Value Proposition & The Business Model Canvas

A strong Value Proposition is the driving force behind any successful business venture. The Business Model Canvas helps focus on the Value Proposition not the product or service.

Last week at the BCIC New Ventures Competition seminar I learned about developing a Business Canvas Model. The term wasn’t entirely new to me; however, it was no more than a single page template and a name. The Business Canvas Model forms part of the write up for the Round 2 Submission in the contest. As I’ve been working through this I’ve come to realize just how powerful a tool it is.

Let’s get one thing straight, I’m no expert. As I mentioned, I’ve just started using this tool. What I have found is how quick it is to learn, and more importantly, how it helps focus on the business model and its viability. So much so that I just had to share it with you.

A One Page Business Plan:

Value Proposition & The Business Model Canvas

The Business Model Canvas is a single page divided into sections which define and identify nine essential areas of any business venture. This short Business Model Canvas video will quickly run you through the template.

Customers & Solutions:

The focus is on the market viability of the product or idea. At its core is defining your Customer, their target market, and the Value Proposition you bring to this. This is different from describing your product or service. It’s about understanding your customer and their needs, and providing them with a solution that has quantifiable value and a unique differentiator.

Value Proposition for CustomersIn support of this, and nestled between the two on the form, are the sections on Channels and Customer Relationships. Channels is where you identify how to deliver the Value Proposition to the Customer. Is the product or service delivered virtually over the internet,  physically delivered to the customer’s door, or does the customer have to visit a bricks and mortar establishment to pick up the product?

Customer Relations is about how you engage your customer pre and post sales. Do you have a monthly news letter; can they access user information on-line; how do they interact with you regarding service issues, etc?

Below these is Revenue Steams. What Products and/or service do you actually sell to the customer. How much do each of the stream contribute to the overall revenue. This can help you focus on which products or services are most important. It’s not always what you think. For instance, if you think Canon is in the business of selling printers, consider how much you paid for your last printer, and how much you have/will spend on ink/toner over the next five years. Now where do you think Canon’s revenue stream is?

Delivering your Value Proposition:

The remaining four sections look at what it’s actually going to take to deliver your Value Proposition to your Customer. The Key Resources focuses on those physical and virtual resources that are absolutely required to deliver your Value Proposition. It includes physical items such as facilities. If R&D is critical to delivering your Value Proposition, then a suitable laboratory is a Key Resource. What human resources do you need, not only to develop the product or service but to get it into your customers hands? How important is after sales support? Finally, don’t forget about Financial resources. Someone is going to have to bankroll your business, at least until you become cash flow positive.

Value Proposition & Business PartnersKey Partners is about identifying synergies. Partnering with an organization in the industry that needs your Value Proposition can be a win win. They may get early access to your solution, and in tern provide market exposure and possibly financing. Similarly, partnering with a supplier of a key item can ensure a continues supply while providing the supplier with a long term revenue stream.

The Key Activities identify how you will deploy the key resources to deliver your Value Proposition. This should be a one-to-one match with your Key Resources and Key Partners. If you have a Key Resource or Key Partner and no activity to assign them too, how key are they? Similarly, how will you carry out Key Activities if you don’t have the resource.

Where’s the Value?

The final section is the Cost Structure, how are you going to make money. Here you focus on your primary costs as they relate to your Key Activities and Key Resources. How will your Revenue Streams cover your costs? Where is your break even point? Are you actually going to make money?

Planning is key to the success of any business activity. The Business Model Canvas is a great tool to help you capture the essence of any business venture. By focusing on the Customer and the Value Proposition. you can quickly determine the viability of your model. One last comment, make sure you validate your assumptions, especially in determining what your customer wants. Yes, this means you’ll likely have to pick up the phone and talk with them.

 

© 2014 Creator Consulting

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