Business Model

A business model describes the rationale of how an organization creates, delivers, and captures value. In general, there are four main areas of business: customers, offers, infrastructure, and financial viability.

 Business Model Structure

Alexander Osterwalder and Yves Pigneur, authors of "Business Model Generation", described business model components very well into nine building blocks:
  1. Customer Segments
    - For whom are we creating value?
    - Who are our most important customers?
    - Mass, niche, segmented, diversified, or multi-sided markets?
  2. Value Propositions
    - What value do we deliver to the customer?
    - Which one of our customer’s problems are we helping to solve?
    - What bundles of products and services are we offering to each segment?
  3. Channels
    - Through which channels do our customers want to be reached?
    - How are we reaching them now?
    - How are we integrating them with consumer decision journey?
  4. Customer Relationships
    - What type of relationship does each of our customer expect us to establish and maintain with them?
    - How costly are they?
  5. Revenue Streams
    - For what value are our customers really willing to pay?
    - How are they currently paying? How would they prefer to pay?
    - Fixed pricing / dynamic pricing? One-time / ongoing payment?
  6. Key Resources
    - What most important resources do our Value Propositions require?
    - Physical? Intellectual? Human? Financial?
  7. Key Activities
    - What most important activities do our Value Propositions require?
    - Production? Problem solving? Platform/Network?
  8. Key Partnerships
    - Who are our key partners & key suppliers?
    - Which key resources are we acquiring from partners?
    - Which key activities do partners perform?
  9. Cost Structures
    - What are the most important costs inherent in our business model?
    - Is our business model cost-driven or value-driven?
Those nine building blocks can be formed in a one-page diagram called Business Model Canvas [pdf]. You may want to print it in a big sheet and put post-it notes for each element in the building blocks. There are some alternative canvas that are more suitable to certain environment, such as Lean Canvas. However, we'll only focus on the original canvas in this article.

Business Model Canvas

For example, the following is current business model of Suitmedia, a creative digital agency based in Jakarta, drawn in a business model canvas. Suitmedia provides digital marketing assistance to achieve your goals and IT solutions to increase your firm's performance.

Example of Business Model Canvas : Suitmedia Digital Agency

From the existing business model canvas, we can easily identify whether our business financially make sense to succeed or not. Later, we can easily evaluate our business model from both big picture and building block perspective with a comprehensive SWOT analysis, or any other framework such as Porter's 5F, 4P, 3C, McKinsey 7S, BCG matrix, whatever we want to apply. Then, after we have our assessment result, we can re-engineer our business model to be more profitable.

Personal Business Model Canvas

We can use business model canvas not only for assessing companies, but also for personal life. It helps us describe the rationale of how we – as an individual – create, deliver, and capture value. In this article, we focus on using business model concept for individual in professional context.

Personal Business Model

The following are nine building blocks of personal business model, as well described by Timothy Clark, author of "Business Model You".
  1. Key Resources
    - Who are you? What are your interests, skills & abilities, personality?
    - What do you have? What knowledge, experience, network, assets do you have?
  2. Key Activities
    - What do you do?
    - What does distinguish your occupation from others?
  3. Customers
    - Who do you help?
    - Supervisor, coworkers, clients, community?
  4. Value Provided
    - How do you help?
    - What value do you deliver to your customers?
  5. Channels
    - How will potential Customers discover how you can help them?
    - How will they decide whether to buy your service?
    - How will they buy it?
    - How will you deliver what Customers buy?
    - How will you follow-up to make sure Customers are happy?
  6. Customer Relationships
    - How do you interact with Customers?
    - Face-to-face or written communication?
    - Single transaction or ongoing services?
    - Acquisition-focused or retention-focused?
  7. Key Partners
    - Who helps you?
    - Colleagues, mentors, professional network, family, friends
  8. Benefits
    - What do you get?
    - Income sources + Other intangible benefits?
  9. Costs
    - What do you give?
    - Hard cost (education, commuting, clothing, etc) + Soft cost (dissatisfaction)
We may notice there are slight differences in the building blocks sequence to emphasize its priority. It is important to assess our personal key resource first, especially the combination of our interest, skills & abilities, and personality, since they determine our career "sweet spot". Then, we can have our Purpose Statement by combining our Value Provided (how we help), Customers (who we help), and Key Activities (what we do). In addition, our Value Provided should be more Customer-oriented and beyond our Key Activities.

For example, this is personal business model of a software engineer. Her/his Purpose Statement is "to improve end-users' life quality and increase tech firm capability in innovation by developing application software."

Example of Personal Business Model : Software Engineer

Later on, we may use this personal business model canvas to revisit our life direction and consider how we want to align our personal and career aspirations. We can start with reflecting who we are and re-identify our career purpose. And then, we may use the same technique as we assessed business model for companies to our personal business model, both from big picture perspective (our world beyond work) and from building block perspective. Finally, we may need to redraw our personal business model canvas if we think we need to reinvent ourself and our career.

"It's not normal to know what we want.
It is a rare and difficult psychological achievement.
— Abraham Maslow

No comments :