Business Model Canvas: Explained with Examples
Got a new business idea, but don’t know how to put it to work? Want to improve your existing business model? Overwhelmed by writing your business plan? There is a one-page technique that can provide you the solution you are looking for, and that’s the business model canvas.
In this guide, you’ll have the Business Model Canvas explained, along with steps on how to create one. All business model canvas examples in the post can be edited online.
What is a Business Model Canvas
A business model is simply a plan describing how a business intends to make money. It explains who your customer base is and how you deliver value to them and the related details of financing. And the business model canvas lets you define these different components on a single page.
The Business Model Canvas is a strategic management tool that lets you visualize and assess your business idea or concept. It’s a one-page document containing nine boxes that represent different fundamental elements of a business.
The business model canvas beats the traditional business plan that spans across several pages, by offering a much easier way to understand the different core elements of a business.
The right side of the canvas focuses on the customer or the market (external factors that are not under your control) while the left side of the canvas focuses on the business (internal factors that are mostly under your control). In the middle, you get the value propositions that represent the exchange of value between your business and your customers.
The business model canvas was originally developed by Alex Osterwalder and Yves Pigneur and introduced in their book ‘ Business Model Generation ’ as a visual framework for planning, developing and testing the business model(s) of an organization.
What Are the Benefits of Using a Business Model Canvas
Why do you need a business model canvas? The answer is simple. The business model canvas offers several benefits for businesses and entrepreneurs. It is a valuable tool and provides a visual and structured approach to designing, analyzing, optimizing, and communicating your business model.
- The business model canvas provides a comprehensive overview of a business model’s essential aspects. The BMC provides a quick outline of the business model and is devoid of unnecessary details compared to the traditional business plan.
- The comprehensive overview also ensures that the team considers all required components of their business model and can identify gaps or areas for improvement.
- The BMC allows the team to have a holistic and shared understanding of the business model while enabling them to align and collaborate effectively.
- The visual nature of the business model canvas makes it easier to refer to and understand by anyone. The business model canvas combines all vital business model elements in a single, easy-to-understand canvas.
- The BMC can be considered a strategic analysis tool as it enables you to examine a business model’s strengths, weaknesses, opportunities, and challenges.
- It’s easier to edit and can be easily shared with employees and stakeholders.
- The BMC is a flexible and adaptable tool that can be updated and revised as the business evolves. Keep your business agile and responsive to market changes and customer needs.
- The business model canvas can be used by large corporations and startups with just a few employees.
- The business model canvas effectively facilitates discussions among team members, investors, partners, customers, and other stakeholders. It clarifies how different aspects of the business are related and ensures a shared understanding of the business model.
- You can use a BMC template to facilitate discussions and guide brainstorming brainstorming sessions to generate insights and ideas to refine the business model and make strategic decisions.
- The BMC is action-oriented, encouraging businesses to identify activities and initiatives to improve their business model to drive business growth.
- A business model canvas provides a structured approach for businesses to explore possibilities and experiment with new ideas. This encourages creativity and innovation, which in turn encourages team members to think outside the box.
How to Make a Business Model Canvas
Here’s a step-by-step guide on how to create a business canvas model.
Step 1: Gather your team and the required material Bring a team or a group of people from your company together to collaborate. It is better to bring in a diverse group to cover all aspects.
While you can create a business model canvas with whiteboards, sticky notes, and markers, using an online platform like Creately will ensure that your work can be accessed from anywhere, anytime. Create a workspace in Creately and provide editing/reviewing permission to start.
Step 2: Set the context Clearly define the purpose and the scope of what you want to map out and visualize in the business model canvas. Narrow down the business or idea you want to analyze with the team and its context.
Step 3: Draw the canvas Divide the workspace into nine equal sections to represent the nine building blocks of the business model canvas.
Step 4: Identify the key building blocks Label each section as customer segment, value proposition, channels, customer relationships, revenue streams, key resources, key activities, and cost structure.
Step 5: Fill in the canvas Work with your team to fill in each section of the canvas with relevant information. You can use data, keywords, diagrams, and more to represent ideas and concepts.
Step 6: Analyze and iterate Once your team has filled in the business model canvas, analyze the relationships to identify strengths, weaknesses, opportunities, and challenges. Discuss improvements and make adjustments as necessary.
Step 7: Finalize Finalize and use the model as a visual reference to communicate and align your business model with stakeholders. You can also use the model to make informed and strategic decisions and guide your business.
What are the Key Building Blocks of the Business Model Canvas?
There are nine building blocks in the business model canvas and they are:
Customer relationships, revenue streams, key activities, key resources, key partners, cost structure.
- Value Proposition
When filling out a Business Model Canvas, you will brainstorm and conduct research on each of these elements. The data you collect can be placed in each relevant section of the canvas. So have a business model canvas ready when you start the exercise.
Let’s look into what the 9 components of the BMC are in more detail.
These are the groups of people or companies that you are trying to target and sell your product or service to.
Segmenting your customers based on similarities such as geographical area, gender, age, behaviors, interests, etc. gives you the opportunity to better serve their needs, specifically by customizing the solution you are providing them.
After a thorough analysis of your customer segments, you can determine who you should serve and ignore. Then create customer personas for each of the selected customer segments.
There are different customer segments a business model can target and they are;
- Mass market: A business model that focuses on mass markets doesn’t group its customers into segments. Instead, it focuses on the general population or a large group of people with similar needs. For example, a product like a phone.
- Niche market: Here the focus is centered on a specific group of people with unique needs and traits. Here the value propositions, distribution channels, and customer relationships should be customized to meet their specific requirements. An example would be buyers of sports shoes.
- Segmented: Based on slightly different needs, there could be different groups within the main customer segment. Accordingly, you can create different value propositions, distribution channels, etc. to meet the different needs of these segments.
- Diversified: A diversified market segment includes customers with very different needs.
- Multi-sided markets: this includes interdependent customer segments. For example, a credit card company caters to both their credit card holders as well as merchants who accept those cards.
Use STP Model templates for segmenting your market and developing ideal marketing campaigns
Visualize, assess, and update your business model. Collaborate on brainstorming with your team on your next business model innovation.
In this section, you need to establish the type of relationship you will have with each of your customer segments or how you will interact with them throughout their journey with your company.
There are several types of customer relationships
- Personal assistance: you interact with the customer in person or by email, through phone call or other means.
- Dedicated personal assistance: you assign a dedicated customer representative to an individual customer.
- Self-service: here you maintain no relationship with the customer, but provides what the customer needs to help themselves.
- Automated services: this includes automated processes or machinery that helps customers perform services themselves.
- Communities: these include online communities where customers can help each other solve their own problems with regard to the product or service.
- Co-creation: here the company allows the customer to get involved in the designing or development of the product. For example, YouTube has given its users the opportunity to create content for its audience.
You can understand the kind of relationship your customer has with your company through a customer journey map . It will help you identify the different stages your customers go through when interacting with your company. And it will help you make sense of how to acquire, retain and grow your customers.
This block is to describe how your company will communicate with and reach out to your customers. Channels are the touchpoints that let your customers connect with your company.
Channels play a role in raising awareness of your product or service among customers and delivering your value propositions to them. Channels can also be used to allow customers the avenue to buy products or services and offer post-purchase support.
There are two types of channels
- Owned channels: company website, social media sites, in-house sales, etc.
- Partner channels: partner-owned websites, wholesale distribution, retail, etc.
Revenues streams are the sources from which a company generates money by selling their product or service to the customers. And in this block, you should describe how you will earn revenue from your value propositions.
A revenue stream can belong to one of the following revenue models,
- Transaction-based revenue: made from customers who make a one-time payment
- Recurring revenue: made from ongoing payments for continuing services or post-sale services
There are several ways you can generate revenue from
- Asset sales: by selling the rights of ownership for a product to a buyer
- Usage fee: by charging the customer for the use of its product or service
- Subscription fee: by charging the customer for using its product regularly and consistently
- Lending/ leasing/ renting: the customer pays to get exclusive rights to use an asset for a fixed period of time
- Licensing: customer pays to get permission to use the company’s intellectual property
- Brokerage fees: revenue generated by acting as an intermediary between two or more parties
- Advertising: by charging the customer to advertise a product, service or brand using company platforms
What are the activities/ tasks that need to be completed to fulfill your business purpose? In this section, you should list down all the key activities you need to do to make your business model work.
These key activities should focus on fulfilling its value proposition, reaching customer segments and maintaining customer relationships, and generating revenue.
There are 3 categories of key activities;
- Production: designing, manufacturing and delivering a product in significant quantities and/ or of superior quality.
- Problem-solving: finding new solutions to individual problems faced by customers.
- Platform/ network: Creating and maintaining platforms. For example, Microsoft provides a reliable operating system to support third-party software products.
This is where you list down which key resources or the main inputs you need to carry out your key activities in order to create your value proposition.
There are several types of key resources and they are
- Human (employees)
- Financial (cash, lines of credit, etc.)
- Intellectual (brand, patents, IP, copyright)
- Physical (equipment, inventory, buildings)
Key partners are the external companies or suppliers that will help you carry out your key activities. These partnerships are forged in oder to reduce risks and acquire resources.
Types of partnerships are
- Strategic alliance: partnership between non-competitors
- Coopetition: strategic partnership between partners
- Joint ventures: partners developing a new business
- Buyer-supplier relationships: ensure reliable supplies
In this block, you identify all the costs associated with operating your business model.
You’ll need to focus on evaluating the cost of creating and delivering your value propositions, creating revenue streams, and maintaining customer relationships. And this will be easier to do so once you have defined your key resources, activities, and partners.
Businesses can either be cost-driven (focuses on minimizing costs whenever possible) and value-driven (focuses on providing maximum value to the customer).
This is the building block that is at the heart of the business model canvas. And it represents your unique solution (product or service) for a problem faced by a customer segment, or that creates value for the customer segment.
A value proposition should be unique or should be different from that of your competitors. If you are offering a new product, it should be innovative and disruptive. And if you are offering a product that already exists in the market, it should stand out with new features and attributes.
Value propositions can be either quantitative (price and speed of service) or qualitative (customer experience or design).
What to Avoid When Creating a Business Model Canvas
One thing to remember when creating a business model canvas is that it is a concise and focused document. It is designed to capture key elements of a business model and, as such, should not include detailed information. Some of the items to avoid include,
- Detailed financial projections such as revenue forecasts, cost breakdowns, and financial ratios. Revenue streams and cost structure should be represented at a high level, providing an overview rather than detailed projections.
- Detailed operational processes such as standard operating procedures of a business. The BMC focuses on the strategic and conceptual aspects.
- Comprehensive marketing or sales strategies. The business model canvas does not provide space for comprehensive marketing or sales strategies. These should be included in marketing or sales plans, which allow you to expand into more details.
- Legal or regulatory details such as intellectual property, licensing agreements, or compliance requirements. As these require more detailed and specialized attention, they are better suited to be addressed in separate legal or regulatory documents.
- Long-term strategic goals or vision statements. While the canvas helps to align the business model with the overall strategy, it should focus on the immediate and tangible aspects.
- Irrelevant or unnecessary information that does not directly relate to the business model. Including extra or unnecessary information can clutter the BMC and make it less effective in communicating the core elements.
What Are Your Thoughts on the Business Model Canvas?
Once you have completed your business model canvas, you can share it with your organization and stakeholders and get their feedback as well. The business model canvas is a living document, therefore after completing it you need to revisit and ensure that it is relevant, updated and accurate.
What best practices do you follow when creating a business model canvas? Do share your tips with us in the comments section below.
Join over thousands of organizations that use Creately to brainstorm, plan, analyze, and execute their projects successfully.
FAQs About the Business Model Canvas
- Use clear and concise language
- Use visual-aids
- Customize for your audience
- Highlight key insights
- Be open to feedback and discussion
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Amanda Athuraliya is the communication specialist/content writer at Creately, online diagramming and collaboration tool. She is an avid reader, a budding writer and a passionate researcher who loves to write about all kinds of topics.
- Key Activities Block in Business Model Canvas
© Entrepreneurial Insights based on the concept of Alex Osterwalder
In this article, we will look at the “Key Activities” block in the Business Model Canvas . We will cover, 1) an introduction to key activities , 2) questions to consider , 3) typical activities , 4) categories for key activities , and 5) a case study on LinkedIn .
As the title suggests, these are the most important tasks a company must carry out in order to fulfill its business purpose. To be successful, a company must carry out key actions that are primarily dictated by its business model. As we studied with the key resources building block, key activities are similarly pivotal in an organization fulfilling its value proposition, reaching its customer segments, sustain its customer relationships and ultimately create long-term revenue streams. Key activities are different according to the business model of the organization carrying out the activity. Hence, an organization that relies heavily on its 3 rd party contracts will list channel management as a key activity. A product-driven business will lend more significance to activities such as continuous research to understand their users better as well as constant innovation in technology.
Hence, it is safe to assume that a key activity for software giant Microsoft is Software Development; similarly, for computer manufacturer Dell, supply chain management may be a key activity, and a consulting business like McKinsey probably lists solving client problems as its key activity.
QUESTIONS TO CONSIDER
When evaluating your business through the Key Activities building block it is essential that you take a holistic view of the business and evaluate related building blocks as well, to understand how they will contribute to your key activities.
- Based on our value propositions , what kinds of activities are key to our business?
- What kinds of activities are key to our distribution channels?
- What kinds of activities are important if we want to maintain our customer relationships ?
- What kinds of activities are fundamental to our revenue streams?
Our Value Propositions will obviously have the most profound impact on the kind of activities we carry out. However, as the business flourishes, we may begin to include unnecessary activities within this block as well. To prevent this, we use a method called the Minimum Viable Product or MVP , which is the most basic version of your product made through a single cycle of the build, measure and learn loop. Most entrepreneurs will resist the Minimum Viable Product because everyone believes that for a product to be a success, it must provide maximum value to its customers. This brings us back to the Customer Segment and Value Proposition building blocks where we learnt that we have to be selective about the customers we target and the kind of value we provide by relieving their pains and giving them gains. Creating a bloated product with tons of extra feature that are of no value to your customer but which add to his investment, is not the way to go. A product is a combination of its form and function, function being what it does and form detailing how it does it. This form is crucial to the customer experience and helps in determining the key activities. Similarly, the kind of customer relationship you want establish will also entail certain key activities to bring it about and so on.
As mentioned earlier the Key activities building block creates a bridge between your value propositions and the customer segments’ needs. Some typical key activities that are commonly practiced by most organizations are listed below;
Research & Development
The research and development department is required to liaise with all other functions of the company whether it be production, marketing or sales. The typical functions of a research department are mentioned below;
- New Product Research: Before a new product can be produced, it must first go through the research and development department which will explore what the design of the product should be, the expected production costs and how long it will take to produce sufficient amounts of the product. R&D also looks into how much customers want or need the product.
- New Product Development : the research phase naturally leads to the product being developed due to the results achieved from the research phase.
- Existing Product Updates: R&D must also look into existing products to see if they require an upgrade based on evolving consumer needs or new entrants into the product category in the market. These changes can additionally be attributed to product glitches that need resolving.
- Quality Checks: Companies can ask their R&D departments to conduct quality checks or they may require the department to collaborate with the Quality Assurance team since they are well versed in the specifications of the product and are ideal for evaluating whether all products are up to the quality standards set by the company.
- Innovation : The R&D team is also responsible for keeping an eye on innovations and new trends within the industry and ensuring that their product stays abreast of these trends.
Production management consists of a number of activities which are outlined below;
- Selection of product and design: the first step is to select the right product and the right design for the product . This is a crucial decision because the combination of the right product (Value Proposition) and the right design (Key Activities)will dictate the success or the failure of the company. Value engineering and value analysis are parts of this activity.
- Selection of Production Process: this stage consists of deciding what production process the organization will be using including the right technology, machines, inventory management system, etc.
- Selecting Right Production Capacity: The production management must have full knowledge of the expected demand for the product and set the production capacity accordingly, since either a dearth or a surplus of the product may lead to problems for the company. Break-even analysis is the most popular tool used by production managers to predict capacity.
- Production Planning: The production manager must decide on the routing and scheduling of the product. Routing is aimed at creating a smooth flow of work by discovering the easiest and most economical flow of work. Scheduling, on the other hand, refers to the timing of activities by mentioning a start and end time for each.
- Production Control: The production manager is also responsible for monitoring and controlling the production process. This is done by comparing planned production with actual production, exploring deviations if any and ultimately correcting these deviations to meet planned production.
- Quality and Cost Control: In today’s economically driven world, consumers won’t the maximum quality for the cheapest price and access to the internet and a world of options make them more discerning and fickle. Hence, it falls on the production manager to not only ensure that he is continuously improving the quality of the product but also to reduce costs so their product can remain competitive in the market in terms of price.
- Inventory Control: Inventory Control is fundamental to a production driven business because it prevents overstocking or understocking. Overstocking means the company will be spending more money on materials that will ultimately go to waste. Understocking will effect production and result in late deliveries.
- Maintenance and Replacement of Machines: The production manager must be on top of the condition of the machines under his function by constantly monitoring them and scheduling regular maintenance like oiling, replacing worn parts, cleaning, etc. This function ensures that there are no unexpected breaks in production.
The Marketing department is responsible for the growth of the company by getting word of the company’s existence and the value it provides to its customers. The functions of the marketing department are explained below;
- Strategy: The senior members of the marketing team are responsible for drafting and getting approval of a marketing strategy for the company, based on its overall goals and missions before cascading this strategy throughout the department and creating goals based on it.
- Market Research : The Marketing department must have full knowledge of the market the company is operating in including the strengths and weaknesses of the product according to the customer, potential competitors in the market to whom the company may lose market share or weaker competitors from whom company can get market share.
- Product Development: The marketing team works in conjunction with the product development team constantly. This is done by identifying possible gap areas in the market for which the company can develop a product to address an unmet need. They are the ones with their fingers on the customer pulse and are a source of insight into consumer needs and feelings. Once the product is developed, the marketing team is also involved in pricing the product.
- Communications: The marketing team is responsible for all communication to go out in the market regarding the product. The nature of this communication varies from press releases to online product reviews, advertisements, e-mails, etc.
- Sales Support: Marketing also works closely with the Sales team by providing them with customer leads, as well as promotional materials for potential customers.
- Events: Marketing is also responsible for organizing and executing events such as seminars, product launches, exhibitions, etc. they will typically call key or prospective customers to such events as well.
Sales & Customer Services
Sales and customer service play a key role in the purchase and post purchase behavior and experience of your customer. This department is key to ensuring that you build a cadre of repeat customers who will become your advocates in the market and drive more business in through word of mouth. Conversely, these customers can also be extremely vocal if they have suffered a bad customer experience with you and can just as easily drive business away. Hence, one of the most crucial weapons in your arsenal is your sales and customer services team. They fulfill the following responsibilities on behalf of your company;
- Handling Problems: Customer service representatives generally spring into action when customers call in with complaints. The breadth of their authority is dependant on company policy but their core task is to ensure that when an irate customer calls, they do everything, within the scope of their job description, to leave him happy or satisfied when he hangs up. Some customer representatives are empowered to solve the problem on the spot by providing a replacement or returning the money. Others may act as gatekeepers who take information and then route it to the relevant departments.
- Assisting in Sales: Customer representatives are also depended upon to help increase the sales of the organization. They may do this by educating customers on the value propositions the product offers. Others may use upselling by telling customers who call in to upgrade their services for improved quality.
- Clerical Tasks: some companies may include administrative and clerical tasks within the ambit of the role of the customer services representative. So representatives may be routing calls to relevant support departments, maintaining a record of customer accounts including new customers and recording any changes that may occur in these accounts.
- Job Specific Responsibilities: though the general spirit of the role remains the same, the details may vary according to the organizational context and industrial realities facing the organization. Hence a customer services representative at an FMCG company may be responsible for a big account like Metro. A customer representative at a bank may also be doing some duties that a bank teller typically does such as counting money, etc.
CATEGORIES FOR KEY ACTIVITIES
These activities are generally a characteristic of manufacturing firms and entail the design, creation and delivery of significant quantities of the product.
For a company that manufactures and sells pantyhose, typical value propositions are listed below;
- This pantyhose lasts longer and, therefore, saves consumers the money they would spend on frequent replacements.
- It provides resistance, so feet don’t slip in heels.
- The product is machine washable.
- Easy to store packaging.
The Key activities would then be;
- Control of production and manufacturing;
- Manage website, online orders and the distribution of the product;
- Create a branding strategy ;
- Marketing and promotion of the product;
- Product and packaging design.
Some consumers or customers have chronic problems. Organizations that list problem-solving as a main activity are usually aiming to find unique solutions to these individual problems. Consultancies, hospitals, and most service organizations typically are trying to solve customer problems uniquely. These organizations are characterized by lots of knowledge management and a focus on continuous learning.
Jiffy Lube is a chain of over 200 businesses in North America which offers oil change and other automotive services to its clientele. Hence, it is a service firm that aims to provide a solution to a recurring problem its target customers may have. Jiffy’s value propositions are:
- Keep cars healthy;
- Keep clothes clean and garages tidy;
- Save customers’ time and help them avoid the hassle of their cars breaking down.
Based on these, the key activities performed at Jiffy can be as follows;
- Change the oil of cars;
- Perform other maintenance work;
- Promote their services to customers through upselling and other marketing activities.
Such organizations will have detailed records on repair work done on the automobiles of their repeat customers and will be able to handle the car with full knowledge of its history, much like a doctor with a regular patient.
A business model where the platform is a key resource usually has platform or network-related key activities. Networks, brands, and software can all be a part of a platform or network-related business.
Agile Enterprise Architecture or AEA offers its services to companies experiencing a surge of work or a cascade of models that need to be done within a limited amount of time. The company’s value propositions are as follows;
- Low-cost architecture modeling;
- Agile and available when needed by customers;
- In the cloud ;
- Its environmentally friendly especially if the client company is willing to forego travel;
- Efficient and effective;
- Involves minimal risk.
Based on these the key activities for this organization are;
- Cloud-based architectural modeling as a service;
- Cloud-based enterprise architecture software as a service ;
- Frequent health checks for the architecture to make sure it remains robust with changing environment.
CASE STUDY – LINKEDIN
LinkedIn is one of the world’s premier business networking websites. The value propositions it provides to its customers are as follows;
- Manage professional profile and build a robust professional network;
- Target and reach the right talent;
- Communicated with the right audience;
- Access to LinkedIn database though API ’s and widgets.
As you can see LinkedIn is a platform/ network based company characterized by a high focus on providing sharing capabilities to its customers. The Key activities performed at LinkedIn would then be;
- Platform Development
Hence, LinkedIn spends a majority of its budget and time in ensuring that its platform remains scalable and usable as the consumer base grows rapidly.
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The Strategic Project Manager
Key Activities of the Business Model Canvas – A Deeper Dive
Organizations are defined by what they actually do. As part of the Business Model Canvas, Key Activities capture what people spend their time day to day in execution of the Business Model.
This post identifies many examples of Key Activities in a wide variety of different types of organizations. The purpose is to help clarify what a Key Activity is, and to give ideas to help spark your thinking.
Where Key Activities Fit in the Business Model Canvas
‘Key Activities’ is one of the nine items that make up the Business Model Canvas . It is the place on the canvas to capture the actionable priorities in an organization. It’s where people spend their time, and what executives are most concerned about. It is on the Execution side of the canvas.
The Business Model Framework is largely credited to Alexander Osterwalder and Strategyzer . To supercharge your understanding of business models, I recommend his book, “Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers” .
For this post, the focus is on a few of the types of activities that are most prominent in organizations today. Note that this is not just about businesses, or private industries. Business Models are important for government and not-for-profit organizations also, and all are considered here.
The key activity types of focus for this post are:
- Production – everything from how a product or service is produced and delivered to customers
- Problem solving – developing custom solutions for customers and clients; usually project based
- Technology – leveraging technology to provide value added for customers
- Platform or network – building a platform that will provide superior value and competitive advantage
- Sales and marketing – externally facing presence that is necessary and present in most organizations
Note that not all organizations will have activities in each of these activity types. Most will have some dominant types.
I recommend these strategy resources on FlevyPro (paid links):
Key Activity Type: Production
Production is a primary activity in organizations that build and sell products. Manufacturing businesses are a prime example. However, most organizations produce something, even if not a primary activity.
Here are five top Key Activities related to Production:
- Design – designing products, machinery, and production processes
- Purchasing – outsourcing materials and other input products
- Build – assembling, processing, and sharing inputs into the desired products
- Deliver – shipping, distributing, and handing off the products to end customers
- Administer – orchestrate, control, and manage the production process
Organizations sometimes outsource all required production as it is not a core activity. In those cases, the outsourcing itself is a Key Activity of the organization.
Key Activity Type: Problem Solving
A consulting organization is a prime example of an organization that solves problems as a core activity. However, many government organizations with certain specialties also solve problems for their internal and external customers.
Here are five Key Activities that fit under the Problem Solving umbrella:.
- Knowledge Management – managing a core shared knowledge base
- Recruitment – identifying, connecting with, and hiring skilled people
- Training – enhancing core skills and integrating people into shared processes
- Interfacing with clients – interacting with those whose problems you are solving
- Writing proposals – detailing scope and cost for future engagements
In addition to for-profit enterprises, many not-for-profits have Key Activities in Knowledge Management and Training.
Key Activity Type: Technology
With Technology there is a focus on an underlying capability that provide strategic advantage.
The following are example Key Activities related to Technology:
- Research & Development – the capability to develop core technologies, or specific applications
- Development – distinct fr R & D, this can include developing software as part of the offering
- System Administration – support for a technology infrastructure that is required
- Support – helping customers and internal personnel through technology issues
- Recruitment – ensuring a stable of people versed in the core technology
Technology-oriented activities may be a part of businesses in consulting and manufacturing; government organizations that design, develop and manage technologies for government use; and not-for-profit organizations that support people that need technology or professions in technology fields.
Key Activity Type: Platform or Network
Platforms and network activity have become more pervasive as organizations try to leverage network effects . In such organizations, each participant added to the network increases the value of the network to all participants.
The following are five Key Activities related Platforms and Networks:
- Research & Development – could related to the Network or the Platform, or to a technology that is a common interest of network participants
- Providing Core Expertise – central expertise that attracts participants, builds community, and continually adds value
- Platform Management – technical support, customer service, and provisioning for new customers
- Membership Management – administration, customer relations, and other value added services
- Quality Monitoring – ensuring that security and content quality meet established standards
As there are many types of network effects, there are many sub-areas of interest that may involve additional Key Activities that fall under Platform or Network.
Key Activity Type: Sales and Marketing
Sales and marketing are critical to most organizations, especially those in private industry. However, it is also a Key Activity Type for not-for-profits in raising money and offering services. It can also be important for government organizations who need to sell internally to customer sin order to obtain the required levels of funding.
- Recruiting – finding people who can sell applies to every organization
- Advertising – making offerings of the organization known in the target market
- Prospecting – continually identifying candidate customers or consumers
- Maintaining – proactively nurturing existing customers and consumers
- Collaborating – coordinating with related stakeholders to create a holistic interaction
Sales and marketing is important to some degree in virtually any organization, whether public or private sector, or for profit or not.
This post looks at an array of ideas for capturing the Key Activities that your organization undertakes, or needs to undertake, to conduct its day to day business. Key Activities are an essential part of executing on the organization’s Business Model.
You can quickly and conveniently work through the Key Activities and other components of the Business Model Canvas with the Lucidchart Business Model Canvas template (Try for free) – recommended!
Importantly, this subject applies to virtually any organization whether commercial for profit, not for profit, startup, or government entity
I would love to hear from anyone from these various organization types about your Key Activities in support of your Business Model. Please share!
To supercharge your understanding of business models, I recommend “Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers” by Alexander Osterwalder.
For a startup-centric presentation of Key Activities of the Business Model Canvas, see “ Business Model Canvas: Key Activities ” by Startup SOS.
I recommend these PM templates and strategy resources (paid links):
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Denis Oakley & Co
I HELP BOLD LEADERS TRANSFORM THEIR BUSINESSES AND THE INDUSTRIES THEY COMPETE IN
February 10, 2018 By Denis Oakley
Key Activities in the Business Model Canvas
Key activities are important things your business needs to do to run. It’s even more specific than that. Key activities are the key things that you need to do in order to deliver your value propositions to customers . In this lesson, we look at what key activities are within the context of the business model canvas and how to identify them and use them correctly.
Key Activities Video
Here’s a video where I run through what the key activities are and how they fit into the business model canvas
Identifying the key activities that you need for your valuation is important. It’s equally important to consider which key activities you need to do yourself. Changing these can be a great source of business model innovation , especially when faced with business model depreciation and disruptive market changes .
Finding the Key Activities
To find your key activity the best place to start is your value proposition
- What’s are the most important actions to build your product or service?
- What’s most important to distribute your product and service?
- What kinds of activities are important if we want to maintain customer relationships? (Personal Service, Your Office, Sharing Experience etc..)
- What kinds of activities are fundamental to your revenue streams? (Credit Limit, Fast Payment, Trust etc..)
What Key Activities Do Your Value Proposition(s) Require?
First of all look at your value proposition. What are the key things that you need to do to make it work? If you have a florist you need to
- buy the flowers,
- prepare them and
- deliver them.
You also need to manage your promotional channels so that customers come to the shop.
If you run a plastics factory your key activities are likely to revolve about:
- maintaining production,
- keeping the operations safe, and
- working out how to reduce costs and improve productivity to keep pace with market changes.
Here there are many many more things that you could be doing. Key activities are the critical things that you absolutely must do in order to develop and maintain your competitive advantage .
Small businesses and startups will often list tasks or processes at this stage because they are fairly simple. When you look at the business model of large enterprises that may comprise hundreds of companies and tens of thousands of employees the key activities need to be captured at a far higher level of abstraction.
It is just the same as looking at a map at different scales. One of the keys is using the right scale to look at your business in its stage of development
What Do You Have to do Everyday?
What key activities do you have to do every day? This is a really good approach for helping you to figure out what is a key activity and what is not. If you or your staff are doing the same activities every day then there is a good chance that they are critical for the delivery of the value proposition. For a supermarket (looking at the unit rather than the enterprise) restocking is a key activity. When customers go into the supermarket they expect to find goods on the shelves to buy. Without them, the business model falls apart.
For a company like Google the key activities are improving its code base and then examine all the data that it has gathered to help it improve search results and let advertisers sell better-converting adverts.
For a company like IKEA, the key activities are optimising its logistics chain to ensure that every store has all the furniture that people in that market are buying. It also works on reducing the cost of its products so that it can maintain it’s market-leading position in flat packed self-assembled furniture.
Is Your Business Based Around Producing or Making Something?
Where a company is involved in making something the key activities usually centre on getting the raw materials, transforming them and then shipping or distributing the finished products.
A dairy farmer’s key activities are feeding the cows, checking them for health, milking them and then storing the milk ready for collection. Nestle’s key activities (if we look at the Yoghurt product line) are collecting the milk, processing it into yoghurt, packaging it into containers and then sending it out into its distribution network.
Space X’s key activities are all about designing and manufacturing ever larger rockets, building more effective rocket control and telemetry systems and selling orbital delivery services to its customers.
The key activities tend to vary quite widely based on the type of customer and the manufacturing process used. Where manufacturing is continuous or mass sales tend to be a far smaller portion of the key activities as these are delivered by channels. When products are very large or highly customised then sales tend to be far more complex and take longer.
Some examples of business models based around production include
Is Your Business Based Around Solving Problems for Customers?
Companies which are problem-orientated tend to have a different set of activities. These companies are often consultants, lawyers and other types of knowledge workers.
A lawyer, for example, has client consultations, pleading and case law review as his critical activities. Activities such as billing are generally not key activities because these are common for all businesses and provide little competitive advantage.
The deeper message of key activities is that these are the activities that provide a competitive advantage. Case law review is something that all lawyers do. How can this be a key activity/ Can you do it faster? Do you have a better process for doing it? Is one of your key resources a software system that allows you to assess more cases than would be possible or feasible by hand.
Problem-solving business models are knowledge-intensive. The key is understanding, in the business model, how this knowledge is obtained, processed and packaged to solve the customers’ problem.
Is your Business Based Around Building a Platform or Network for Other People to Use?
When we look at platforms, what we are doing is analogous to providing a meeting hall for people to use. If it is a market place the meeting hall has to have tables for sellers to display their wares. It has to have all the facilities that buyers need to make purchases.
When we look at the key activities we can see that there is often a build once-optimise continually process. Facebook , for example, was built once. Mark Zuckerberg only ever built a single Facebook. Over time almost all the original code has been upgraded, expanded, replaced and optimised as the value proposition has changed over time.
It’s tempting to just say build and optimise the platform. That is doing too little work. What is far better is to delve down into the details and say – what is it about the way that we build and optimize the platform that gives us the amazing results?
The other aspect to bear in mind with platforms is that you are often serving two or more customer segments simultaneously using the platform. There will be platform-centric key activities. There will be key activities that are focused on each of the customer segments (or groups of them under certain conditions)
If you want to see some examples of platform key activities have a look at these business models
Deciding the Key Activities in Your Business Model
When I design business models for clients the key activities are one of the last parts of the business model canvas that I work on.
For most startups, there aren’t normally more than 2-3 key activities. That is mainly because if an activity is key it should be consuming most of a person’s time. Startups have few people and limited time and resources. They can’t as a result have too many key resources. They are unable to deliver on them if they do.
Having lots of key activities is also an indication of sloppy thinking and an inability to prioritise what is really important. Focusing on just a few activities allows you to get really good at them and find a source of competitive advantage . Being very good at some activities is also a great way of defending against threats to your business model .
One way of prioritising is to imagine that no-one has come into the office. You are the only person in there.
What are the first three things that you do?
Those will normally be your key activities
So for example when I worked at a food delivery company as the VP of operations I cared about three things
- Are the chefs cooking?
- Are my delivery riders here?
- Has the website and app sent me lots of customer orders to fulfil
That translated to
- Platform build & Optimisation
in our business model canvas.
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How to Build a Great Business Model Canvas – The FREE Course
- Value Propositions
- Marketing & Distribution Channels
- Customer Relationships
- Key Resources
- Key Activities
- Key Partners & Suppliers
About Denis Oakley
Explorer | Trail Runner | Mountain Lover
'Big' companies are civilisation. I stay in the wilderness guiding entrepreneurs and startups on their journey to becoming 'Big'.
Then I head back to the frontier
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I help entrepreneurs transform their industries through wiser choices
Outcome : More Traction, Bigger Rounds, Better Products
Method : Problems, Customers, Business Models, Strategy
- Business Development
- Business Model
Business Model: Key activities
The Key activities of a business represent what the company must do to make the business model work. These activities can be producing a product or providing a service, or a mix of both.
For example, if your business focuses on production of a product, your activities may include learning more about the customers and new production techniques to improve the product. For example, you are already producing chairs. One of your activities may be to doing market research to find out if customers are happy with your chairs or if you need to update the model to better fit their needs.
If you own a restaurant, some of your activities may be to experiment on new recipes to provide your customers with new dishes to bring new customers, or provide more varied options for your customers.
I am in production industry as I produce pumpkin products. Hence my key activity is “producing fresh pumpkin products”. But that also includes activities to experiment on new products that I can sell, such as what I did with the pumpkin wine and pumpkin jam.
What are your activities?
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