Chapter 4

Building Business
Models
Learning Objectives:

1. Understand the concept of a business model;

2. Design a business model canvas for a startup;
3. Select the network of key partners;
4. Choose key activities essential to the value proposition;
5. Formulate a good customer value proposition;
6. Recommend the relationship the startup should form with the customer
segments;
7. Select the customer segment/s to serve;
8. Propose for a channels to use to communicate with customer segments;
and,
9. Prepare a lean canvas for startup.
Peter Drucker

“A business model is supposed to

answer who your customer is, what
value you can create/add for the
customer and how you can do that
at reasonable costs.”
What is a business model?

● Defines the foundation of its company’s

core value proposition, targeting customers ,
key resources, and assumed revenue
streams
● Offers a framework for success and
overcoming challenges
● Involves the product or service offering, the
targeted customers, and the economic
engine that will enable a business to meet its
profitability and growth objectives.
Key Components of a Business Model

01 Everything it takes to make something

- design, raw materials, manufacturing

02 Everything it takes to sell that thing

- marketing, distribution, delivering a service, processing the scale

03 How and what the customer pays

- pricing strategy, payment methods, payment timing

https://articles.bplans.com/what-is-a-business-model-business-models-explained/l
Different Types of Business Models
A person or a
registered company
which makes
Manufacturer
finished products
from raw materials
in an effort to make
a profit.
Different Types of Business Models

An entity or a
company that
purchases
Distributor
noncompeting
products or product
lines, stores them in
warehouses, and
resells them to
retailers or directly
to the customers.
Different Types of Business Models

A person or
business that
Retailer purchases goods
from the wholesaler
or directly from the
manufacturer.

Normally do not
produce their own
items.
Different Types of Business Models

Can be a
manufacturer,
Franchise distributor, or
retailer.

A method of
distributing
products or services
involves a
franchisor.
Different Types of Business Models

Refers to the old-

fashioned street-
Brick-and-mortar side business that
sells products and
services to its
customers face-to-
face in an office or
store that the
business owns or
rents.
Different Types of Business Models

A model where a
company combines
its online and a
Bricks-and-clicks physical presence.

Customers may
place their orders
online and then pick
up the products
from the physical
stores.
Different Types of Business Models

Products are
directly sold to the
Direct Sales
customers.
Different Types of Business Models

Uses a lot of human

interaction and
High Touch involvement in
order to have a
highly personalized
experience.
Different Types of Business Models

Owned and
operated by a
Family family.
Owned Decision Making is
controlled by the
family members.
Basic Types of Modern Business Models

Nickel-and-dime

Makes use of the lowest price

strategy in selling basic product or
service to the customers.
Basic Types of Modern Business Models

Freemium

A combination of free and paid services

normally used by tech companies in the
Software as a Service (SaaS) or apps
business model.
Basic Types of Modern Business Models

E-Commerce

An upgradation of the old-style brick-and-

mortar business model. Focuses on buying
& selling of goods or services creating a
web-store using the internet.
Basic Types of Modern Business Models

Subscription

Offers a long term contract to

customers by paying a fixed amount
every month or year.
Basic Types of Modern Business Models

Aggregator

A network model where the

company acts as a middleman
between two individual parties.
Basic Types of Modern Business Models

Online Marketplace

There is a collection of different sellers

into one platform. Sellers compete to
deliver similar products/services at
competitive prices.
Basic Types of Modern Business Models

Hidden Revenue

The company offers its services for free but

earns revenue streams from advertisements
which are paid for by identified sponsors
when information is shared.
Basic Types of Modern Business Models

Data Licensing /

Data Selling

Companies that sell real-time data to third

party users for analysis, advertising,
customer insight and other users.
Basic Types of Modern Business Models

Agency-Based

A partner company that has specialization

in doing non-core business activities such
as advertising, digital marketing, PR, even
janitorial, and security.
Basic Types of Modern Business Models

Affiliate Marketing

A commission based model where

companies make profit by promoting a
partner’s product and convince its
followers & users to buy the same.
Basic Types of Modern Business Models

Dropshipping

The owner has no ownership of the

product or hold any inventory but he has
an E-store.
DROPSHIPPING
Basic Types of Modern Business Models

Network Marketing

Also called multi-level marketing; this

model works on direct marketing and
direct selling philosophy.
Basic Types of Modern Business Models

Crowdsourcing

Solicits intellectual information of users

on what value-added concepts be
inputted in the product and or service
offering.
Basic Types of Modern Business Models

Blockchain

A digital ledger that is irreversible and

decentralized. The model works on peer-
to-peer interactions & document all on a
digital decentralized ledger.
Basic Types of Modern Business Models

Low Touch

There is minimum human assistance or

intervention in selling a product or
service.
Basic Types of Modern Business Models

Razor and Blade

A business model in which one item is sold at

a low price or even given for free in order to
intensify the sales of a complementary good,
such as consumable supplies.
Basic Types of Modern Business Models

Consulting

Composed of experienced and qualified

professionals that offers services based on
their line of expertise.
Basic Types of Modern Business Models

Social Enterprise

Aims to put up a business more for

creating a positive change but with profit
.
The Business Model Canvas
KEY PARTNERS
Different Types of Partnerships

01 Strategic Alliances - an agreement between non-competitors

to help each other do an equally advantageous task but
retaining their independence

02 Coopetition - an agreement between competitors to help share

the risk that these companies may take

03 Joint Ventures - when two businesses because of their mutual

interest agreed to for a completely different company

04 Buyer-Supplier relationship - the most usual type of

partnerships in businesses
The Business Model Canvas
KEY ACTIVITIES

CATEGORIES:

1. Marketing
2. Sales
3. Design
4. Development
7. Distribution
5. Operations
6. Customer Experience
The Business Model Canvas
KEY RESOURCES

CATEGORIES:

1. Physical
2. Intellectual
3. Human
4. Financial
The Business Model Canvas
CUSTOMER VALUE PROPOSITION

FACTORS:

1. Functional Value
2. Emotional Value
3. Economic Value
4. Symbolic Value
Types of Customer Value Proposition

1. All Benefits
2. Favorable
Points of
Difference
3. Resonating
Focus
The Business Model Canvas
CUSTOMER RELATIONSHIPS

TYPES:
1. Personal Assistance
2. Dedicated Personal
Assistance
3. Self-Service
4. Automated Services
5. Communities
6. Co-Creation
The Business Model Canvas
CUSTOMER SEGMENTS

TYPES:
1. Mass

2. Niche

3. Segmented
4. Diversified
5. Multi-Sided Platforms
CHANNELS
CHANNELS
VALUE PROPOSITION
CANVAS
VALUE
PROPOSITION
CANVAS
TYPES OF CUSTOMER GAINS

1. Required Gains

2. Expected Gains

3. Desired Gains
4. Unexpected Gains
CUSTOMER PAINS

1. Productivity Pains
2. Support Pains

3. Financial Pains
4. Process Pains
CUSTOMER JOBS

1. Functional Jobs

2. Social Jobs
3. Personal/Emotional Jobs
4. Supporting Jobs
a. Buyer of value
b. Co-Creator of value
c. Transferor of value