Overview
As any entrepreneur will tell you, finding the right business model is imperative to building a sustainable business. Developing your business model is no simple task, as there are numerous types of business models that vary based on what the product is, how it is made, and who will be buying it. In fact, some businesses have multiple business models, serving very different customers. But how effective is a good business model without a purpose behind it? Upon completion of this Skill, you will have a better understanding of what constitutes a business model, how to ensure there is a viable customer segment for your product or service, how to balance providing customer value with making money, as well as the fundamental importance of passion and purpose.
One particularly effective tool for helping to identify and analyze the right model for your business is the Business Model Canvas (BMC). The BMC can be thought of as the building blocks to your business, and a thorough understanding of how each block relates to your business helps increase your effectiveness as an entrepreneur. Here, we will go in depth of each of the nine blocks that comprise the BMC: Customer Value Proposition, Customer Segments, Customer Relationships, Revenue Drivers, Cost Structure, Key Resources, Key Activities, Key Partnerships, and Channels.
While ensuring each of the blocks is as inclusive as possible through hypothesis testing and experimentation, the two most important aspects of the BMC are (1) the Customer Value Proposition (CVP), and (2) the customer segments, or the group of people who will most likely want to purchase your product or service. Understanding a specific segment of customers’ problems and how you can solve them through frequent engagement and testing allows a business to deliver value to that target customer. A business must receive value that can be reflected in a monetary way while providing value for a well-vetted customer segment, or else there is no business to be had.
However, even the most well-structured business model will have difficulty without a purpose behind it. In his book The Art of the Start, entrepreneur Guy Kawasaki refers to it as a founder’s “meaning.” An entrepreneur’s why, purpose, or meaning, and by extension the business’ why, purpose, or meaning, is the driving force behind any well-structured business model. This meaning usually stems from a founder’s values, which tend to manifest their way into being the entire company’s values. Not only does this purpose help all stakeholders in a company have a unified vision, but this singular focus also helps steer the business through an ever-changing world.
A well-structured and frequently tested business model is the foundation of any sustainable business. A focused and diligent approach to ensure all of the pieces are in place helps to increase a business’s chances of success. Combining a carefully vetted business model with a focused and shared purpose will ultimately help your business adapt to inevitable change.
Further Reading
Not sure where to start?Assess your skills level for developing your business model
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