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The difference between market takers and market makers isn’t product innovation, its business model innovation.
-Vala Afshar, Evangelist at Saleforce.com

Most entrepreneurs, who have a startup idea, struggle with the concept of translating that idea into a profitable business. Very often the budding entrepreneur has a deep, beautiful and elegant solution to a problem that doesn’t exist, which is the ultimate outcome of not knowing who are his/her customers. The entrepreneur faces a lack of understanding about who’s problem they are going to solve and what difference would the problem solving bring to their audience’s lives. Because they don’t know what their customer wants them to deliver, the entrepreneurs create and deliver a product which may or may not be needed by the consumer. This exercise of trying to push their product in target audience’s lives rather than building a product around their customer; wastes time, resources and energy on an unscalable business venture.
Using a business model canvas from the conception of a startup can help an entrepreneur avoid these mistakes and build their startup for growth.
What is a business model canvas?
Business model canvas is a strategic tool that helps entrepreneurs focus on the business strategy and growth potential of their startup idea. It explores and explains how a business will design, create, offer and monetize Value. Creating an effective business model canvas can not only save time and resource, but can also help scale and sustained a business for the long term.
Why to use the business model canvas?
Business model canvas helps you bring out visual thinking and helps you create a short concise document that can become a source for your investor pitch. It allows you to make quick iterations and helps understand all 9 blocks that form essential components of one’s business strategy. It is also easy to share and use, to receive rapid feedback from the advisors and mentors. This blog explores all 9 segments of a classic business model in detail.
1.Customer segments
The customer segment block indicates the different groups of people or companies you are trying to target.
A segment is a group of people or a group of companies with common desire or pain points. Now you need to investigate if these segments have common a pain point, common needs, or desires. These questions should come in your mind before defining the segment. You need to make sure that the industry itself is a large enough market to sustain your business. Further, as a startup you should think if the segment is reachable, if the segment is not reachable then there is no point in creating a business model, as you cannot scale it. The next question is if the segment is profitable? What is the penetration level in the segment? For example, if you chose a segment with 90% penetration, there are high chances that you will be at loss. So, chalk our what is the benefit in going after that segment as opposed to a segment where penetration level is low.
How to segment your customers?
• If the segments require different type of relationships and interaction from your company
• If the segments are reached through different distribution channels
• If the segments need distinct offers
• If the segments are willing to pay for differ aspect of the offers
• If the segments differ significantly in terms of profitability to your business

Study and analyze your competition. Find out what are their strengths, if there is something unique or different that they offer to your targeted segments, and how you can differentiate your offering from their offering. The next part is finding out how much will this customer segment pay for your product.

2.Value Proposition
An organization’s value proposition is the combination of products and services it provides to its customers. These are the benefits and experiences your product or services are going to deliver which will delight the customer.
“The value proposition provides value through a number of attributes such as customization, performance, “getting the job done”, brand/ status, design, newness, price, cost and risk reduction, accessibility, as well as convenience/ usability.”
In this box, the first thing is you should know is what problem you are solving. Focus on customer benefits and how will your customer receive that benefit. Remember features do not equal to benefits. The changes or pain relief your product offers through its features is your benefit. Map the benefits to the key pain points; what you are exactly offering and how it is different from your competition. Quantify the benefits that you offer as precisely as possible.
Articulate the experiential benefits of your products. Remember that on the surface level you are competing on 3 things- first is customer experience, second is product differentiation and third is cost. Articulate how uniquely you can solve the problem and how it would delight your customers.
Questions to be asked
• 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 and services are we offering to each Customer Segment?
3.Channels
Channels are customer touchpoints that play an important role in the customer experience. Communication, distribution, and sales channels comprise a company’s interface with customers.
The primary functions of channels include raising awareness among customers about a company’s products and services, helping customers evaluate a company’s value proposition, allowing customers to purchase specific products and services and delivering a Value Proposition to customers
You need to find relevant channels to reach out your segment. Find out what are the best channels to reach your customer and search for the uncluttered channels that you can use to find your audience. For example, if you have a business of neighborhood security alarms, a channel like Nextdoor can give you a much better and targeted audience then Facebook and Twitter.
You should also define the channels that will help you build awareness of your product and help build a marketing funnel such as social media or OOH advertising. You might also consider which channel yield is more likely to give you profits. Cost-effectiveness is a must while defining your channel strategy.

Questions to be asked
• Through which Channels do our Customer Segments want to be reached?
• How to best utilize a channel – do you need to leverage a channel partner, resellers, or value-added services?
• How are we reaching them now?
• How are our Channels integrated?
• Which ones are most cost-efficient? How are we integrating them with customer routines?
4.Customer Relationships
An organization must select the kind of relationship it will have with its customer segment in order to create financial success and sustainability.
This box describes what type of relationship you want to build with customers. There are some drivers of customer relationship like customer acquisition, customer retention, and upsell. There could be different types of relationships that the customer segment might want to build with you depending on your product’s use, value, and emotional appeal. The type of customer relationship could include personal assistance for very direct access like enterprise software, dedicated personal assistance, self-service, user communities, and co-creation.
Questions to be asked
• What are the customer drivers?
• What type of relationship our customer segment expects us to establish?
• Is it cost-effective according to the revenue of the company is it be fitted with revenue model?
• How are they integrated with the rest of our business model?

5.Revenue Streams
A revenue stream is the methodology a company follows to get its customer segments to buy its product or service to generate revenue.
There are different types of revenue models such as is licensing where you can sell perpetual licenses. Or subscriptions that have become popular due to a service-focused business environment. A freemium model is also increasingly becoming popular where you offer a product for free to make sure the customer sees the value of the product and then gradually increases the value which the customer has to give. Franchising, advertising, leasing bundling and pay as you go are few other ways to create a revenue model.
Suppose, your primary model is giving you 60 million revenues and secondary is giving 35 million revenues and the third one is giving 5million $ revenue so you have to think why you need the third revenue model.

Questions to be asked
• How do you monetize the value you deliver?
• How much customer is willing to pay via each revenue model?
• Which one they want to adopt quickly and why?
• How many revenue models you will be using?
• What’s your primary revenue model or the main model you are focusing on?
• What will be the contribution of each revenue model to total revenue?
6.Key Resources
These are the assets of the organization fundamental to how it provides value to its customers. These resources allow an enterprise to create and offer a Value Proposition, reach markets, maintain relationships with Customer Segments, and earn revenues.
Questions to be asked
• What Key Resources do our Value Propositions require?
• What Key Resources do our Distribution Channels require?
• What Key Resources do our Customer Relationships require?
• What Key Resources do our Revenue Streams require?

7.Key Activities
Key activities describe the most important things a company must do to make its business model work. These are the activities that are key to producing the company’s value proposition.
They are most important processes that need to occur for the business model to be effective. These activities enable you to deliver value proposition.
Questions to be asked
• What Key Activities do our Value Propositions require?
• What key activities are needed for your channels?
• What key activities are needed for our revenue stream?
• What key activities are needed for our customer relationship?

8.Key Partnerships
Key partnerships are the network of suppliers and partners who complement each other in helping the company create its value proposition. Companies create alliances to optimize their business models, reduce risk, or acquire resources.
It could be a strategic alliance between non-competitors, a strategic partnership between competitors or joint ventures to develop new businesses. Basically, it is mutually beneficial arrangement between two different stakeholders.

Questions to be asked
• Who are our Key Partners?
• Who are our Key Suppliers?
• Which Key Resources do we need to acquiring from partners? What expertise do they bring to the table?
• Which Key Activities do partners perform?

9.Cost Structure
This box defines the cost of running a business according to a particular model. For instance, you ought to know what is the fixed cost or variable cost for your business. If you are in the production business you should know unit production cost. If you are in a manufacturing business, you should know how much will be your customer acquisition cost.
What are the most important costs among all the cost you have this should be known to you. For example, for an airline company; the plane is the most expensive asset, and then comes the pilot. If the plane is full of passengers then only the business will grow. Then you have to see that can you leverage the cost arbitrage. You need to find your cost of acquisition via a vis the customer lifetime value to justify the acquisition costs.
Questions to be asked
• What are the most important costs inherent in your business model?
• Which Key Resources are most expensive?
• Which Key Activities are most expensive?

The business model canvas is like the first building block for your business and once you have that in place you can start your journey with some constant guiding document in hand. Since the business model is not set in stone and you need to pivot your startup as market and consumer needs change, you can alter your business model canvas to better fit the current scenarios.
After you fill out the 9 boxes of Business model canvas the next step is getting feedback on each of the boxes from experts and making the business plan perfect on paper. Once you have the direction set up by your business model canvas, you can start working on your market segments, penetration, market share, and market positioning in detail. The template will also serve you while you start working on your investor pitch as it contains the relevant business information.

By- Naren Patil and Deepika Salwankar

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