You might think that having a new business idea is a great thing. After all, you are passionate about solving a problem, creating value, and making a difference in the world. But did you know that having a new business idea can also be a big problem?
According to a study by Harvard Business School, about 75% of startups fail within the first 10 years. And one of the main reasons for this failure is that many entrepreneurs fall in love with their ideas and ignore the market realities. They spend too much time and money on developing their products or services, without validating their assumptions, testing their hypotheses, and getting feedback from potential customers.
This is why having a new business idea is not enough. You need to have a new business model. A business model is the way you create, deliver, and capture value for your customers. It includes your value proposition, your customer segments, your channels, your revenue streams, your cost structure, your key resources, your key activities, and your key partnerships.
A business model is not a static document that you write once and forget. It is a dynamic tool that you use to experiment, learn, and pivot as you discover what works and what doesn’t. It helps you to avoid wasting time and money on building something that nobody wants. It helps you to find the product-market fit that is essential for your success.
So how do you create a new business model? One of the best methods is to use the Business Model Canvas, developed by Alexander Osterwalder and Yves Pigneur. The Business Model Canvas is a visual template that allows you to map out your business model on one page. It helps you to clarify your assumptions, test your hypotheses, and communicate your value proposition.
The Business Model Canvas consists of nine building blocks:
– Value Proposition: What value do you offer to your customers? What problem do you solve or what need do you satisfy? How do you differentiate yourself from your competitors?
– Customer Segments: Who are your customers? What are their characteristics, needs, preferences, and behaviors? How do you segment them into different groups?
– Channels: How do you reach your customers? What are the best ways to communicate, deliver, and sell your value proposition to them?
– Revenue Streams: How do you make money from your customers? What are they willing to pay for? How do they pay? How much do they pay?
– Cost Structure: What are the main costs involved in running your business? What are the most expensive resources and activities? How can you reduce or optimize them?
– Key Resources: What are the most important assets that you need to create, deliver, and capture value? They can be physical, intellectual, human, or financial.
– Key Activities: What are the most important things that you need to do to create, deliver, and capture value? They can be production, problem-solving, platform/network, or channel management.
– Key Partnerships: Who are the key partners that help you create, deliver, and capture value? They can be suppliers, distributors, complementors, or allies.
– Customer Relationships: How do you interact with your customers? What type of relationship do they expect from you? How do you build and maintain loyalty and trust?
To use the Business Model Canvas, you can follow these steps:
1. Start with your value proposition. Write down what value you offer to your customers and how you differentiate yourself from your competitors.
2. Identify your customer segments. Write down who your customers are and how you segment them into different groups.
3. Map out your channels. Write down how you reach your customers and what are the best ways to communicate, deliver, and sell your value proposition to them.
4. Define your revenue streams. Write down how you make money from your customers and what are they willing to pay for.
5. List your cost structure. Write down what are the main costs involved in running your business and what are the most expensive resources and activities.
6. Specify your key resources. Write down what are the most important assets that you need to create, deliver, and capture value.
7. Describe your key activities. Write down what are the most important things that you need to do to create, deliver, and capture value.
8. Identify your key partnerships. Write down who are the key partners that help you create, deliver, and capture value.
9. Outline your customer relationships. Write down how you interact with your customers and what type of relationship they expect from you.
Once you have completed the Business Model Canvas, you can use it to test your assumptions and hypotheses with real customers. You can use various methods such as interviews, surveys, experiments, prototypes, or minimum viable products (MVPs) to validate or invalidate your ideas. You can also use feedback loops.
Read about why you need a business consultant!