The 9 Building Blocks of a Business Model

Business Proposal Writing

January 20, 2015

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

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

#5: Revenue Streams

#6: Key Resources

#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

#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.

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