Business Proposal Writing
The 9 Building Blocks of a Business Model
January 20, 2015
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One of the important Business Model while planning a business or proposing a business model to investors is: 9 Building Blocks.

 

#1: The Customers

  • Their needs require and justify a distinct offer
  • They are reached through different Distribution Channels
  • They require different types of relationships
  • They have substantially different profitability
  • They are willing to pay for different aspects of the offer Mass Segments include:
  • Mass – Don’t Distinguish; All Focus on One Large Group; Consumer Electronics
  • Niche – All aspects of distribution, relationship, value etc are tailored to the specific
  • Segmented – Slightly different needs and problems in market segments; Banking: Private Client Groups cater to those with $500,000 or more vs general consumer banking
  • Diversified – Serve two totally unrelated market segments; Amazon is in retail but also is selling infrastructure
  • Multi-Sided – Serve two more interdependent segments; Credit card companies need both a large base of card holder and a large base of merchants; News Paper – readership and advertisers
  • For whom are we creating value?
  • Who are our most important customers?

#2: Value Proposition

  • Why customers chose your company over others
  • Solves problem or satisfies a need
  • Caters specifically to the customer segment
  • What value do we deliver to the customer?
  • Which problem are we solving?
  • Which needs are we satisfying?
  • What are we offering?

The answers include:

  • Newness – New set of needs that customers previously didn’t perceive because there was no similar offering
  • Performance – Improving product or service performance: PC sector used to rely on this factor to bring more and more powerful machines to market. Recently failed to produce customer demand
  • Customization – Tailoring products or services to specific needs/problems
  • Getting the Job Done
  • Design
  • Brand/Status
  • Price
  • Cost reduction
  • Risk reduction
  • Accessibility
  • Convenience/Usability – Customer co-creation, mass customization

#3: Channels

  • Which channels do our customers want to be reached on?
  • Which channels work best?
  • Which ones cost less?
  • How are they integrated into customer routines?
    • Direct vs Indirect
    • Salesforce vs. Wholesale
  • Partner vs Own
    • Partner Stores vs Own Stores
    • Where does Web Sales Fall – Own and Direct

Channel Phases

  • Awareness – How do we raise awareness about our company?
  • Evaluation – How do we help customers evaluate our organization’s Value Proposition?
  • Purchase – How do we allow customers to purchase specific products and services?
  • Delivery – How do we deliver a Value Proposition to customers?
  • After Sales – How do we provide post-purchase support?

#4: Customer Relationships

  • For Customer Acquisition
  • Customer Retention
  • Boosting Sales
  • What type of relation is established and maintained?
  • How costly are they?
  • How do they integrate with Business Model?

#5: Revenue Streams

  • For what value is each customer segment truly willing to pay?
  • What do they currently pay?
  • How are they paying?
  • What would they prefer?
  • Transaction vs Recurring
  • Fixed vs Dynamic

#6: Key Resources

  • For what value is each customer segment truly willing to pay?
  • What do they currently pay?
  • How are they paying?
  • What would they prefer?
  • Transaction vs Recurring
  • Fixed vs Dynamic

#7: Key Activities

  • What Key Activities do our Value Propositions require?
  • Distribution Channels? Relationships?
  • Revenue Streams?
  • Production
    • Design, making, delivering
    • Manufacturing
  • Problem Solving
    • Come up with solutions to individual customer problems
    • Knowledge management and training
  • Platform/Network
    • Match Making
    • Platform Promotion, Service, Management

#8: Key Partnerships

  • Strategic Alliances between Non-Competitors
  • Coopetition: Alliances between Competitors
  • Joint ventures to develop new business
  • Buyer-supplier relationships to assure reliability
  • Who are our Key Partners?
  • Who are our Key Suppliers?
  • Which Key Resources are we acquiring?
  • Which Key Activities do others perform?

#9: Cost Structure

  • mportant costs incurred by while operating
  • What are the important costs inherent to our business model?
    • Cost-Driven – Minimize cost; No Frills Airlines
    • Value Driven – Premium Value Propositions; Luxury hotels
    • Fixed Costs – Remain the same despite changes in volume of goods or services produced; Physical plant
    • Variable Costs – Vary proportionally with the volume of goods or services produced; Ticketing
  • Which Key Resources are most expensive?
  • Which Key Activities are most expensive?
  • Economies of Scale
    • As output expands cost advantages arrive
    • Bulk purchases
  • Economies of Scope
    • Cost advantages due to larger scope of operation
    • Use the same distribution channel for multiple products

Thank To Mr. YUN SEOK-JIN from whom I have heard about this Business Model.

About author

ZERIN

CEO & Founder (BdBooking.com - Online Hotel Booking System), CEO & Founder (TaskGum.com - Task Managment Software), CEO & Founder (InnKeyPro.com - Hotel ERP), Software Engineer & Solution Architect

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