lecture 3 - business model

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Business Models The Thought Process Behind Building Your Business Model


In the first 2 lectures, we have covered the basics of what entrepreneurship is like in Pakistan and how to idea proof your venture.


While building on the right idea is essential to the success of your venture, getting the model right is critical.


Did you know that 80% of businesses are started without a business plan?


Without a business plan, you don’t have a guidebook that will show you – or anyone else – what your business is about to do and why it’s important.


A business plan is essential, but how do you write a business plan that works?


Business Model Canvas Mapping Your Business


At emagine, we like to use a tool called the Business Model Canvas.


Develop a simple 1 page document that could be used by entrepreneurs to develop their business models accurately and efficiently.


The Canvas is comprehensive. It highlights all the key areas that matter to successful business model generation and eliminates everything else.


We are going to dig deep into this canvas so that you can effectively use it to develop your business model and then use it to write your business plan.


The Business Model & It’s Importance


The first question you are going to ask is –

What is a business model?


Now, there are multiple definitions of what makes up a business model depending on who you talk to, their level of education/experience and what they do for a living.


But essentially, a business model: Describes the rationale of how an organization creates, delivers, and captures value.


Confused?


A business model is the reason that you do what you do, why you do it, and how you expect to make money from it.


When you get this wrong, your entire business plan is weak and can easily be turned down by investors, but more importantly – it won’t give you the guidance you need to run your business.


So let’s break this down…


The 9 Building Blocks The Logic of How a Company Makes Money


To build an effective business model, we believe that there are 9 basic building blocks that must be addressed.


These 9 building blocks cover 4 main areas: Customers Offer Infrastructure Financial Viability


These 9 building blocks give us the blueprint for our strategy


So what are the 9 building blocks?


And they all fit together like this…


Block 1 – Customer Segments


Defines the different groups of people or organizations a venture aims to reach and serve.


Customers are the heart of the business model and without them, no business can survive.


A company may group them into different segments: Common Needs Common Behaviors


You can also have multiple Customer Segments within 1 business model


But you must decide on who your customers are when developing the business model.


Needs require and justify a distinct offer Reached through different distribution channels Require different types of relationships


Substantially different profitabilities Willing to pay for different aspects of an offer


The Different Segments of Customers Mass Market

Businesses focused on mass markets don’t distinguish between different Customer Segments – they focus on one large group with broadly similar needs and problems.

Niche Market

Businesses targeting niche markets cater to very specific, specialized Customer Segments. Value Propositions, Distribution Channels and Customer Relationships are all tailored to the specific requirements of the market

Segmented

Some businesses distinguish between market segments with slightly different needs and problems. The segments have similar but varying needs and problems which affect Value Proposition, Distribution Channels, Customer Relationships and Revenue Streams.

Diversified Businesses with diversified customers serve two or more unrelated Customer Segments with very different needs and problems.

Multi-‐sided Businesses that serve two or more independent Customer Segments.


Block 2 – The Value Proposition


Describes the bundle of products and services that create value for a specific Customer Segment


It’s the reason why customers turn to one company over another – because it solves the problem or satisfies the need.


The Value Proposition is an aggregation, or bundle, of benefits that a company offers customers.


Some can be innovative representing a new or disruptive offer.


Others can be similar to existing market offers, with added features and attributes.


What value do we deliver to the customer? Which one of our customer’s problems are we helping to solve? Which customer needs are we satisfying? What bundles of products/services are we offering each Customer Segment?


Value can be created by simply helping a customer get certain jobs

done.


But the value proposition is determined through specific things: Design Brand/Status Price Cost Reduction Accessibility Ease of Use Convenience


We will continue this lecture in 2 weeks when we move back to our 3 hour format.

lecture 3 - business model

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