Overview of the Business Model Canvas Modules

Customer Segments – the customer segment building block defines the different groups of people or organizations as an enterprise aims to reach and serve. Customers comprise the heart of any business model, and in order to better serve and satisfy customers, a company may group them into segments with common needs, behaviors, and other attributes.

Value proposition – the value proposition block describes the bundle of products and services that create value for a specific customer segment. This is the reason why customers turn to one company over another. It solves a customer problem or satisfies a customer need. Each value proposition consists of a selected bundle of products and/or services that caters to the requirements of a specific Customer Segment. In this sense, the value proposition is an aggregation, or bundle of benefits that a company offers customers. 

Channels – the channel building block describes how a company communicates with its customer segments in order to deliver a value proposition. Channels are customer touch points that play an important role in the customer experience which serve functions such as raising awareness among customers about a company’s products and/or services, allowing customers to purchase specific products and/or services, and providing post-purchase customer support.

Customer relationships – customer relationships describe the types of relationships a company establishes with specific customer segments. A company should always clarify the type of relationship it wants to establish with its customers. Relationships can range from personal to automated. Personal assistance is based on human interaction. The customer communicates with a real customer representative to get help during a sales process or after the purchase is complete. Automated services have a mix of more sophisticated customer self-service with automated processes.

Key resources – the key resources building block describes the most important assets required to make a business model work. These resources allow a company to create value proposition, reach markets, maintain relationships with customers, and earn revenues. Key resources can be financial (lines of credit or stock options for hiring key employees), physical (manufacturing facilities, buildings, vehicles, machines, and distribution networks), intellectual (brands, proprietary knowledge, patents, and copyrights), or human (people).

Key activities – the key activities building block describes the most important things a company needs to do in order to make its business model work. These are the most important actions a company takes to successfully operate. Similar to key resources, key activities are required to create and offer value proposition, reach markets, maintain customer relationships, and earn revenues. Key activities can be categorized into production, problem solving, and platform/network. Production activities relate to designing, making, and delivering a product in substantial quantities. Key activities for problem solving relate to creating new solutions to individual customer problems. Business models designed with a platform as a key resource are dominated by platform or network related key activities.

Key partnerships – key partnerships refer to the network of suppliers and partners that constitute a business model. Companies create partnerships and alliances to optimize their business models, reduce risk, or acquire resources. There are four different types of partnerships including strategic (between non-competitors), competitive (between competitors), joint ventures, and buyer-supplier relationships (assuring reliable supplies).

Cost structure – the cost structure describes all the costs incurred in order for a company to operate. This portion describes the most important costs incurred while operating under a certain business model. Everything that is done within a company will lead to costs which can be calculated relatively easily once key resources, key activities, and key partnerships are defined. Naturally, companies should try to minimize their costs throughout every area. There are two types of business cost structures that include cost-driven and value-driven. Cost-driven business models focus on minimizing costs wherever possible through the use of low price value propositions, maximum automation, and extensive outsourcing. Value-driven business models are less concerned with the cost implications of a particular business model design and rather have a focus on value creation. These value propositions have a high degree of personalized service usually characterized with luxury products and/or services.

Revenue streams – the revenue steam building block represents the cash a company generates from each customer segment (costs must be deducted from revenues in order to create earnings or profit). A company must ask itself, how much are customers willing to pay for a certain product and/or service? Each revenue steam can have different pricing mechanisms such as fixed list prices, bargaining, auctioning, volume dependent, or yield management. There are two types of revenue streams which include transaction revenues resulting from one-time customer payments and recurring revenues resulting from ongoing payments.