A 360 View of the Business Model Canvas

     Visual images can be helpful tools for understanding complex concepts. For example, imagine trying to grasp how the Earth looks without a map, or learning all the chemical elements without a periodic table. It would be more difficult trying to wrap our minds around either without an organized visualization of the concept such as a map or chart. 

     Businesses can be complex as well, a visual tool can help understand how it delivers value now and in the future. A Business Model Canvas (BMC) is one visualization tool for businesses that every entrepreneur and executive needs to be able to put to good use. Afterall, how can one run and improve a business that they do not fully understand inside and out?

      Businesses are rarely simple; they tend to be rather intricate and even convoluted at times. Each organization, both for- and non-profits, consists of the following important components:

1. Value proposition

2. Market segments

3. Key activities

4. Customer relationships

5. Delivery channels

6. Resources

7. Partnerships

8. Revenue streams

9. Cost structures

 

Most people can hardly wrap their head around 2-3 of these components at any one time, let alone all 9! A BMC is the perfect tool for visualizing a business’ key factors, all in one place.

     To help build your BMC, here we outline and define the 9 components, along with some good questions to help get you started with formulating your answers. 

 

1. Value Proposition

     A value proposition clarifies a business’s purpose for existing. It is essentially an understanding of the problem being solved, or need being satisfied, by the business. This can be quantitative, such as price or speed. Or it can be qualitative, such as how it looks or feels. 

     The more compelling the Value Proposition, the more potential customers will be drawn to it.  Forbes (2013) has an easy guide for constructing your business’ value proposition here

Some questions to draw this out:

What value do we deliver to customers?

  From the customer’s perspective, does it solve a problem or satisfy a need?

  Why do customers use us instead of other similar businesses?

 

2. Customer Segments

      It is beyond important to know what kinds of people would be interested in your business product or service. Knowing these groups makes marketing efforts significantly more effective. If you try to focus on everyone, you are not focusing. 

      Dividing up potential customers into groups based on certain characteristics or criteria provides a clear target to pursue. Such segments can include groupings based on common needs, age, sex, location, income, and habits. Not only does it create a laser-focus for your marketing campaigns, but it gets your brand in front of those that might actually be interested in buying from you. 

Some questions to draw this out:

Does our product/service satisfy the need of a certain group of people?

For whom are we creating value?

What do our potential customers tend to think, see, feel, or do?

Who are our most important, or profitable, customers?

3. Key Activities

     Key activities are the things a business does that enable its Value Proposition. These are things that go on in the background that make the business model work and operate successfully. 

Service industries tend to be easier to list out, such as providing quality repairs, stellar customer service, or unique expertise. Product-based businesses also have key activities for how they produce their products. A beverage product may conduct key activities like filtration, quality control practices, or annual certification.

Some questions to draw this out:

What does our business do to enable the Value Proposition?

What is required to make our business model work?

What uniquely strategic things does the business do?

 

4. Customer Relationships

      Customer relationships describes how the business establishes favorable interactions with customers. It starts in the beginning when they first purchase from the business and goes on all the way through to the support they get after. Each time a customer interacts with the business, judgements and impressions are being made. The businesses that are able to ensure each of these customer experiences are impressive can be sure to gain loyal customers that return and provide referrals – the holy grails of sales.

Some questions to draw this out:

What experiences do our customers expect from us?

How do we rate our customer service? Why?

What marketing strategies do we use to capture and retain customers?

5. Channels

      Channels consist of the flow of information, distribution, and sales. They are the way customers hear about, purchase, and receive from the business. Channels are how the customers buy and businesses deliver. Understanding the different channels through which products and services are delivered can lead to process improvements and innovations in how deliveries are made.

Some questions to draw this out:

Where can customers buy from our business? How do we reach them?

How do we raise awareness of our value proposition?

How are we integrating them with our customers’ routines?

In what ways do we help customers evaluate our value proposition?

 

6. Key Resources

     Key resources are vital assets in place that enable your business model to run. These resources include physical things like facilities, people, computers, or vehicles. Key resources can also include intangible things like registered patents or trademarks. They can be owned, leased, or acquired.  

Some questions to draw this out:

What assets does the business require to create its value proposition?

What resources are used in distribution channels?

Which resources are in place to maintain favorable customer relationships?

 

7. Key Partnerships

      Relationship building is an important part of being successful in business. No one person or organization can be good at all things, so they partner with other firms that can help. Amazon has been utilizing delivery firms for decades like USPS and FedEx because it makes sense to let them do what they do best: home deliveries. Organizations often aim to accomplish goals by leveraging industry expertise such as marketing, accounting, and consulting professionals. Partnerships are also commonplace in non-profits where organizations with a similar cause join forces to gain traction and awareness. 

Some questions to draw this out:

Who are our key partners? What key activities do they perform?

What outside firms do we use to deliver our products or services?

Who are our key suppliers?

 

8. Revenue Streams

        Revenue streams are the way businesses collect money from each customer segment. Business models have various ways of creating revenue

streams. These can be through one-time transactions like auctions, or recurring mechanisms like subscriptions or annual memberships. Netflix’s primary stream of revenue comes from their streaming services that are billed monthly, but they also have another stream coming from mail-order dvd options. The more ways businesses can make money, the better.

Some questions to draw this out:

What are customers really willing to pay for our value proposition?

How do customers pay for our products or services? 

How much does each stream contribute to the overall revenue?

 

9. Cost Structure

     The cost structures of a company are the main drivers of costs to operate. They describe the costs incurred to do business. Almost all key activities and resources have costs associated with them in order to create and deliver value. Fixed and variable costs are the obvious ones, but economies of scale and scope can uncover new ways of creating value.

Some questions to draw this out:

What are the biggest costs to operate?

Do you buy raw materials, partially built components, or outsource and resell?

How are sales personnel paid? Salary or commission?

 

 

 

Conclusion

   BMCs are great tools for understanding how business models work and can lead to innovative ways for businesses to create value. There is no excuse for entrepreneurs and executives to lack a full understanding of how their business model works. Spending the time to create this simple “map” can help leaders better understand, design, innovate and implement the strategy that they envision. By creating what a business model looks like now, one can plan for how it can look in the future. This is the tool used to get there.

Download your free BMC template: Click here. 

 

   Modern Consulting 360 (MC360) specializes in consulting with new and existing businesses to build out strategic plans for achieving their goals. BMCs are just one of several tools used to shape an understanding of your current business model. From there we discover new and upgraded ways of marketing and selling your value proposition. Contact us today to find out what we can do for you.

Read More
Sam Mohammad Sam Mohammad May 27, 2020 0 Comments

3 Key Relationships of Marketing & Supply Chain Management

How is marketing and supply chain management (SCM) related?

It is important for marketing and supply chain professionals to have a strong understanding of how the two fields harmonize. The marketing and SCM fields are so broad and interconnected, that it can be harder to think of how they differ, than how they relate. 

When decisions and efforts from both functions unify together, organizations can pack a more powerful punch in the results they pursue. They can satisfy customer demand triggered by the company’s advertisements, and by making their products and services consistent, companies can build long-term trust. When the two perform disjointedly, the organization starts pursuing different internal goals, which frequently leads to dysfunction or even disaster. 

The first step to understanding how the two business functions come together is through definition. 


Marketing Defined:

As defined by the American Marketing Association: “Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.” (AMA, 2019).

SCM Defined:

As defined by the Council of Supply Chain Management Professionals: “Supply chain management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies.” (CSCMP, 2019).


Let’s look at some examples of how marketing and SCM are related.

1. Supply and demand:

This might be somewhat rudimentary, but it’s a powerful concept here. The whole basis of a free market economy is supply and demand. 

Supply is overseen by the company’s SCM personnel. Such functions include sourcing, procurement, logistics, inventorying, distribution, and more. Demand is overseen by marketing managers, like advertising, sales, differentiation, and customer feedback through surveys and focus groups. 

When these two components come together, a business can effectively supply the products that their marketers promoted. Marketing is the recognition of what customers need. SCM is the delivering of those customer needs. This is the broader essence of the relationship between SCM and marketing, but there is much more behind this face value.

2. Avoiding stockouts from promotions:

When items are promoted with advertisements and discounts, the number of sales tend to increase. Hopefully not so much as to cause stockouts, which is when the inventory of items is sold out completely. Stockouts are a SCM’s worst nightmare. 

Of course, it’s bad for the customer because they will lose trust in coming to your business for things, but it’s a huge opportunity missed for the retailer and manufacturer to earn profits. One saying goes “Stockouts cause walkouts”. Customers lose confidence in shopping at locations that fail to stock enough of what they came to purchase. This leads to the risk of customers developing new habits of shopping at competitor locations. For example, if CVS keeps running out of milk, people might start shopping at Walgreens.

When the marketing team is setting up promotions, it is important to communicate with supply managers to ensure some measures are put into place to prevent stockouts. Some SCM considerations to prevent stockouts:

  1. Forecasting accuracy
  2. Safety stock utilizations
  3. Fast resupply logistics capabilities (Just-in-time)

3. Brand quality:

Quality can be the key differentiating factor for many products and services, especially heavily competitive markets. A trust in a company’s standard of quality often keeps customers coming back for more. 

Take Häagen-Dazs ice cream, for example, the level of quality in their ingredients is held to a higher standard than most other brands of ice cream. They source their vanilla beans very precisely to keep consistency in their vanilla ice cream. This builds customer trust. Sourcing and procurement are critical SCM functions that facilitate a company’s quality standard. 

On the flip side, marketers need to be able to convey the right messaging in their advertisements regarding things like product quality. Good marketers know their products well. Häagen-Dazs marketers would benefit from having an understanding of their ice cream’s quality so they can formulate marketing strategies that speak to their target market. 

SCM personnel must communicate with marketing to ensure the right products are being produced and the right messages are being sent out. If the marketing department is sending messages that are inconsistent with the company’s SCM capabilities, customers can get misleading information and lose trust.

Conclusion: 

A company’s SCM and marketing departments are more interconnected than it may seem on the surface. The reality is that organizations that encourage communication and collaboration between the two are poised to be more in-tune with customer needs and delivery expectations. When properly integrated, the business model becomes inherently more cohesive and high-performing.

SCM needs marketing to facilitate communication with potential customers. Marketing needs SCM to fulfill the products and services advertised. The two go hand-in-hand. 

Perform planning and goal-setting sessions with representatives from both functions. Ensure processes are in place that promote communication and knowledge sharing between the two departments. Then encourage and recognize the efforts of collaboration.

Interested in learning more about Supply Chain Management or Marketing? Reach out to the MC360 Team. 

References:

CSCMP, 2019. Definitions and glossary. Retrieved from: https://cscmp.org/CSCMP/Educate/SCM_Definitions_and_Glossary_of_Terms.aspx

AMA, 2019. What is marketing. Retrieved from: https://www.ama.org/the-definition-of-marketing-what-is-marketing/

Read More
Sam Mohammad Sam Mohammad December 10, 2019 0 Comments

Building Business Strategies is Like Throwing Darts

The time has finally come. You’ve poured your blood, sweat, and tears into your most recent content piece, and it’s ready to be packaged up and sent to the client to be pushed live. After a few final checks and only…

Read More
Sam Mohammad Sam Mohammad July 9, 2019 0 Comments