.

Business Model Innovation

Business model innovation is all about combining all these factors with the other nine segments of the business model canvas and finding potential patterns that match the problem that you are trying to solve. They also have to deliver lots of value to your customers and solve their pain.

Business model design is frequently far harder than many entrepreneurs realise and it is good to have a guide to help bring things together. It is also critical to have a clear idea of how you are going to test your business model. This is so that you can validate it early and save time and money, or pivot whilst you still have a runway.

How to Build a Great Business Model Canvas – The FREE Course

This free course is in 10 lessons – each with a video and accompanying text. It describes how the business model canvas works and how to use it.

1. Introduction 
2. Customers
3. Value Propositions
4. Marketing & Distribution Channels
5. Customer Relationships
6. Revenues
7. Key Resources
8. Key Activities
9. Key Partners & Suppliers
10. Costs

Read More

Photo by John Cobb on Unsplash

The Cost Structure are the expenses of your business.

Together with the Revenue component you can estimate the profitability of your business.
At this stage you need to create the confidence that your cost and revenue are in balance.

Ask yourselve what the biggest costs drivers are for your business.
Look at your Key Resources and Key Activities and determine the most expensive parts

What cost is equal all the time and what cost changes if you produce more?

Fixed cost can be rent, maintenance and licence fee.
Ask yourself what would happen if you would triple your sales? The cost that increases is your variable cost.

Look at the Key Resources and Key Activity to verify if the main the cost drivers are identified.

How to Build a Great Business Model Canvas – The FREE Course

1. Introduction 
2. Customers
3. Value Propositions
4. Marketing & Distribution Channels
5. Customer Relationships
6. Revenues
7. Key Resources
8. Key Activities
9. Key Partners & Suppliers
10. Costs

In this section, we will focus on partnerships that contribute to making your business model more effective.

Who are your key partners/suppliers?
What is the most important motivation for the partnership?

The reason for partnership can differ and plays a vital role in making your business a success. Partnerships can optimise resources, reduce risk or help you gain access to knowledge and experience. You may partner with many organisations but not all parts are key partners in the business. Add only the important partners to the Canvas.

If your business is not able to function without xxx, then xxx is your key partner.

However, partnerships can change over the course of a business lifecycle. A partnership may be necessary during the first year of a start-up but differs throughout the years.

Key Partners:

• Analyse the nature of them based on the following key questions;
• Which partnerships are critical to our business?
• Who are our critical suppliers?
• Which of our suppliers and partners are sourcing our key resources?
• What type of partnerships would suit our needs?
• For a partnership to be healthy and sustainable, there need to be visible gains on both ends.When forming a partnership, evaluating the impact on the clients is important. Ensure your partnership fills the gaps of the business and is translated to the customer.

What to do:

Add your key partnerships to the Canvas. What is the impact of your key resources – cost and resources. If it is not a healthy or balanced option ask yourself,
“What can you do to reduce the risk/create control.”

How to Build a Great Business Model Canvas – The FREE Course

• Introduction 
• Lesson 1 – Customers
• Lesson 2 – Value Propositions
• Lesson 3 – Marketing & Distribution Channels
• Lesson 4 – Customer Relationships
• Lesson 5 – Revenues
• Lesson 6 – Key Resources
• Lesson 7 – Key Activities
• Lesson 8 – Key Partners & Suppliers
• Lesson 9 – Costs

Key activities are important things your business needs to do to run. It’s even more specific than that. Key activities are the key things that you need to do in order to deliver your value propositions to customers. In this lesson, we look at what key activities are within the context of the business model canvas and how to identify them and use them correctly.

Key Activities Video

Here’s a video where I run through what the key activities are and how they fit into the business model canvas

Identifying the key activities that you need for your valuation is important. It’s equally important to consider which key activities you need to do yourself. Changing these can be a great source of business model innovation, especially when faced with business model depreciation and disruptive market changes.

Finding the Key Activities

To find your key activity the best place to start is your value proposition

• What’s are the most important actions to build your product or service?
• What’s most important to distribute your product and service?
• What kinds of activities are important if we want to maintain customer relationships? (Personal Service, Your Office, Sharing Experience etc..)
• What kinds of activities are fundamental to your revenue streams? (Credit Limit, Fast Payment, Trust etc..)

What Key Activities Do Your Value Proposition(s) Require?

First of all look at your value proposition. What are the key things that you need to do to make it work? If you have a florist you need to

• buy the flowers,
• prepare them and
• deliver them.

You also need to manage your promotional channels so that customers come to the shop.

If you run a plastics factory your key activities are likely to revolve about:

• maintaining production,
• keeping the operations safe, and
• working out how to reduce costs and improve productivity to keep pace with market changes.

Here there are many many more things that you could be doing. Key activities are the critical things that you absolutely must do in order to develop and maintain your competitive advantage.

Small businesses and startups will often list tasks or processes at this stage because they are fairly simple. When you look at the business model of large enterprises that may comprise hundreds of companies and tens of thousands of employees the key activities need to be captured at a far higher level of abstraction.

It is just the same as looking at a map at different scales. One of the keys is using the right scale to look at your business in its stage of development

What Do You Have to do Everyday?

What key activities do you have to do every day? This is a really good approach for helping you to figure out what is a key activity and what is not. If you or your staff are doing the same activities every day then there is a good chance that they are critical for the delivery of the value proposition. For a supermarket (looking at the unit rather than the enterprise) restocking is a key activity. When customers go into the supermarket they expect to find goods on the shelves to buy. Without them, the business model falls apart.

For a company like Google the key activities are improving its code base and then examine all the data that it has gathered to help it improve search results and let advertisers sell better-converting adverts.

For a company like IKEA, the key activities are optimising its logistics chain to ensure that every store has all the furniture that people in that market are buying. It also works on reducing the cost of its products so that it can maintain it’s market-leading position in flat packed self-assembled furniture.

Is Your Business Based Around Producing or Making Something?

Where a company is involved in making something the key activities usually centre on getting the raw materials, transforming them and then shipping or distributing the finished products.

A dairy farmer’s key activities are feeding the cows, checking them for health, milking them and then storing the milk ready for collection. Nestle’s key activities (if we look at the Yoghurt product line) are collecting the milk, processing it into yoghurt, packaging it into containers and then sending it out into its distribution network.

Space X’s key activities are all about designing and manufacturing ever larger rockets, building more effective rocket control and telemetry systems and selling orbital delivery services to its customers.

The key activities tend to vary quite widely based on the type of customer and the manufacturing process used. Where manufacturing is continuous or mass sales tend to be a far smaller portion of the key activities as these are delivered by channels. When products are very large or highly customised then sales tend to be far more complex and take longer.

Some examples of business models based around production include

• Tesla
• Apple

Is Your Business Based Around Solving Problems for Customers?

Companies which are problem-orientated tend to have a different set of activities. These companies are often consultants, lawyers and other types of knowledge workers.

A lawyer, for example, has client consultations, pleading and case law review as his critical activities. Activities such as billing are generally not key activities because these are common for all businesses and provide little competitive advantage.

The deeper message of key activities is that these are the activities that provide a competitive advantage. Case law review is something that all lawyers do. How can this be a key activity/ Can you do it faster? Do you have a better process for doing it? Is one of your key resources a software system that allows you to assess more cases than would be possible or feasible by hand.

Problem-solving business models are knowledge-intensive. The key is understanding, in the business model, how this knowledge is obtained, processed and packaged to solve the customers’ problem.

Is your Business Based Around Building a Platform or Network for Other People to Use?

When we look at platforms, what we are doing is analogous to providing a meeting hall for people to use. If it is a market place the meeting hall has to have tables for sellers to display their wares. It has to have all the facilities that buyers need to make purchases.

When we look at the key activities we can see that there is often a build once-optimise continually process. Facebook, for example, was built once. Mark Zuckerberg only ever built a single Facebook. Over time almost all the original code has been upgraded, expanded, replaced and optimised as the value proposition has changed over time.

It’s tempting to just say build and optimise the platform. That is doing too little work. What is far better is to delve down into the details and say – what is it about the way that we build and optimize the platform that gives us the amazing results?

The other aspect to bear in mind with platforms is that you are often serving two or more customer segments simultaneously using the platform. There will be platform-centric key activities. There will be key activities that are focused on each of the customer segments (or groups of them under certain conditions)

If you want to see some examples of platform key activities have a look at these business models

• Google
• Amazon
• Audible
• Tencent

Deciding the Key Activities in Your Business Model

When I design business models for clients the key activities are one of the last parts of the business model canvas that I work on.

For most startups, there aren’t normally more than 2-3 key activities. That is mainly because if an activity is key it should be consuming most of a person’s time. Startups have few people and limited time and resources. They can’t as a result have too many key resources. They are unable to deliver on them if they do.

Having lots of key activities is also an indication of sloppy thinking and an inability to prioritise what is really important. Focusing on just a few activities allows you to get really good at them and find a source of competitive advantage. Being very good at some activities is also a great way of defending against threats to your business model.

One way of prioritising is to imagine that no-one has come into the office. You are the only person in there.

What are the first three things that you do?

Those will normally be your key activities

So for example when I worked at a food delivery company as the VP of operations I cared about three things

• Are the chefs cooking?
• Are my delivery riders here?
• Has the website and app sent me lots of customer orders to fulfil

That translated to

• Cooking
• Delivery
• Marketing
• Platform build & Optimisation

in our business model canvas.

How to Build a Great Business Model Canvas – The FREE Course

1. Introduction 
2. Customers
3. Value Propositions
4. Marketing & Distribution Channels
5. Customer Relationships
6. Revenues
7. Key Resources
8. Key Activities
9. Key Partners & Suppliers
10. Costs

In this lesson we cover revenue in the business model canvas. It is one of 9 free lessons in which we cover how to use the business model canvas to grow your startup. We need revenues for our startup as otherwise the lights go out sooner or later. Customers pay us for the value that we provide to them. The amount that they pay us has to cover all of our costs which include our key activities, the resources that we use and the partners who help us deliver.

One of the biggest problems that many startups face is that they deliver value but a customer is not prepared to pay for it. Or not prepared to pay enough to make the business viable. This is what makes the whole process of determining product market fit (or problem-solution fit) so important. It is really easy to create solutions. it is a lot harder to create solutions that people will pay for AND which will cover all the other costs and leave a handsome profit behind.

Photo by Vitaly Taranov on Unsplash

How to Build a Great Business Model Canvas – The FREE Course

In this lesson we have covered revenue in the business model canvas. We have another eight lessons covering all the key aspects of the business model canvas and how you can use it as a firm foundation for your startup or business success.

1. Introduction 
2. Customers
3. Value Propositions
4. Marketing & Distribution Channels
5. Customer Relationships
6. Revenues
7. Key Resources
8. Key Activities
9. Key Partners & Suppliers
10. Costs