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Part 1: What is a Business Model
The first part of this series reviews what a Business Model is, and discusses some other basics before going into details of the components of the Business Model Canvas. This course assumes followers have a background on business basics.
The full lecture is now available as a video recording for a step-by-step process with explanation and examples. Make sure that subtitles in English are set for best results.
Topics covered:
- Why is a Business Model essential?
- Investors and Judges, and their link with Business Models
- Samples of basic Business Models
- Components of a Business Model
- The Business Model Canvas
- The Value Proposition Canvas
- What compliments it?
- Business Model Pointers towards getting on the right track
Resources Mentioned:
First things first..
In its basic meaning, a business is all about turning an idea into profit. The Business Model is the story that tells how a business works: Who are the customers and what do they need? How can a business satisfy this need while generating profit? 1
Why is a "Business Model" important?
- Identifies who the customer is
- Helps clarify what the customer pain is
- Describes the value provided for the customer
- Clarifies how a business will make money by bringing its value to the customer
- Addresses the main business functions and parts including its marketing, sales, production and other components
- While not focused on the environment of business, it helps in defining the market and competition
Business Models are of a particular interest to investors and judges of startup competitions as they help pin down key indicators to evaluate a potential startup. These indicators include:
- Core strategy and soundness of the proposed Value Proposition (VP)
- Understand how costs and pricing are calculated *
- Understand profit generation
Samples of basic Business Models
We see business models all around us in shops, food chains, and groceries. Some of the most common models include:
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Bundling2 Selling similar/relevant goods together Like fast-food joints |
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Leasing Offering rental services rather than selling at high-margins Leasing car companies |
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Basic Service Providing basic service at cheaper cost IKEA furniture, Self-service stores |
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Subscription Paying a rolling fee in return for a service Netflix, BEIN Sports |
Developing the right Business Model is essential when building a new startup, because it helps to quickly come up with idea iterations, kill unsound ones and grow the one with the right structure and potential, in addition to using speedy decision making and learning more by consulting experts.
Simply, it gets you started without over-planning and incurring significant costs.
For existing businesses, A Business Model can also be useful for leveraging existing strengths (channels, brand ,sales), and seeing the bigger picture: what is being done and can how it be improved.
This is why a renewed Business Model can re-invent the business.
Components of a Business Model
A Business Model consists of the following:
What compliments it?
Business Models are an essential part of a Business Strategy and for understanding how a business works, but they don’t tell the full story.
The environment that a business lies within is crucial to understand and breakdown (which is not going to be covered by a business model as it complements its function), focusing on: 3
- Market trends and forces
- Macro-economic forces (Global and regional economies)
- Industry forces (Competitors)
- Trends (Social, Technological)
Business Model Pointers
In order to develop a Business Model correctly, there are 7 rules of thumb that need to be followed throughout the process (before, during, and after the completion of the Business Model draft)
Get the lecture for free including this lesson and the 7 essential Business Model pointers- Click "Download Presentation" below.
Files for this lecture:
Business Model and Value Proposition Canvases here
In the next part, we dig deeper into the first component of the Business Model Canvas: Customer Segments. We address Customer Profile, Target Markets, and how to link a customer to a Market.
Part 2: Customer Segments
