Intro to Business Model
The Business Model Canvas is a widely used strategic management template for developing new or documenting existing business models. It consists of nine components, which enable visualization of the business model in a one-page form. Flexibility is one of the advantages of the Business Model Canvas – it can help both startups and already established organizations. You can use the Canvas to discuss ideas and even to brainstorm the ups and downs of the business industry.
The Business Model Canvas has had a strong impact on businesses. It isn’t just a strategic plan that is hidden on your computer – it’s a plan that businesses keep adding to and updating with new information. Besides, the Canvas allows businesses to make decisions right away. Traditional strategic planning involves weeks of research and hard work before any decisions are made, but the Canvas can change that by quickly providing an overview of the business industry.
The Business Model Canvas can support your entire team. Every participant will know what’s going on because they’ve both participated in it and seen or heard the discussion. Many traditional business plans solve a problem that was relevant to the time they were written and also require a fair amount of research to write. They then end up sitting in someone’s drawer. In today’s fast-paced environment, technological changes can mean that your industry could change at any moment. This is why the Business Model Canvas has become so important – not as much for what it contains, but how soon it is written.
Key Components of Business Model Canvas
The Business Model Canvas (BMC) is a strategic tool for developing new business models. The heart of a business model is broken down into nine categories, according to the “building blocks” theory. The nine components of the Business Model Canvas are Customer Segments, Value Propositions, Customer Relationships, Channels, Revenue Streams, Key Resources, Key Activities, Key Partnerships, and Cost Structure.
1. Customer Segments represent the different groups of people or organizations an enterprise aims to reach and serve. An organization must make a choice about where to focus— which group of customers they want to reach. Customers are categorized by desires, needs, the ability to pay, and the platforms that serve as vehicles for distribution. There are different types of customer segmentation: mass market companies, niche market companies, and specific customers.
Value Propositions show the features and characteristics of the products and services that are sold, delivered, and distributed to the customers. This component provides value to the customers, which is differentiated from competitors in order to have a competitive advantage. In short, a value proposition is a direct proxy for what you get from customers in terms of revenue. It consists of quantitative aspects in terms of buyer outcomes and qualitative aspects in terms of the problems, needs, and/or wants you are seeking to solve.
Customer Segments
1. Discover our customer segments. Each company has a different profitability among the different groups of customers. A web page to watch free online movies will have a different financial value for a teenager, a retired professor, or a ten-year-old child, and it is probably good if people do not have any children watching R-rated films. Of course, a porn page could call itself adult, but it would be interesting for illegal adult audiences, and given that this is not a niche of possible customers, a niche market is not.
If you are targeting the target market, the students in the immediate neighborhood can bring in a teenage customer for the entire class. Parents or people with children could be the secondary target. We also know that college students have a circle of influence.
2. Learn about market segmentation in depth. A niche market, the granular market divides the target market into smaller, measurable segments with specific preferences. The demographic division is based on age, sex, and income propensity. Psychographic segmentation considers whether target customers have diverse psychological attributes, shaping their personality and lifestyle.
Behavioral segmentation is the exploitation of advantages made by the public based on loyalty, attention, attitude, and benefits received. Geographical segmentation is also part of the localization of residence. To understand this concept, put yourself in the shoes of a potential customer, specify your location, list the characteristics of these communities, and then compare the answers with the requirements of your business. After each of the segments has been studied, determine which field your business should prioritize.
Value Proposition
The value proposition sector thematically covers all aspects relating to the product and service offer and leaves its origin and further elaboration aside. The name refers to the offer a business places on the market and which is directed at customers. As such, this component of the business model canvas actually operates as a strategy element, because a strong value proposition ultimately describes how a company outmatches its competitors. In order to communicate a clear and obvious benefit to customers effectively, it will need to take into consideration all parts of the canvas project.
Zeroing in on the potential consumers of one’s project will allow for further strategies that could be utilized to entice them. An understanding of customer requirements and the position of the company and competing businesses will ultimately place a more accurate set of strategic tactics for presenting a compelling value proposition. Developing a compelling value proposition includes understanding the customer: What are their requirements and interests?
The value proposition provides a way to understand, at a high level, the company’s strategy and differentiators. The value proposition should be clearly communicated and tailored to the recipients. For example, if the message is to a buyer, the value proposition will be about the increase in capabilities. If the message is to an investor, the value proposition will be about the financial returns.
How is a value proposition created? The value proposition ends up in the business model as one of the key components for communicating the upside of the business. It can—and should—be tested and iterated as part of the go-to-market strategy and capture plan. Like elementary particles making up an atom, the value proposition makes up the larger communication of the business model.
It evolves in response to market changes, technology disruptions, or the introduction of new products. An effective approach to conveying the company’s value proposition is to use a simple example: “Our work will help you be relaxed. Our expertise, combined with the latest technology, will allow you to build the most energy-efficient power plants in the world.”
The value proposition space is the place where the innovation-to-market processes and the target customers should come together. Whether they do so is a strategic decision. Most companies have experience with a certain target group and understand this group’s world—competencies as well as perception. Nevertheless, a company might want to integrate its innovation to a new target group and to test the lower estrangement from innovative thinking.
If it intends to slip into a field that is already inhabited by competitors, it needs to establish what the client companies truly need. Overall, market and process expertise as well as target group experience are essential in developing a value proposition. They make the company less dependent on quick improvisation and hypotheses. Some companies often use value propositions to prevent things from going wrong. It can secure a customer before making an offer. It can help to coin the subscription contract later on. Unlike value proposition shaping the offer to the market, no market information is gathered.
Channels
Channels refer to the methods and pathways used by businesses to connect with their customers. These pathways are the distinct routes through which potential and existing customers will find your company and/or product offering, and they are usually the pathways through which a business will complete the sales process. Part of the trap of devising the right channels begins with the type of business you are running; if it is a conventional business-to-customer model, there are a number of different ways to approach the sale.
Are you an internet-based business, or do you have a physical store where customers must come in and interact with representatives to make a deal? Both routes are valid and potentially profitable, but a business should spend time deciding and analyzing which channel is best for generating sales.
Once a business has chosen the best channels to deliver its value proposition to the right customer segment, it must determine the effectiveness of that channel. This involves a number of things to consider; indeed, it is primarily about the customer experience. From the moment a potential customer undergoes some form of interaction with the chosen channel, they are engaged in a customer experience.
For most businesses, the best method of appealing to the right customer segment is through directly controlled indirect channels, where control is relinquished to one or more secondary entities that connect with customers on the business’s behalf. When deciding on channels, businesses should consider potential customer reach and accessibility, the relationship built through communication, and most importantly, customer investment.
Customer Relationships
Customer relationships identify the kinds of relationships a company establishes with its targeted customer segments. Since contact referrals and wonderful verbal comments from those that know, like, and trust you are the most effective means of client attraction and retention, building strong, as well as long-term, relationships is the end game of any marketing strategy. A business is nothing without its customers, and the process of creating value for these customers is ongoing. Good customer relationships are one of the other elements in the creation of value, one that can be made by experience. Experience requires relationships; relationships build repeat business.
Understanding and managing customer expectations are the first steps in defining, maintaining, and solidifying anchors for customer relations. To develop stable ongoing relationships with your client base, understand what they expect from you. What is it about your product or services your clients love? What would they hate to see change? If suitable, give samples in most of the sectors and indicate where these traits are integrated.
Once you know this, use this data to develop relationship services that fit these traits like a hand to a glove. Encourage feedback mechanisms. Ongoing feedback arms you with information about whether you are delivering what your clients expect. Use client focus groups if necessary to keep your finger on the pulse and use the outcomes to turn processes around and fine-tune services. Tailored, personal, transactional – engaging for your best clients, often high commitment, high effort on your part. More likely to happen in B2B transactions. The term “affinity club” in the membership circles is another example of this involvement with one’s customers.
This component reflects on the business resources used to manage these kinds of relationships. Engaging the customer in this way means the company can leverage the power of the personal relationship factor. One example of having personal relationships with clients is having a qualified professional who regularly meets individuals for whiteboarding sessions and any necessary restructuring of the candidate’s portfolio. You can also have key account managers whose job it is to liaise with their same-level executives, such as purchasing managers and financial controllers in companies. This type of attention is generally employed when the customer has the highest levels of value.
This engagement factors heavily into the repeat business side of the value proposition, as it becomes a habit for a customer to keep going back to the company because they are wholly looked after and the interface is familiar and secure. Often, “events” like birthday cards, free lunches, reminders, and flowers help enhance the closeness of the relationship. Integrated interfaces are perhaps the most advanced customer relationship of them all.
A good example is an online CRM providing sophisticated services. These services can give holiday suggestions, updates on literature, music, and games, and track the client’s interests, plus a selection of purchases and much more. Each time a client interacts with any part of this integrated technology, their choices are being logged for future reference. All the while, the client interacts only with a keypad and a screen.
These sophisticated relationship products set companies competitively apart, providing their clients with not only selection but also maintaining a personalized customer focus, even in a very impersonal, net-based environment. Keep in mind that the online integration takes place with the brand as a whole, not an individual; hence, real “personal, transactional, customized” relationships this way are not an option. Of course, the question of trust and invasion of privacy frequently pops up on the issue, and it is up to the customers to choose the level they are comfortable with.
Revenue Streams
In this building block, we determine the ways that our business generates income from its customers. This is crucial for a business as the revenue produced helps our business cover costs and generate a profit. Understanding the different ways we can generate money provides a greater opportunity to make more revenue and optimize our economics. There are various revenue models that businesses use to generate income.
For example, some businesses can charge a one-time purchase fee to their customers, such as a car manufacturer that sells vehicles at a fixed price. Alternatively, some companies may use a subscription model, charging customers a fixed monthly amount for access to their product, such as a broad service, gym, or streaming service. To optimize this building block, the business needs to ensure that its revenue streams align with its customers’ value propositions. The more money the customer is willing to pay for the targeted jobs, the more revenue streams the business can sustain.
Pricing has a direct effect on revenue streams. Higher pricing can produce more revenue. Costs can affect pricing to the customer, but premium pricing can be based on exclusivity. Scalability relates to whether the revenue stream has the potential to scale. Can the revenue from the customer streams remain over time? There can be various ways to scale revenue streams; subscription-based models provide scalable revenue.
Scalability is important as it can offer sustainable growth once the customer base is established. Risk and uncertainty are also what the business must manage, as they can affect their investment to secure future revenue. The business must evaluate which sources of revenue offer the highest or best potential for scale over time. There may be alternative revenue streams that can achieve this; the most suitable channel depends on leveraging customer relations and partnerships. Sustainably managing your revenue streams is critical to your business, enabling you to both operate and scale in a sustainable way.
Key Resources
Key resources are those assets or capabilities that are essential for delivering value propositions to customers. Like other dimensions of the business model, they can be general, specific, or encompass both physical and non-physical assets and skills. Sometimes these are also referred to as strategic assets because they play a key role in achieving competitive advantage and are not easy to replicate. Many firms outsource these assets to external suppliers; however, if this relationship is not managed carefully, it can lead to over-reliance on the suppliers’ strategic assets, compromising the value proposition.
A solid understanding of one’s key resources is important if the company is to align its strategic and investment plans effectively. If a firm, for example, decides to focus its strategy on low-cost production, then it is vital that the firm has in place the financial and labor resources mentioned. Assessing resources in a business plan, in addition to the periodic need to update the resource allocation over time, is an effective means of establishing the company’s strategic pathway and operational activities accordingly. As such, it is crucial to consider, on the one hand, resources that generate or facilitate value for the customer and, on the other, resources that in and of themselves represent value.
In this way, the former can help create a competitive advantage by differentiating the product or service that must be delivered, while the latter type of strategic resource is a competitive advantage in itself. It seems important to notice that by focusing on desirable customer values, rather than on the process of value creation, we run the risk of valuing the resources only in the process of creation, whereas from a strategic management point of view, resources are also fundamentally involved in the output section.
Key Activities
This essential building block of the business model focuses on the most important actions that a company must do to operate successfully. It concentrates on operations, problem solving, or activities related to the platform or network. In reality, key activities imply an insight into the operations, marketing, and delivery of products, services, or platforms. They signal the fundamental aspects of producing, marketing, and delivering products and services within a business model. The business model must evolve and be expected to face disruptions due to market, technological, and other challenges.
Of the three elements of an external business model, only key activities involve significant operational issues. Key activities are required to execute the value proposition. Being aware of the interaction between the different building blocks and their dependencies on key activities is essential. This allows for more informed suggestions on performance improvement programs and optimizations. The identification and subsequent improvement of key activities can lead to a significant increase in operational efficiency and to greater agility. It is possible to identify three categories of activities:
• Operations: dealing with production and the delivery of offerings, rules, best practices, or program management. These activities pertain to the question, “How do we make it?” • Problem-solving: dealing with federating and leveraging offering stakeholders and network externals. These activities pertain to the question, “Who do we work with?”; “Valuable in what way, and to whom?” These activities raise awareness and help to make a difference.
• Platform/Network: dealing with activities that leverage engagement in organizations’ own platform and/or partners or other network entities. These activities are effective. They deal with the effective work profile, co-employment, elections, governance, project management, assessment, meetings, results, cost-benefit, business case, and resource management control. They aim to reach through activities until project completion, via partners, and/or the network.
Key Partnerships
The Business Model Canvas is as much about defining key partnerships as about outlining key activities. In practice, this does not mean having to develop everything on your own. Aim for the most effective means of delivering value to your customer and consider the question, ‘Do we build, do we buy, or do we partner?’
A partnership is a collaborative relationship. The partners agree to work together to enhance collective effectiveness. Partners enable resources, key activities, and core capabilities that we could not pursue independently. They will help create an efficient model. The design of the business model helps visualize partnerships from both a supply and a demand-side perspective. It visualizes the dependence and rights of the different actors within the value chain.
Relationships can differ; they can be based on logistics, technology, marketing, sales, knowledge, or access to customers. In terms of strategic position in the value network, partnerships can be a customer relationship or a supplier relationship. They are often types of partnerships, like joint ventures, marketing and distribution partnerships, strategic or cooperative partnerships, and knowledge partnerships forming research labs or joint patents, and more. The beauty of a partnership is that it is seen as an intermediate form between using yourself or buying in the activity or resource.
A partnership thus helps boost the flexibility to deal with demand fluctuations. A partnership is recognized as adding value. This could concern, for instance, the sharing of knowledge, cost reduction, risk reduction, or quality improvement. At the supply side of the business model canvas, partnerships improve the effectiveness of the various elements within the supply chain; this counts from resources within ‘input’ to the after-sales and marketing and distribution operations within the business model. They could support the development of revenue streams, like adding channels to your sales operations.
At the demand side of the business model, service elements and partnerships can help develop more engaging services. A service might, for instance, become much more attractive if its offering becomes more comprehensive by including the elements of a partner. Again, improvement of effectiveness and enhancement of service delivery are key arguments often used to strengthen the results of a collaboratively structured business model.
The general objectives of the firm are taken into account. The rationale for the nature of the relationships allows a differentiation process: do the different partnerships just respond to efficiency driving objectives, to expansion of activities, to issues related to quality and customer relationships, to favorable positioning in a market, or to innovative dynamics? A performance assessment of the management of partnership relationships enables a virtuous circle, going from the grasp of the objectives to the return of practice. The analysis also changes over time and in space: supply and demand are not only emphasized, but the hybrids, the fuzzy, and the intermediary players can be identified.
Cost Structure
An overview of the different types of costs involved in operating a business sounds banal at first, but in the process of running a business, you have to extensively think about what you need to spend money on now and in the future. Especially when managing a company in financial terms, it is important to differentiate between these costs: different planning and control approaches are necessary for operating a company at a profit. Overall, operating income depends on the number of sales, the difference between sales and variable costs, and the amount of fixed costs.
For this section, it is particularly important to know why the supplier provides the services it does. Which costs must the supplier incur in order to produce the added value? In essence, as much detail as possible is used to explain what is necessary to be able to offer the value propositions. The cost structure reveals how the supplier creates the added value. The cost drivers reveal what ultimately determines the costs: which resources are needed to create the added value, how they are obtained, and what they cost, and which value propositions are offered and to whom. If the value propositions differentiate, the costs can be aggregated on this basis.
Successful cost management depends on looking ahead to the future. One must examine the costs to find out how they are likely to rise or fall in the future. Only in this way is it possible to estimate the cost of manufacturing a product or rendering a service in the future. Orienting the cost-airline strategy solely towards the past is, therefore, short-sighted. It is better to keep an eye on how costs are likely to change.
If possible, one examines the period over which cost and industrial change occurs, as different costs may respond to different factors over time, just as different costs may respond to different stock levels at the same time. The speed of cost change will be indicated by a detailed study of its pattern. If costs change abruptly during a certain period and then settle back again, this will reveal the rate and duration of the change.
Benefits of Using Business Model Canvas
The Business Model Canvas offers several benefits for organizations of all kinds. It first and foremost allows you to create an overview of a business, so you can visualize and think about it clearly. By presenting the models in a visual way, it can pull in multiple partners, employees, and stakeholders that would not have otherwise been involved in the strategic discussions and that are needed to form the strategic plan. This can help a company leverage the ideas and strengths that these partners have to offer.
The Business Model Canvas also offers a way of identifying and changing elements of a business model that allow the highest yield of return. Elements can be quickly modified and multiplied for the most innovative and diverse approaches to a business to pull higher profits and shut down long-standing companies that refuse to change methodologies. The Business Model Canvas is simple to use. This means that it is easy to create new canvases often. One may create a new canvas after new data presents itself or after other canvases have been applied to some measure.
Alternatively, a company may wish to change elements as soon as they are thought of and then make a final version. The Business Model Canvas also allows for environmental monitoring. It is simple enough to analyze the surrounding environment that a business dwells in more often because it is easy to discuss and even map so many forces in detail. With the simplified model, interaction is more likely to be clarified to its base level and others will come on board to discuss and spread the information.
The plan might become outdated very fast, but this is an advantage according to some theorists. This is because the new strategy planned in the model is most up-to-date. A big component of the importance of the Business Model Canvas is that it actually vigorously forces reviewing and reflection, acceptance, and realization to be combined into an existing strategy enabling the strategy to improve and adapt under current circumstances.
Lastly, the Business Model Canvas allows for precision decision-making. Participants in the decision-making process are bound to have a shared understanding that allows for a more focused strategic direction. A worse outcome may emerge if they do not in the overlapping of ideas and cross disciplines. The other theoretical benefit of creating and using the Business Model Canvas is that participants in the decision-building process have been shown to point in,
sometimes, very effective and very consensus directions for furthering strategic plans. In the end, the Business Model Canvas has become a very practical tool and mission for ratifying the vision and strategy in the dynamic business setting for the businesses embracing the strategy plan. It is actually thought to advantage the general postmodern context by addressing the increasing unreality of time and space, the blurring of representation/disorientation and of “the real”, and the rise towards a “distance of involvement” concomitantly, so it is becoming a necessary approach to strategize for the connected times.
Real-Life Examples of Business Model Canvas
Uber: Uber is an example of an exciting business model application. The company evolves the way the world moves. They use a smartphone to connect passengers with Uber’s drivers, the independent contractors. Their platform is available in 68 countries and 515 cities worldwide. By using the Uber app, users can pay not only for car sharing but also for e-bikes, scooters, and freight. When they’re at it, they can buy more luxurious car alternatives. Uber tries to connect all forms of travel to one, helping them maintain and retain a leadership role in the market. Uber has three main segments as well: municipal transport, which will earn a return in the coming months, goods, and freight.
Airbnb: Airbnb is a part of the hotel industry that allows people to rent their homes for short-term stays via an online platform. The company has been building itself as a way to “belong” and live your life. Airbnb is very eager to look after its hosts and guests but also its employees, if it is to treat colleagues in the same way. Like Uber, Airbnb is spreading its wings to air travel as well. Hosts’ primary benefit proposition is the ability to earn money while informing culture and building friendships. The primary Airbnb value propositions are authenticity, interest, availability, and a feeling of having a place to stay when it comes to guests. Category: Education
Uber
Customer Segments Uber has dual customer segments: the ones who look for rides are the riders, and the ones who give rides are the drivers. This operational model is also called a dual-sided marketplace. Value Proposition Uber has targeted low-profit and tech-savvy individuals as its potential customers. Its value proposition is based on the accessibility, well-being, and affordability of the rides. It has made it easier for people to travel from one place to another within a city, despite not owning an advanced standard vehicle.
Additionally, it is a cost-effective way of reaching your desired destination compared to many cab services in the city. Uber’s strategy canvas allows it to provide these factors by avoiding areas that aren’t necessary, such as the availability of traditional taxis in the pick-up and drop-off areas. Channels The main and most important channel partner of Uber through which it reaches its customers is the Uber mobile application. Uber is working independently in some areas, but in many populated areas, the company has to partner with local transportation authorities to double its efficacy.
Key Activities Uber does not operate its own system of transportation; instead, it offers drivers who work as collaborators on the orders through its platform. It operates through the given steps: instead of maintaining its own system, it allows its drivers to take care of the cars, and it does not charge any interest on selling or renting any vehicle. Its pricing model includes cars at varying price points (including low-cost options, which increasingly replace taxis and dispatched car services), and even high-priced services for corporates.
It also provides SUVs and limousines for larger groups or events. For luxury travel, they have extended versions of their premium services in some countries. As of 2020, it announced that customers in select cities can opt for a monthly subscription plan that would include food delivery, grocery delivery, and ride-hailing services combined. Preferred restaurants and savings are available for customers with this plan. Customers who are concerned about emissions and their carbon footprint can request electric or hybrid vehicles with their ride.
Airbnb
One company that leverages business model innovation is Airbnb. Founded in 2008, this online marketplace links travelers with local people by letting out extra rooms, whole apartments, and even castles. In 2017, the company had nearly 4 million listings worldwide. Airbnb states that one of its values is providing unique accommodation options to travelers that are off the beaten path and offered at relatively affordable prices.
The availability of a variety of accommodation types located in diverse locations is a major driver for customers, as we can see from the unique selling proposition. Airbnb segments its customer base into two distinctive groups: travelers and hosts. In the Business Model Canvas, one can also depict the world’s total accommodation market in the past, which consisted of harmless travelers by 100% and unknown hosts by 100%. These days, with Airbnb, the sizes of the two groups are slowly shifting to unknown travelers by 60% and known hosts by 40%.
Airbnb has nearly 100 million registered users, which include both travelers and hosts. The main services that Airbnb provides are the listing and advertising of available properties and providing a communication channel for hosts and travelers. Airbnb offers a range of different channels to connect hosts with travelers. The primary channels to reach customers are the company’s website and the mobile app, which is available for both Android and iOS devices.
Hence, offering location-based services and push notifications will enhance promotion and satisfy both travelers and hosts. Airbnb uses indirect communication channels through different social media networking sites to gain popularity and create new business. With Airbnb, customer relationship management is a way of building trust. Reviews and ratings play a huge role in the trust-building exercise. Trust is of utmost importance while dealing with complete strangers, especially in the accommodation business.
Many functionalities like availability, booking, payment, message service, and reviews are required for an online rental accommodation booking engine. Moreover, the fee charged by Airbnb is 3% of the booking value for hosts. Additionally, a service fee for every booking made by travelers is used as a revenue model. The site even offers insurance for rentals regarding damage or loss coverage during the rental period. Airbnb continues to grow and expand by introducing new services. New services include the experiences part, which is targeted at travelers. Problem-solving and execution are the pillars of customer reliance.
It continues to dominate the online rental marketing and management service. Companies must show adaptation towards the changes happening in the market to satisfy customers’ desires. In conclusion, Airbnb shows a good execution of the International Business Model Canvas. The best examples include updating their services to meet today’s user expectations. The first example is the service of home sharing, which began with just an apartment.
Today, users can have experiences staying on a boat, private islands, castles, and more. The second example is the existing Balloon Dinner service, a unique way for travelers to visit locations and connect with locals. With users ready to pay for unique experiences, Airbnb has expanded its destinations into cities such as Paris, New York, Rome, Barcelona, and so on. This shows successful execution in collecting revenue at an affordable cost.
Netflix
Netflix and the Business Model Canvas is a great example of how to create a successful market leader by using this tool. When Netflix began, the creators were just looking to drive physical video rentals out of business. Instead, they’ve driven entire platforms to bankruptcy. Think about it. Blockbuster, an iconic company that thrived for nearly three decades, has become the subject of detriment. Netflix’s customer segments have evolved because of its business model, but they’ve always sought entertainment.
Initially, they rented out DVDs, but between the timely mail system and added cost, it wasn’t very convenient or offered good value. Today, they’ve changed from renting movies to selling streaming subscriptions. Because of the absence of brick-and-mortar rentals, you don’t need a Netflix store on every corner, so the convenience is there, but how do people find Netflix? Channels include promoting the app, signing partners ranging from gaming systems to top branded smart TVs, and using social media to gain attention. From that standpoint, technology has played a significant role.
Primary customer relationships are based on personalized ratings and recommendations, features that have impressed customers and the media with Netflix’s algorithmic rating model. They track consumer engagement and churn. Netflix has free trials for new customers, allowing them to sample the product and see if it’s worth a subscription. From there, subscriptions are either a monthly fee or free with a wireless plan from certain partners.
Partnerships bring in additional revenue, such as a newly formed deal with an internet provider. But the main bucket of cash comes from recurring revenue. Since subscriptions are their bread and butter, some of their main activities include gathering content, licensing, and creating movies and shows that are diverse and unique for consumers. In fact, Netflix is becoming known for original content. It’s an activity that offers them the largest competitive advantage in the industry. Furthermore, technology doesn’t just provide personalized choices; it’s utilized in all activities and resources to keep users engaged and happy with Netflix.
Tesla
Tesla has shown it is possible to use an innovative business model to completely revolutionize industrial sectors. Conventional automakers primarily compete on quality and size as differentiators. Tesla creates electric cars and ecosystem products which significantly reduce greenhouse gas emissions, are faster and safer than internal combustion engine vehicles, are fully connected and infused with technology, fit a CEO with low humility, engage with a high level of community, and are designed to be autonomous over time. Tesla has reinvented the basic assumptions of the car or automotive manual. The automotive sector is now moving away from its disheartening past to a transport of the future.
The rise in sustainability and corporate concern for footprints have called potential buyers of products and services to be ecologically conscious. Eco-conscious customers do not want to harm the planet while satisfying the need for personal, civic, or office-based transport. Trendsetters, environmentalists, and educators represent the eco-conscious populace, which grows and develops new products. Tesla uses online and physical locations owned and managed as a method of contact. Local employees have a unique understanding of customers and local needs.
Customer service and customer relationship security – “At Tesla, we aren’t just building a car or solar products – we’re building a whole new way of living.” Once a Tesla is purchased, they provide excellent service. With a large concentration on word of mouth, their consumers, both business and individual, serve as their brand. Customer relationship security – “While traditional sales channels have taken a dip, Teslas are always in demand. 80% of consumers use word of mouth to learn about Tesla.”
Patreon
The patronage platform is the communication and distribution channel that connects creators with audiences and fans. Its Business Model Canvas helps creators describe, develop, and get feedback by following their first nine steps to build and lead a perfect entrepreneurial team. With an offering of attracting patrons – paying audiences, fan customers, or donors – in order to enable creators to be supported in an altruistic and cooperative manner beyond the traditional way of making money,
it describes its unique added value by demonstrating that creators will receive a regular and steady monthly income. Examples show that a significant percentage of collected funds come from a membership patronage ranging from a low to a high amount per individual or corporate entity, while the crowdfunding method is most commonly used to attract large industrial users to their business platform.
Its customer segment comprises creators and patrons, two interdependent sides that share a mutually beneficial relationship. In turn, attracting more creators at higher selection rates while conducting relevant customer segment analyses is the platform’s vital issue.
Owing to its digital content nature, the platform’s physical key activities are optimized processes and systems, where it connects the two sides by offering various channels, including its website as the face of the platform, an app, and all of its social media assets. The crowdfunding method further became applicable with no significant changes to the infrastructure, whereas the customized content, either via the feed or through the creator’s respective digital platform, provides patrons with a sense of belonging or membership in a secret society.
Case Studies on Successful Implementation of Business Model Canvas
Spotify, Inditex, and Tienwa Printing Machinery are organizations from various industries that have implemented the Business Model Canvas tool successfully. They have leveraged the use of the tool for growth, innovation, and scalability.
The case studies illustrate that the strategy tool has proven adaptable to different market conditions and usable in practice over time. Nevertheless, each organization has experienced difficulties during its Business Model Canvas implementation.
Spotify struggled with challenges around experimenting, while Inditex had to work with uncertainty due to strategy innovations. Tienwa Printing Machinery needed to use the tool for constructing future possibilities.
Each of these organizations has also developed solutions to overcome these difficulties. Finally, the study highlights measurable results of activity using the Business Model Canvas: the launch of a new product, specific solutions provided by suppliers to improve effectiveness and reduce costs, and results in the form of efficiency and increased revenue.
Lessons learned: Overall, the case studies result in positive evidence that the Business Model Canvas can be valuable in increasing efficiency and effectiveness, supporting new product launches and innovation, and stimulating business success by uncovering attractive future business possibilities and a means for realizing them. Additions and adaptations were necessary in practice, which supports the results of several earlier conceptual studies.
