There is a great deal of differences between our saying and doing. An apparently original idea, even if the most innovative of the century, is nothing without a nice business model to implement it. There is a huge step between thinking about innovation and doing innovation, one that requires a lot of work and a lot of effort.
Passion and resolution are needed to innovate. It all starts from a simple intuition and it gets to a start-up. One of the first steps to take is the realisation of a Business Model. Let us try to understand it together.
Business Models and Canvas
According to Alexander Osterwalder, creator of CanvasBusiness Model, a Business Model describes how an entity creates, distributes and catches value. There are a few key concepts to analyse in the latter sentence.
First, and it may seem obvious, though it is not, a business model must follow a certain logic, made of data and tangible materials, that is, not based on impressions nor on the feeling that our idea is the best in the world. As good as an idea can be, what determines its failure or success is the way it is implemented.
Furthermore, it is necessary to create value for the client and to be able to deliver the product to them. In addition, it is required to be able to foresee how our products can be of benefit to us, in order to catch their value.
At the beginning, a chart can be used, providing the connections between the different elements of the company. Such a chart is composed by nine building blocks:
- Customer Segments
- Value Proposition
- Relationships with Customers
- Profit flows
- Key Resources
- Key Activities
- Key Partnerships
- Cost Structure
To whom is your company directed? In this section of the Canvas it is essential to focus on people or entities that are to be achieved. Market researches and knowledge of any customer needs are the starting points. Each segmentwill have specific requirements, which are to be highlighted in this frame.
Why should the client choose you? The answers to this question can be various: for example, product/service innovation, lower price, more accessibility, better quality of product/service. Find your added value, it is essential for your business’ success.
How is the contact with the client realised? A channel can be direct, that is property of the company, or indirect, in other words one of the company’s partners’ property.It is important to choose channels properly in terms of costs and brand identity: they will be the interface with clients.
Relationships with customers
It is useful to establish company relationships with different client segments. Today, there are three kinds of relationships: personal (agent dedicated to the client), self-service (indirect relationship, automatic service) and community (interaction between clients).
Price and payment method are the key words in this section. Payment methods can be different, for example: asset sale, rental, brokering commission, enrolment fee.
What do you need?Plants, machineries, licences, permits, staff, cash.
What to do in order to make the model work? There are three types of activities: manufacturing, problem-solving and maintenance, platforms development.
Which external players do you need to fulfil your model at best?
A company needs to know how to manage the possibilities in its possession to improve and enhance its business. It can decide, this way, to establish strategic relationships with other companies.
Which costs will you have to support? Costs originate from the choices made in the previous steps. They can be separate in fix and variable, considering potential economies of scale or purpose.