The Business Model: 9 Building Blocks

Every entrepreneur must know how and be able to clearly explain their business models to well...anyone. Thanks to Alexander Osterwalder you can explain not only your business model but the business model of any company/school/individual using the 9 building blocks outlined in his book Business Model Generation. After getting to know these 9 building blocks the business of explaining business models will come easy to you.


I'll go into these 9 building blocks and also use "Newspaper XYZ" a local newspaper company as an example and highlight how their business model works. Here We Go.

1. Customer Segment: These are the persons your business is creating value for, your most important customers, the ones who will be paying for your services.


Eg. Newspaper XYZ would be creating value for two main groups; Readers (General Public) and Advertisers (Businesses/Marketers) 


2. Value Proposition: This is the actual value you are creating for your customer segments. Meaning what problems are you solving for them? how are you satisfying their needs?


Eg. For readers Newspaper XYZ is satisfying their need for the latest news across a wide array of topics (sports, entertainment, news, etc)  and they do so with clear and concise articles written by a professional team of writers and editors. They give advertisers the chance to place ads amongst those articles hence showcasing their business to Newspaper XYZ's large community of readers.


3. Channels: This is how you communicate and deliver your value propositions to your customer segments. 


Eg. For readers Newspaper XYZ would deliver their value proposition through the physical newspapers which would be distributed through newspaper stands, supermarkets, subways etc. Newspaper XYZ also has a website XYZ.com that readers can also get news from.


4. Customer relationships: What type of relationship does each of your customer segments expect you to establish and maintain with them?


Eg. Newspaper XYZ may have an active social media community across Facebook, twitter,Google+, etc that it uses to maintain a healthy relationship with its readers. Advertisers are able to maintain relationships through Newspaper XYZ sales reps.


5. Revenue Streams: These are the areas in which you expect to generate cash for your business. 


Eg. Newspaper XYZ generates cash from 2 main sources; 1. Readers purchasing paper, 2. Advertising in print and online version of paper


6. Key Resources: What resources are necessary to create and deliver your valu proposition? these can be either physical, intellectual, financial or human.


Eg. Newspaper XYZ's key resources include Distribution network and logistics, writers, editors and website.


7. Key Activities: What Key activities do your value propositions require? your channels? customer relationships? revenue stream?


Eg. For Newspaper XYZ these would be writing and producing a daily paper and of course distribution.


8. Key Partners: This is the network of suppliers and partners that make the business model work.


Eg. Newpaper XYZ's key partners may include Printers, distributors, advertisers and Freelance reporters.


9. Cost Structure: These are the costs you'll incur operating your business model . i.e. can be easily found after defining the key activities, resources and partners (KR+KA+KP)


These 9 building blocks can be sketched out on a Business Model canvas which is a visual map of your business model to be decorated with the beloved post-it notes as you explain and at times alter your business model.