Category: Small Business Tips and Advice

In our last post, we discussed the Revenue Streams portion of a Business Model Canvas. The Business Model Canvas allows you to describe and think through the business model of your small business, your competitors, or any other company. This concept has been applied and tested around the world and used in large organizations, as well as hundreds of thousands of small businesses.

Today, let’s talk about Key Resources.

What are Key Resources in the Business Model Canvas?

The Key Resources Building Block of the Business Model Canvas describes the most important assets required to make a business model work.

Every business model requires Key Resources. They allow an enterprise to create and offer a Value Proposition, reach markets, maintain relationships with Customer Segments, and earn revenues. Different Key Resources are needed depending on the type of business model. A microchip manufacturer requires capital-intensive production facilities, whereas a microchip designer focuses more on human resources.

Key resources can be physical, financial, intellectual, or human. Key resources can be owned or leased by the company or acquired from key partners.

Ask yourself these questions:

• What Key Resources do our Value Propositions require?
• Our Distribution Channels?
• Customer Relationships?
• Revenue Streams?

The different types of Key Resources

Key Resources can be categorized as follows:

Physical

This category includes physical assets such as manufacturing facilities, buildings, vehicles, machines, systems, point-of-sales systems, and distribution networks. Large retailers rely heavily on physical resources, which are often capital-intensive. Some have an enormous network of stores and related logistics infrastructure. Others have an extensive IT, warehouse, and logistics infrastructure.

Intellectual

Intellectual resources such as brands, proprietary knowledge, patents and copyrights, partnerships, and customer databases are increasingly important components of a strong business model. Intellectual resources are difficult to develop but when successfully created, they offer substantial value. Consumer goods companies like Nike and Sony rely heavily on
brand as a Key Resource. Microsoft and SAP depend on software and related intellectual property developed over many years. Qualcomm, a designer and supplier of chipsets for broadband mobile devices, built its business model around patented microchip designs that earn the company substantial licensing fees.

Human

Every enterprise requires human resources, but people are particularly prominent in certain business models. For example, human resources are crucial in knowledge-intensive and creative industries. A pharmaceutical company, for example, relies heavily on human resources. Its business model is predicated on an army of experienced scientists and a large and skilled sales force.

Financial

Some business models call for financial resources and/or financial guarantees, such as cash, lines of credit, or a stock option pool for hiring key employees. Ericsson, the telecom manufacturer, provides an example of financial resource leverage within a business model. Ericsson may opt to borrow funds from banks and capital markets, then use a portion of the proceeds to provide vendor financing to equipment customers, thus ensuring that orders are placed with Ericsson rather than competitors.

Read our complete Business Model Canvas series here!

In our last post, we discussed the Channels portion of a Business Model Canvas. The Business Model Canvas allows you to describe and think through the business model of your small business, your competitors, or any other company. This concept has been applied and tested around the world and used in large organizations, as well as hundreds of thousands of small businesses.

Today, let’s talk about Customer Relationships.

What are Customer Relationships in the Business Model Canvas?

The Customer Relationships Building Block describes the types of relationships a company establishes with specific Customer Segments.

A company should clarify the type of relationship it wants to establish with each Customer Segment. Relationships can range from personal to automated. Customer relationships may be driven by the following motivations:

• Customer acquisition
• Customer retention
• Boosting sales (upselling)

Ask yourself these questions:

• What type of relationship does each of our Customer Segments expect us to establish and maintain with them?
• Which ones have we established?
• How costly are they?
• How are they integrated with the rest of our business model?

What are the components of a Customer Relationship?

We can distinguish between several categories of Customer Relationships, which may co-exist in a company’s relationship with a particular Customer Segment:

Personal assistance

This relationship is based on human interaction. The customer can communicate with a real customer representative to get help during the sales process or after the purchase is complete. This may happen on-site at the point of sale, through call centres, by email, or through other means.

Dedicated personal assistance

This relationship involves dedicating a customer representative specifically to an individual client. It represents the deepest and most intimate type of relationship and normally develops over a long period of time. In private banking services, for example, dedicated bankers serve high net-worth people. Similar relationships can be found in other businesses in the form of key account managers who maintain personal relationships with important customers.

Self-service

In this type of relationship, a company maintains no direct relationship with customers. It provides all the necessary means for customers to help themselves.

Automated services

This type of relationship mixes a more sophisticated form of customer self-service with automated processes. For example, personal online profiles give customers access to customized services. Automated services can recognize individual customers and their characteristics, and offer information related to orders or transactions. At their best,
automated services can stimulate a personal relationship (e.g. offering book or movie recommendations).

Communities

Increasingly, companies are utilizing user communities to become more involved with customers/prospects and to facilitate connections between community members. Many companies maintain online communities that allow users to exchange knowledge and solve each other’s problems. Communities can also help companies better understand their
customers.

Co-creation

More companies are going beyond the traditional customer-vendor relationship to co-create value with customers. The StoryGraph invites customers to write reviews and thus create value for other book lovers. Some companies engage customers to assist with the design of new and innovative products. Others, such as YouTube, solicit customers to create content for public consumption.

Read our complete Business Model Canvas series here!

In our last post, we discussed the Value Proposition portion of a Business Model Canvas. The Business Model Canvas allows you to describe and think through the business model of your small business, your competitors, or any other company. This concept has been applied and tested around the world and used in large organizations, as well as hundreds of thousands of small businesses.

Today, let’s talk about Channels.

What are Channels in the Business Model Canvas?

The Channels Building Block of the Business Model Canvas describes how a company communicates with and reaches its Customer Segments to deliver a Value Proposition.

Communication, distribution, and sales channels comprise a company’s interaction with customers. Channels are customer touch points that play an important role in the customer experience. Channels serve several functions, including:

• 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
• Delivering a Value Proposition to customers
• Providing post-purchase customer support

Ask yourself questions like:

• Through which channels do our Customer Segments want to be reached?
• How are we reaching them now?
• How are our Channels integrated?
• Which ones work best?
• Which ones are most cost-efficient?
• How are we integrating them with customer routines?

How to find the best Channels for your small business

Finding the right mix of channels to satisfy how customers want to be reached is crucial to bring a Value Proposition to market. A business can choose between reaching customers through its own channels, through partner Channels, or a mix of both.

Owned Channels can be direct, like an in-house sales force, social media, or a website, or they can be indirect, such as retail stores owned or operated by the organization. Partner Channels are indirect and span a whole range of options, like wholesale distribution, retail, or partner-owned websites.

Partner Channels lead to lower margins, but they let a brand expand its reach and benefit from partner strengths. Owned Channels, and particularly direct ones, have higher margins but can be costly to put in place and to operate. The trick is to find the right balance between the different types of channels, to integrate them in a way to create a great customer experience, and to maximize revenues.

Read our complete Business Model Canvas series here!