Topic 2: Discuss the key components of the Business Model Canvas and their significance
There are various templates of business models, both online and offline. The reason why the Business Model Canvas was chosen for the purposes of this Module is because it is brief and concise, very easy to follow and fill-in, and it can be found on several sources online and for free.
The Business Model Canvas is comprised of 9 components, which are like building blocks, and each one has a specific meaning:
- Customer Segments: Who are the possible – or the ideal – customers and why would they buy the product/ service? Demographics are of key importance here: age, gender, socio-economic status etc. Creating customer personas, like the following one, can be very useful:
EH Consortium, created on Canva
- Value Propositions: Why would the customers prefer this product/ service instead of the competitors’? What problems does it solve? What needs does it address? What gap does it fill?
- Channels: How is the business reaching potential customers? Physical stores? E-shop? Social media? Mobile app? Is customer service a priority, e.g. call center/ helpdesk/ online chat/ bot?
- Customer Relationships: How does the business build and maintain customer relationships? Salespeople? Brand ambassadors?
- Revenue Streams: What is the business strategy? Direct sales? Free samples and giveaways? Licensing/ subscription?
- Key Resources: All the assets needed to create value for the customers, e.g. a very strong brand/ trademark, a very experienced and talented human capital, a very functional software etc.
- Key Activities: Areas that the business will be really good at, e.g. design, customer service, retail management etc.
- Key Partners: Joint ventures, strategic alliances etc.
- Cost: Space, rent, payroll, marketing, fixed or variable costs. Are they realistic? Is the plan realistic?
By being so well-structured and by asking all the important questions, the model allows a potential or an established entrepreneur to describe, design, challenge, invent, and pivot their business model, and this is why it is so popular worldwide.
A relevant video can be found here: https://vimeo.com/78350794
