This post is an extract of my forthcoming book on business model innovation. The innovation book looks at why business model innovation is needed and how it works. You can read more about it here. These posts are early drafts of planned content and I’m putting them out to get feedback. Please do comment below, or subscribe to these pages to get each new section as it is published. In today’s post, we will be looking at finding opportunities in this new world.
There are a number of ways of doing a business model canvas. Here I’m just talking about capturing information on a business model, not the process of designing a business model. We’ll cover that in other chapters in some depth.
I normally start with the following approach
What’s the problem?
I make a note of this at the bottom section of the value proposition segment. This keeps me honest when I come to write down value propositions as they should be a solution to the problem if the business model is going to work.
Who has the problem?
That’s your customer segments – or segments. If you have a two-side model or something that isn’t plain vanilla, every segment should map back to a problem. You can have one problem for many segments, many problems for one segment, or vice versa. However, a word of caution, generally 3-5 entries in each part of the canvas. Otherwise, you flood the brain with data, and it becomes too difficult to make sense of it (read Daniel Kahnemann to understand why).
How do you solve the problem?
This is your value proposition or propositions. Increasingly here, I like short punch sentences. A single word is not enough. It definitely shouldn’t be jargony. I was working with a client yesterday and their value proposition was ‘X improves the pricing performance and profitability of digital insurers, brokers, and MGAs by providing an AI-driven software platform that easily integrates into existing systems.’. I’ve been working with them for months and barely understood what that means. On the business model canvas that was turned into – ‘Improves pricing in hardening markets’. Simple, clear, and comprehensible – if you are in insurance. We also had ‘Instant integration’.
This is the core of the business model. The next step is to ask.
How do you make money?
I get a lot of waffles here, but normally you only need a couple of words. ‘SaaS’, ‘Commission on meals’. Most people reading can almost instantly connect the dots. Additional data obscures rather than clarifies here.
How do you get customers?
Only include the top 3 channels that give you 80% of the revenue of your new customers. We’re doing high level here.
How do you look after them?
For a long time, I have answered this as a what statement. What do you do to look after them to build and maintain the relationship? Increasingly, I’ve moved to a really blunt how statement. ‘We fawn over them’ Tiffany’s. ‘We don’t care until they cause problems’ ‘We don’t care even if they cause us problems’ Verizon. ‘There is no way for them to talk to us’ Google’ ‘We make them feel part of our tribe’ Seth Godin.
Is that too blunt? For public consumption yes. We can all see the PR impact, but it doesn’t do any good to fluff this issue when we are talking about how the business works. What does that? How doesn’t it?
That’s the customer-facing side of the business model canvas.
What do I need to deliver the value proposition?
Again – the top three things. Here, you need to be super-specific. Lots of startups put down platforms, databases, etc. Everyone has those. What do you have that is special or different. Why can you deliver the value proposition and no one else can? If you are a generic company n a generic industry – there’s less need to be unique here.
How do you do it?
Again 3-5 points. Usually, one is associated with getting customers. The remainder focuses on how to transform the key resources into the value proposition.
Who do you need?
Key partners are a mystery for a lot of people. The simplest thing to do here – what do you borrow, rent or buy from someone else to either provide you with key resources or transform them into the value proposition.
How much will this cost?
What are the three biggest items in your cost structure?
Using this approach, you can sit down with almost any website (and assuming they have clue) be able to pull the business model together in a few minutes. Is it perfect? No. Does it capture everything? No. Is it good enough? Yes.
It is a sketch of how your business, or in much of the rest of this book, how your competitor operates. It’s a simple sheet that quickly enables your thoughts to concentrate and focus and enables your team to do in the same way at the same time. It gets you to alignment quickly.
One point that I have found incredibly powerful. Do not use excel or word for this. When you have lines of text in the different parts of the business model canvas, it makes it visually intimidating, and you lose 90% of the value. Instead, use Visio or LucidChart or a similar diagramming tool. Put your text inside a process block. That limits the amount that you can write and makes it super easy to move everything around.
It also allows you to draw wonderful arrows showing your processes, systems, and patterns, connecting everything together.
If You Want to Read More
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