12 Aug On Startups: The Three Keys of Osterwalder’s Business Model Canvas
“The secret of getting ahead is getting started. The secret of getting started is breaking your complex overwhelming tasks into smaller manageable tasks, and then starting on the first one.” – Mark Twain
In 2008, Alexander Osterwalder, business theorist, consultant, and co-founder of Strategyzer, released a simple 9-step template he called the “Business Model Canvas”. This tool was created to assist entrepreneurs and business owners in breaking down their ventures into smaller, easier to understand segments, the idea being that each segment can be honed in on, tweaked, and improved significantly by utilizing the canvas.
In this article we’ll discuss the three keys you’ll need to build a concrete and detailed business plan for your startup – your key resources, key activities, and key partners.
This is the third post in a series of articles examining Osterwalder’s Business Model Canvas. To start from the beginning, click here.
What resources are critical to the proper functioning of your business model? Begin by making a list of the materials you’ll need, the equipment you’ll require, and the types of people you’ll need to hire to deliver your value proposition the your customers. (img source)
The tool classifies your business needs into four types of key resources – physical, financial, intellectual, and human.
Examples of physical resources include the facilities, buildings, vehicles, machines, and distribution networks needed to successfully operate your business. Financial resources include all cash and lines of credit you use to develop and maintain your venture.
Intellectual resources involve a company’s brand, patents and copyrights, partnerships, and customer lists, while human resources (not the same as HR) can be defined as the employees that comprise the variety of roles within a functional company.
To spell out this concept, we’ll list some of the key resources the owner of an Italian restaurant would need to successfully operate his pizzeria.
Physical: the restaurant, food preparation equipment, company delivery vehicles
Financial: money to pay for ingredients, his employees’ paychecks, utilities for the building (rent, water, electric, etc.)
Intellectual: secret recipes, cooking methods unique to the pizzeria, the company name, brand, and customer database
Human: 5 cashiers, 12 cooks, 6 drivers, 3 managers
Creating a detailed list of the resources you’ll need to operate your venture is not only necessary to get the most out of the following segments of the tool, but even more importantly, you’ll have a better idea of the monetary costs associated with running and maintaining your business.
What activities or actions will you need to consistently take for your business to succeed? When considering this question, think of each segment of the tool we’ve covered so far. What actions are necessary to effectively operate your distribution channels? Maintain and enhance your customer relationships? Communicate your value proposition to your customers?
To illustrate this concept, let’s examine a few of the key activities a coffee shop owner might prioritize in order to keep their startup restaurant open. Listed below are some of the areas the entrepreneur can focus on with an example from each.
business development – building relationships with fair trade coffee farmers to provide a more desirable product for customers
marketing – creating an Instagram page to share weekly specials and contests followers can enter into to win free drinks
product development – buying higher quality coffee beans and high-end brewing equipment to create a superior product
market research – collecting menus from similar restaurants in town, analyzing their menu for new ideas and items to sell
Keep in mind that your list of key activities will likely be much longer than this. There are countless other areas you should focus on to ensure your startup is successful – we’ll list a few places to start below. Additionally, you can take a look at the business plan to the right to get an idea of other areas you can consistently develop: (img source)
- more effective communication with your clients/customers
- researching market trends and establishing new distribution channels
- building and improving your sales and onboarding processes
- attending networking events to meet other professionals in your industry
They say that no man is and island – turns out the same is true for businesses. Whichever industry you’re in, you’ll rely on at least one (but probably a few) other entities to create and distribute your product to your customer segments.
Whether it’s to gain access to a particular resource, reduce the risk of putting a new product on the market, or to save your bottom line by optimizing your production processes, there are plenty of reasons you should consider forming strategic relationships with other companies.
Listed below are some of the most common types of partnerships with an example of each. (img source)
The tool classifies partnerships into four different types:
strategic alliance – a partnership between non-competitors; ex: Spotify and Uber recently formed an alliance that allows each business to pursue prospects from the other’s customer lists, giving them a significant advantage over their competitors (source)
co-opetition – a strategic partnership between competitors with the end goal of a beneficial outcome for both parties; ex: Samsung and Sony agreed to share research and development costs when they were both working on a new design for flatscreen LED televisions (source)
joint ventures – two or more businesses work together to complete a new project that requires insights from multiple industries; ex. Google and NASA combining efforts to create Google Earth (source)
buyer-supplier relationships – partnership that ensures business owners have a steady supply of resources coming in, while the supplier knows they have a confirmed buyer for their product; ex. Starbucks only sources coffee beans from certain farms in South America, Asia, and Hawaii (source)
Now that you have a better understanding of the types of partnerships that exist between businesses, ask yourself the following questions while completing this segment of the canvas:
Which partnerships are critical to my business?
Who are my critical suppliers?
What type of partnerships will suit my needs?
Remember, at the end of the day it’s crucial that any partnerships you enter into are mutually beneficial – both you and your partner should stand to gain some type of advantage by developing a strategic relationship.
Check in next week for our analysis of the two remaining segments of the Business Model Canvas, cost structure and revenue streams. In the meantime, take a look at our blog – you’re sure to find something you like.
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