MODULE 2.pptx

Opportunity Recognition
Module -2

Outlines
Opportunity Recognition
Business Model
What Is a Business Plan?
7 Steps to a Perfectly Written Business Plan
Market opportunity analysis
Identify the customers or potential customers for a business
Recognize a value proposition
Business Model Canvas
Business Model Canvas Examples
Assessment - Activity

To succeed, jump as quick
ly at opportunities as you
do at conclusions.
Benjamin Franklin

Recognizing Opportunities
A business opportunity is a consumer need or want t
hat can potentially be met by a new business.
In economics, a need is defined as something that p
eople must have to survive, such as water, food, clot
hing, or shelter.
A want is a product or service that people desire.

Problems
A problem could be something you
are experiencing personally. Or it co
uld be a problem you observe other
s experiencing
Changes
Change often produces needs or w
ants that no one is currently supplyi
ng. Consider climate change and th
e trend toward taking better care of t
he environment. Many new busines
s opportunities have occurred beca
use people are interested in purcha
sing “green” products and services.
A problem could be something you
are experiencing personally. Or it co
uld be a problem you observe other
s experiencing

New Discoveries
For example, someone who has an
enjoyable hobby can discover some
thing recognizable as a business op
portunity. Inventions also come abo
ut because someone wanted to find
a way to solve a problem. Other exa
mples include changes in technolog
y or medical and technological disco
veries that entrepreneurs find ways
to convert into products and service
s.
Existing Products and Services
This is not the same thing as copyin
g a product or service and then calli
ng it by another name (which can b
e illegal). Instead, it means looking f
or ways to significantly improve a pr
oduct, perhaps at a lower price. It c
ould also involve improving the quali
ty and manner in which customers a
re served—including such features
as better locations, longer hours, or
quicker service.

Unique Knowledge
Entrepreneurs sometimes turn one-
of-a-kind experiences or uncommon
knowledge into a product or service
that benefits others. Think about yo
ur own knowledge and experiences.
Is there anything unique or unusual
that you could use to create.

A Business Model is a conceptual structure that supports the via
bility of a product or company and explains how the company op
erates, makes money, and how it intends to achieve its goals. All t
he business processes and policies that a company adopts and f
ollows are part of the business model.
According to management guru Peter Drucker:
“a business model is supposed to answer who your customer is,
what value you can create/add for the customer and how you can
do that at reasonable costs.”

Manufacturer:
A manufacturer makes finished products from raw materials. It may sell
directly to the customers or sell it to a middleman i.e another business t
hat sells it finally to the customer. Ex: Ford, 3M, General Electric.
Distributor:
A distributor buys products from manufacturers and re
sells them to the retailers or the public. Ex: Auto Dealer
ships.

Retailer:
A retailer sells directly to the public after purchasing th
e products from a distributor or wholesaler. Ex: Amazo
n, Tesco.
Franchise:
A franchise can be a manufacturer, distributor or retaile
r. Instead of creating a new product, the franchisee use
s the parent business’s model and brand while paying r
oyalties to it. Ex: McDonald’s, Pizza Hut.

Brick-and-mortar:
Brick-and-mortar is a traditional business model where
the retailers, wholesalers, and manufacturers deal with
the customers face-to-face in an office, a shop, or a sto
re that the business owns or rents.
nufacturer:
A manufacturer makes finished products from raw materials. It may sell
directly to the customers or sell it to a middleman i.e another business t
hat sells it finally to the customer. Ex: Ford, 3M, General Electric.
E-Commerce:
E-Commerce business model is an upgradation of the t
raditional brick-and-mortar business model. It focuses
on selling products by creating a web-store on the inter
net.

“Everything is based on a simple
rule: Quality is the best business
plan, period.”
Steve Jobs

What Is a
Business Plan?
A business plan is a statement of your b
usiness goals, the reasons you think the
se goals can be met, and how you are g
oing to achieve them.

1
Quick
Summary
This is a brief synopsis lasting no more than thirt
y seconds to three minutes. It’s used to interest p
otential investors, customers, or strategic partner
s. It may seem strange to consider this a type of
business plan, but it is. In some cases, the quick
summary may be a necessary step toward prese
nting a more fully developed plan.

2
Oral
Presentation
This is a relatively short, colorful, and entertainin
g slide show with a running narrative.

3
Investor’s
Business
Plan
Anyone who plans to invest in your start-up busin
ess (banks, investors, and others) needs to know
exactly what you are planning. They need a detai
led business plan that is well written and formatte
d so all the information can be easily understood.

4
Operational
Business
Plan
This plan describes in greater detail than the inve
stor’s business plan how the company will meet it
s goals. It is also often less formal than an invest
or’s business plan.

Each type of plan will address The Three C’s.
The Three C’s
Concept.
What is your product or s
ervice and how is it differ
ent from similar products
or services?
Customer.
Who will be buying yo
ur product or service
and why?
Capital.
How will you locate the in
itial money your business
will need? What will be y
our costs and what kind o
f profit can you expect?

Professional investors typically see many business pla
ns each year and make very few investments. They wil
l immediately reject an incomplete or poorly written pla
n. Investors are busy people and don’t have time to re
ad an overly long business plan. Your plan, including t
he financials, should be no longer than 20 typed pages
(and many are much shorter). It should require no mor
e than an hour of reading time.
Most plans will include these seven parts (althoug
h the order may differ, depending on the type of bu
siness):
Parts of a
Business Plan

Business Idea. Not only do you describe your product or service in this
part of the business plan, but you also talk about the type of business y
ou will start and the type of business ownership you will use. Recently, i
n this part of the business plan, entrepreneurs have begun to describe h
ow their business is socially responsible.
Opportunity & Market Analysis. Your description of the market should
include an account of the market, its size, its trends and characteristics,
and its growth rate. Describe your market research. List your competitor
s and describe your competitive advantage. Provide your marketing pla
n, your product and pricing strategies, and your plans for promotion.

Financial Strategies. This section shows any historical financial data, a
s well as projected figures including estimated sales and expenses (typi
cally extending for five years). This section also describes any financing
required by the business.
Organizational Structures. In this part of the business plan you discus
s the organizational structure of the company. You can provide profiles o
f key managers and, if appropriate, information about your board of dire
ctors. You can also describe how you plan to train and motivate your em
ployees, if appropriate.

Legal Structures. In this part of the business plan you describe any int
ellectual property or contract issues. You also talk about how your busin
ess will be protected by insurance, the affect of taxes on your business,
and any relevant government regulations that affect the business.
Business Management. Describe how the business will be managed (f
ocusing on production, distribution, operations, purchasing, and inventor
y).

Plan for Growth. Here you describe your plans to grow the business an
d the challenges it may face. You may also describe your plans to franc
hise or license the business, if that is part of its plan for growth.

Steps to a Perfectly Written Business Plan

We recommends that a business plan include:
Executive summary -- a snapshot of your business
Company description -- describes what you do
Market analysis - research on your industry, market and competitors
Organization and management -- your business and management structure
Service or product -- the products or services you’re offering
Marketing and sales -- how you’ll market your business and your sales strategy
Funding request -- how much money you’ll need for next 3 to 5 years
Financial projections -- supply information like balance sheets
List of addenda -- an optional section that includes résumés and permits

Getting started may be difficult to do
So, here are seven steps for writing a
perfect business plan.

1. Research, research, research.
“Research and analyze your product, your market and your o
bjective expertise,” William Pirraglia, a now-retired senior fin
ancial and management executive, has written. “Consider sp
ending twice as much time researching, evaluating and thinki
ng as you spend actually writing the business plan.
“To write the perfect plan, you must know your company, you
r product, your competition and the market intimately.”

2. Determine the purpose of your plan.
A business plan, as defined by Entrepreneur, is a “written docume
nt describing the nature of the business, the sales and marketing s
trategy, and the financial background, and containing a projected p
rofit and loss statement.” However, your business plan can serve s
everal different purposes
But, if you want to attract investors, your plan will have a different
purpose and you’ll have to write a plan that targets them so it will h
ave to be as clear and concise as possible. When you define your
plan, make sure you have defined these goals personally as well.

3. Create a company profile.
Your company profile includes the history of your organizatio
n, what products or services you offer, your target market an
d audience, your resources, how you’re going to solve a prob
lem and what makes your business unique. Company profile
s are often found on the company’s official website and are u
sed to attract possible customers and talent. However, your
profile can be used to describe your company in your busine
ss plan. It’s not only an essential component of your busines
s plan; it’s also one of the first written parts of the plan.

4. Document all aspects of your business.
Investors want to make sure that your business is going to m
ake them money. Because of this expectation, investors wan
t to know everything about your business. To help with this pr
ocess, document everything from your expenses, cash flo
w and industry projections. Also, don’t forget seemingly mino
r details like your location strategy and licensing agreements.

5. Have a strategic marketing plan in place.
A great business plan will always include a strategic and aggressive marketing plan. This typically includ
es achieving marketing objectives such as:
• Introducing new products
• Extending or regaining market for existing products
• Entering new territories for the company
• Boosting sales in a particular product, market or price range. Where will this business come from? Be
specific.
• Cross-selling (or bundling) one product with another
• Entering into long-term contracts with desirable clients
• Raising prices without cutting into sales figures
• Refining a product
• Having a content marketing strategy
• Enhancing manufacturing/product delivery
“Each marketing objective should have several goals (subsets of objectives) and tactics for achieving tho
se goals,” states Entrepreneur.

6. Make it adaptable based on your audience.
“The potential readers of a business plan are a varied bunch, ranging fro
m bankers and venture capitalists to employees,” states Entrepreneur. “A
lthough this is a diverse group, it is a finite one. And each type of reader
does have certain typical interests. If you know these interests up-front, y
ou can be sure to take them into account when preparing a plan for that p
articular audience.”
For example, bankers will be more interested in balance sheets and cash
-flow statements, while venture capitalists will be looking at the basic busi
ness concept and your management team. The manager on your team, h
owever, will be using the plan to “remind themselves of objectives.”

7. Explain why you care.
Whether you’re sharing your plan with an investor, customer or team me
mber, your plan needs to show that you’re passionate and dedicated, and
you actually care about your business and the plan. You could discuss th
e mistakes that you've learned, list the problems that you’re hoping to sol
ve, describe your values, and establish what makes you stand out from t
he competition.
When I started my payments company, I set out to conquer the world. I w
anted to change the way payments were made and make it easier for an
yone, anywhere in the world to pay anyone with few to no fees. I explaine
d why I wanted to build this. My passion shows through everything I do.

Market
opportunity analysis
As you work on your business pla
n, a major section needs to be de
voted to identifying future opportu
nities for your company. This is ke
y to developing a long term strate
gy, because without any planning
you’re likely to only have short ter
m success. Not something a typic
al business owner wants to hear.
If you’re still waiting to make a sta
rt on your business plan.

1. Identify what’s currently happening in the business environment.
In this section you need to look at the economic conditions (growth, sta
ble or decline) as well as any trends or social changes that could have
an impact on the business. Delve into both the legal and regulatory sit
uations, as these can often change and you need to be prepared for a
ny future expected changes as well. Research the latest technology an
d state of the art developments, and take into account the natural envir
onment. Are there any vulnerabilities or limitations on resources that c
ould hinder your growth?

2. Define the industry and determine the outlook.
Here you need to state exactly the industry that you are operating withi
n, and make forecasts on the size of the market. Look back over the la
st 5 years, and project how you believe it will grow over the next 12 mo
nths, 3 years and 5 years. Look to your competition and discover the
marketing practices that are being utilized, and see if you can see any
major trends or shifts within your industry. Here there are major implica
tions for potential opportunities, as you need to ensure you’re moving i
n the same direction as the market.

3. Dive into the details of your competitors.
You need to know what businesses you are competing with, and know
their products inside and out. Go through their product mix, and compa
re this with the products you are offering. Make sure you’re objective in
your approach, and also identify the relative strengths and weaknesse
s of the products from your customers’ point of view. Look at how your
competition is reaching the market, the channels they’re using to both
distribute and market their products, and the level of service that’s bein
g offered. If you have details on the market share of other businesses i
nclude it here, and sum it all up in a couple of short sentences that outl
ine the implications of this section regarding the opportunities in the m
arket.

4. Describe your target market.
You need to build a profile of your ideal customer, so that you can adequately focus your
sales and marketing efforts and reach your customers. If you haven’t built a marketing pl
an before. In essence you simply need to look at the needs of your customers, but if you
get stuck try asking yourself one of these questions:
• Who are my potential customers?
• What are my potential customers like as a consumer?
• What are my potential customers looking for?
• When is the product needed?
• Is there a particular channel that the product sells best in?
• How do my potential customers make a decision to buy a product?
• How important is each of my products attributes to my potential customers?
• Are there any outside influences that have an effect on their buying decision?
• Is there any limitations that can influence the level of opportunity?
• What is the competition starting to do?
• How is the market developing and changing?

5. Create your projections.
Use a variety of techniques that build on all of the information in your b
usiness plan to set a forecast of your sales. This includes best and wor
st case scenario analysis, any intuition or “gut-feelings” you have abou
t new markets, and compare any results you have seen to date. The fi
nal recommendation in a market opportunity analysis is a simple answ
er to this question. Is the project a go? Or a no go?

Identifustomey the crs or potential
customers for a business
Entrepreneurs who operate small-scale, or lifestyle, ventur
es face different risks and stresses. Talented people usual
ly avoid companies that offer no stock options and only lim
ited opportunities for personal growth, so the entrepreneur
’s long hours may never end. Because personal franchise
s are difficult to sell and often require the owner’s daily pre
sence, founders may become locked into their businesses
. They may face financial distress if they become sick or ju
st burn out. “I’m always running, running, running,” compla
ins one entrepreneur, whose business earns him half a mil
lion dollars per year. “I work 14-hour days, and I can’t rem
ember the last time I took a vacation. I would like to sell th
e business, but who wants to buy a company with no infra
structure or employees?”

Are you starting to roll out your marketing
plan and netting yourself some customers?
Follow these 10 steps to be successful.
10 Steps To Target And Connect With Potential Customers Effectively

1. Survey Customers
You won’t be able to connect effectively
with your potential customers if you don’
t have a customer in mind. Survey curre
nt customers, as well as members of yo
ur target market, to find out how you ca
n better present your product or service,
or what aspects might be missing from
what you’re currently offering.
2. Research Your Competitors And Fi
nd Out Who Their Customers Are
An easy way to find out which kind of m
arketing campaign works and which don
’t is by researching competitors in your i
ndustry.
Not only will this inexpensive effort give
you some ideas to follow for your own c
ampaigns, this research will also reveal
dark spots in your competitor’s process
and present new directions for you to ta
ke your own marketing strategy.

3. Target Ads
Far cheaper than most methods of adve
rtising, Facebook and Google targeted
ads prove that a little can go a long way.
While most advertising in the real world
only reaches whoever comes across a
billboard, bus stop or commercial, these
targeted ads can locate the people who
are most likely to need your service bas
ed on geographical location, demograp
hics (including age, gender, education a
nd relationship status), interests (based
on what they’ve shared or “liked”) and b
rowsing activity.
4. Smart Social Media
There’s having a presence on social me
dia, and then there’s having a social me
dia presence. When it comes to keeping
customers, a little more effort on Faceb
ook, Twitter and Instagram really go the
distance.

5. Respond To Every Email, Tweet, Facebook Co
mment, And Phone Call; Adjust Yourself As Nec
essary
When Paul English was still presiding over Kayak,
one of the most valuable practices he insisted on i
mplementing was to keep an extremely annoying, l
oud phone in the middle of the office to receive cust
omer complaints. This ensured the calls were answ
ered — by anybody, including engineers, developer
s, content managers, or even English himself.
At Zappos, Tony Hsieh values customer service so
much that they build in customer service training for
every new hire, regardless of the job. And its custo
mer service has gone to such lengths as to go to a
rival shoe store to get a pair of shoes that the site h
ad run out of.
The point? Always answer calls, always care for yo
ur customers, and always fix problems as they com
e in — your customers will love you for it.
6. Affiliate Marketing
Affiliate marketing has been around since the
early days of the Web, and it’s still an overlo
oked but highly effective means to raise your
brand awareness significantly.
And with the number of affiliate networks out
there, who operate on a PPC (Pay Per Click)
or PPA (Pay Per Action) basis, it has never b
een easier or safer to find your product being
promoted by appropriate publishers.
EBay, Amazon and certain marketing compa
nies offer their own affiliate networks, but you
can also try an exclusive PPA affiliate networ
k.

7. Establish Trust In Your Community: Pu
blish User Reviews, Get Likes, Syndicate
Articles
With so many new, competing businesses co
ngesting almost every industry, it’s getting in
creasingly difficult to stand out and grow a de
cent-sized following. To gain support, compa
nies first have to establish trust.
As more than 88 percent of consumers trust
online reviews as much as personal recomm
endations, it only makes sense to start by pu
blishing user reviews and sending samples o
f your product for trusted bloggers to review.
8. Connect With The Right Influencers
Engaging with big players in your industry ca
n be an extremely effective way to garner a
wider share base. After all, if you can get the
attention of a thought leader or an influencer,
you have the chance to capture their fans an
d friends, as well as establish trust and credi
bility.
Reach out to appropriate bloggers or entrepr
eneurs at conferences or over Twitter, send t
hem relevant and interesting blog content th
at might pique their interest, and once again
— be a human being, not just your company.

9. Post Relevant Content On Blogs
Keeping a practice of continually and diligentl
y publishing relevant and original blog conten
t not only helps keep your company shining i
n the warm Google sun, but it also helps pot
ential customers truly get to know your comp
any and where it’s coming from.
The content doesn’t have to be self-promotio
nal (and shouldn’t be), but it should offer cont
ext into why your product or service is import
ant, suggest the best ways to solve industry-
related problems that arise in the everyday li
ves of your target demographic, impart some
valuable wisdom, and generally inspire peopl
e to share your point of view.
10. Craft An Engaging Newsletter
To Foster Leads
One of the most time-consuming as
pects of online marketing is generati
ng leads. Often, that involves analy
zing customer demographics and s
ocial media activity, putting out ads
and online surveys and updating us
er data from year to year.

Identifying Your Competition
Types of Competition
- Direct competitors. A business in your market that sells a product or service similar to yours
is your direct competitor. McDonald’s® and Burger King® are examples of direct competitors in
the fast food industry, because they sell a similar line of products. An ice cream shop that also
sells hamburgers might also be considered direct competition for McDonald’s and Burger King.
However, the ice cream shop would not be considered a strong competitor, because its main fo
cus is on ice cream products. Hamburgers are only a sideline.
- Indirect competitors. A business that sells a different product or service from yours but fills t
he same customer need or want is your indirect competitor. For example, Taco Bell® is in the f
ast-food industry, but it is an indirect competitor with McDonald’s and Burger King. This is beca
use Taco Bell sells fast-food products but not hamburgers. On a broader level, non-fast-food re
staurants could also be considered indirect competition because the food they sell fills the sam
e basic need.

What Is a Value Proposition?
A value proposition is the promise you make to deliver produ
cts and services of value to your customers. This promise is
what allows you to edge out your competitors by describing
what sets you apart and how you will solve a problem the co
nsumer has.
Recognize a value proposition

Use these steps to help you better develop your value proposition:
1. Identify customer benefits: Make a list of all of the ways your customers can
benefit from your product.
2. Link benefits to the value offered: Consider the ways in which your products
will bring value to the customer.
3. Differentiate and position yourself: Clearly establish who your target audienc
e is, what you are offering them, and how you stand out compared to your c
ompetition.
How to Determine Your Value Proposition

Business
Model Canvas
A business model describes how a com
pany creates, delivers and captures val
ue.

WHAT IS A BUSINESS MODEL CANVAS?
The Business Model Canvas, developed by Alexander Osterwalder, is a vi
sual representation of current or new business models, generally used by
strategic managers. The Canvas provides a holistic view of the business a
s a whole and is especially useful in running a comparative analysis on the
impact of an increase in investment may have on any of the contributing fa
ctors.
The Business Model Canvas gives people a common language through w
hich they can evaluate traditional processes and bring innovation into their
business models.

THE TRADITIONAL APPROACH TO A BUSINESS MODEL
Most startups fail because entrepreneurs put all their faith in the idea of the product the orga
nization exists to create. In their loyalty to this product or service, they fail to give in depth co
nsideration to the business model their organization will follow. Usually the business model is
either a one-size-fits-all model, common in the industry or it is a random amalgamation of sys
tems and processes, created at the spur of the moment to further the main goal; sell the prod
uct or service.
Successful new ventures do not go to market with their first idea; instead, the product/ servic
e has usually gone through several iterations before arriving at the final version. Similarly, org
anizations are more sustainable if they have considered several business models before deci
ding on a particular one.

THE 9 BUILDING BLOCKS
The Business Model Canvas cate
gorizes the processes and internal
activities of a business into 9 sepa
rate categories, each representing
a building block in the creation of t
he product or service. These cate
gories represent the four major as
pects of a business; customers, of
fer, infrastructure, as well as finan
cial viability.

1. Customer Segments
The total customer pie is divided into segments ba
sed on the manner in which an organization’s pro
ducts or services address a specific need for the s
egment. The customer segment is an essential pa
rt of an organization’s business model and is key t
o ensuring that the product features are aligned wi
th the segments characteristics and needs.

2. Value Propositions
An organization’s value proposition is the combination of products and service
s it provides to its customers. Osterwalder stated that these offerings need to
be unique and easily differentiated from competition. Value propositions can b
e divided into two categories:
Quantitative: this stresses the price or efficiency of the product or service
Qualitative: this value proposition highlights the experience and results the pr
oduct and its use, produce.
The value proposition provides value through a number of attributes such as c
ustomization, performance, “getting the job done”, brand/ status, design, newn
ess, price, cost and risk reduction, accessibility, as well as convenience/ usabil
ity.
.

3. Channels
The medium through which an organization provides its value propositi
on to its customer segment is known as a channel. There are various
options for channels available to an organization, and the selection is
based on the channel that is the quickest, most efficient with the least
amount of investment required. There are two basic kinds of channels;
Company owned channels such as store fronts or Partner Channels s
uch as Distributors. A company can opt to choose either one or employ
a combination of both.

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 sustainabili
ty ,Customer Relationships can be categorized as follows:

4. Customer Relationships
An organization must select the kind of relationship it will have with its custom
er segment in order to create financial success and sustainability ,Customer R
elationships can be categorized as follows:
Personal Assistance: In this kind of relationship the company interacts with t
he customer directly through an employee who provides the human touch by a
ssisting the customer presale, during the sale and even may provide after sale
s services.
Dedicated Personal Assistance: This kind of relationship is characterized by
a very close interaction between the customer and the company through a ded
icated representative who is assigned a set of clients and is pers
onally responsible for the entire experience the customer has with the compan
y.

Self-Service: Self-Service places the onus of the customer experience on the tools the
company provides for the customer to serve him or herself.
Automated Services: These are customized self-service relationships where the histori
cal preference of the customer is taken into account to improve the overall experience.
Communities: In today’s electronic age creating communities of clients allows organizat
ions to communicate with them directly. This allows for an enhanced client experience b
ecause the community allows clients to share their experiences and come up with comm
on challenges and solutions.
Co-creation: The customer has a direct hand in the form the company’s product or servi
ce will take.
For an entrepreneur, the priority is to identify the type of relationship he/ she has with th
e customer. Then the value of the customer must be evaluated in terms of the frequency
of his expenditure on the firms product and services. Loyal customers are relationships t
hat the company should aim to invest in as they will yield steady revenue throughout the
year.

5. Revenue Streams
A revenue stream is the methodology a company follows to get its customer s
egments to buy its product or service. A revenue stream can be created throug
h the following ways:
• Asset Sale: the company sells the right of ownership over the good to the customer.
• Usage Fee: the company charges the customer for the use of its product or service.
• Subscription Fee: the company charges the customer for the regular and consistent use of its product or service.
• Lending/ Leasing/ Renting: the customer pays to get exclusive access to the product for a time-bound period.
• Licensing: the company charges for the use of its intellectual property.
• Brokerage Fees: companies or individuals that act as an intermediary between two parties charge a brokerage fee
for their services.
• Advertising: a company charges for others to advertise their products using their mediums.

6. Key Resources
These are the assets of the organization fundamental to how it provides value
to its customers. Resources can be categorized as human, financial, physical
and intellectual.
For an entrepreneur, it is important to begin with listing your resources. This gi
ves you a clear idea of what final product or service your company needs to cr
eate for the customer and which resources are dispensable, resulting in cost s
avings for your company. Once the final list of resources is available, the comp
any can decide on how much it needs to invest in these key resources to oper
ate a sustainable business.

7. Key Activities
Activities that are key to producing the company’s value proposition. A
n entrepreneur must start by listing the key activities relevant to his/her
business. These activities are the most important processes that need
to occur for the business model to be effective. Key activities will coinci
de with revenue streams. Now it is important to evaluate which activitie
s are key by adding or removing some and evaluating their impact.

8. Key Partnerships
To create efficient, streamlined operations and reduce risks associated
with any business model, an organization forms partnerships with its hi
gh-quality suppliers. Key partnerships are the network of suppliers and
partners who complement each other in helping the company create it
s value proposition. Partnerships can be categorized as follows;
Strategic alliance between competitors (also known as coopetition),
Joint ventures .
Relationships between buyers and suppliers.

9. Cost Structure
This defines the cost of running a business according to a particular m
odel. Businesses can either be cost driven i.e. focused on minimizing i
nvestment into the business or value driven i.e. focused on providing
maximum value to the customer.
Following are some traits of common cost structures;
• Fixed Costs: costs that remain the same over a period of time
• Variable Costs: as the name suggests, these costs vary according
to a variance in production
• Economies of Scale: costs decrease as production increases
• Economies of Scope: costs are decreased by investing in busines
ses related to the core product.

Pain relievers describe how your products and services alle
viate specific customer pains. They explicitly outline how yo
u intend to eliminate or reduce some of the pains that annoy
your customers before, while, and after they are trying to ge
t a job done. Typically, great value propositions alleviate onl
y a limited number of severe customer pains but do that ver
y well. Make sure you focus on pains you have identified in t
he customer profile.
How do I add Pain Relievers to
my Value Proposition Canvas?

Produce savings? E.g. in terms of time, money, or efforts.
Make your customers feel better? E.g. by killing frustrations, an
noyances, things that give customers a headache.
Fix underperforming solutions? E.g. by introducing new feature
s, better performance, or better quality.
Put an end to difficulties and challenges your customers encou
nter? E.g. by making things easier or eliminating obstacles.
Wipe out negative social consequences your customers encou
nter or fear? E.g. in terms of loss of face, lost power, trust, or st
atus.
Questions to ask

Eliminate risks your customers fear? E.g. financial, social, tech
nical risks, or what could go awfully wrong.
Help your customers better sleep at night? E.g. by helping with
big issues, by diminishing concerns, or eliminating worries.
Limit or eradicate common mistakes customers make? E.g. by
helping use a solution the right way.
Get rid of barriers that are keeping your customer from adoptin
g solutions? E.g. lower or no upfront investment costs, flatter le
arning curve, or the elimination of other obstacles preventing a
doption.

Example 1:
Google

The first thing you should know about Google’s business model is that it is multi-side
d. This means that it brings together two distinct but related customers.
In Google’s case, its customers are its search users and its advertisers. The platfor
m is only of interest to advertisers because search users are also present. Converse
ly, search users would not be able to use the platform free of charge were it not for a
dvertisers.

As you can see the diagram gives you an immediate understanding of the key parts of Google’s business m
odel.
We can see that:
• Google makes money from the advertiser customer segment, whose ads appear either in search results or on web pages.
• This money subsidizes a free offering to the other two customer segments: search users and content owners.
• Google’s business model has a network element to it. That is, the more ads it displays to web searchers the more advertise
rs it attracts. And the more advertisers it attracts the more content owners it attracts.
• Google’s Key Resource is its search platform including google.com, Adsense (for content owners) and Adwords (for adverti
sers).
• The key strategic activities that Google must perform are managing the existing platform including its infrastructure.
• Google’s key partners are obviously the content owners from whom a large part of its revenues is generated. OEMs (Origin
al Equipment Manufacturers) also form a key partner.
• OEMs are companies who produce mobile handsets to whom Google provides its Android operating system to for free. In r
eturn, when users of these handsets search the internet they use the Google search engine by default, thus bring more use
rs into the ecosystem and generating even more revenue.

Example 2:
Skype

From the Business Model Canvas, we can see that Skype has two key value propositions:
• The ability to make calls over the Internet, including video calls, for free.
• The ability to make calls to phones cheaply.
• Skype operates a freemium business model, meaning the majority of Skype’s users (the Free Us
ers customer segment) use the service for free to make calls over the internet, with just 10% of u
sers signing up to the prepaid service.
• We can see from the customer relationship building block that customers typically have a help th
emselves relationship with Skype. Typically, this will be by using their support website.
• The channels Skype uses to reach its customers are its website, skype.com, and partnerships wi
th headset brands.
• Looking at key partnerships, key activities, and key resources together, the main thing to notice i
s that Skype is able to support its business model of offering cheap and free calls because it doe
sn’t have to maintain its own telecoms network like a traditional telecoms provider. Skype doesn’t
need that much infrastructure at all, just backend software and the servers hosting use accounts.

Example 3:
Gillette

• Gillette’s business model is based on the “Bait & Hook” business model pattern. This model is ch
aracterized by an attractive, inexpensive or even free initial offer that encourages ongoing future
purchases of related products or services. With this business model, the bait is often provided at
a loss, subsidized by the hook.
• In Gillette’s case, an inexpensive razor handle forms the bait, and continued purchases of the bla
des represent the hook.
• The business model is very popular in SaaS (Software as a Service) businesses, where typically
a free initial month leads to a monthly subscription.
• In the diagram above we have used the thickness of the arrows to indicate the size of revenue ge
nerated. In Gillette’s case, all revenues are generated by just one customer segment, but the vast
majority of revenues come from Frequent Blade Replacements, with just minor revenues coming f
rom the purchase of handles.
• If you look at the left-hand side of Gellettes Business Model Canvas you will notice how all major
costs are aligned with delivering the value proposition. For example, marketing costs help to build
Gillette’s strong brand and R&D costs help to ensure that the blade and handle technology is uniq
ue and proprietary.

Assessment
Describe the two types of competit
ors.
What is a competitive advantage?
In order, list the six basic steps us
ed in market research.
Assessment
Compare the advantages and dis
advantages of buying an indepen
dent business versus buying a fr
anchise. How are these business
opportunities alike? How are the
y different?
What type of business opportunit
ies match well with your current
goals, both financial and nonfina
ncial?
Activity

MODULE 2.pptx

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