Business Models: What & Why?
What is a business model, and why is it important to irrigation entrepreneurs in Sub-Saharan Africa?
Overview
A business model is a written document that explains your company’s strategy for creating and delivering value that people are willing to pay for.
A business model contains 9 parts, which together show how your company intends to make money. Start-ups are designed to develop and test business models, until they find a successful model that can be scaled up into a company.
Finding a successful business model requires customer discovery, an interview method to understand what customers care about, and get as much useful market information about customers as possible early in your product development.
Creating an initial business model, and then updating/revising your model after engaging in customer discovery, is vial for entrepreneurs because most start-ups fail by building something customers don’t want (shown in Mistake #1 below).
The 9 parts of a business model are:
- Customer Segments — For whom are we creating value? Who are our most important customers?
2. Value Propositions — What value do we deliver t o the customer? Which one of our customer’s problems are we helping to solve? Which customer needs are we satisfying?
3. Channels — Through which Channels do our Customer Segments want to be reached? How are we reaching them now?
4. Customer Relationships — What type of relationship does each of our Customer Segments expect us to establish and maintain with them? Which ones have we established?
5. Revenue Streams — For what value are our customers really willing to pay For what do they currently pay? How are they currently paying? How would they prefer to pay?
6. Key Resources — What key resources do our business model require? For example: physical, intellectual, human, financial, etc.
7. Key Activities — What key activities do our business model require? For example: production, problem solving, platform/network, etc.
8. Key Partnerships — Who are our key partners? Who are our key suppliers? Which key resources are we acquiring from partners? Which key activities do partners perform?
9. Cost Structure — What are the most important costs in our business model? Which key resources and activities are most expensive?
This information can be organized on a Business Model Canvas. At Water Entrepreneur, we will teach you how to develop an initial business model canvas, conduct customer discovery interviews, and analyze and synthesize insights from customer discovery to strengthen your business model and improve your company operations. Please read our other Business Model articles to learn more, and contact us to receive individualized coaching.
Sources
9 Components of Business Models: Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers by Alexander Osterwalder and Yves Pigneur
Business Model Canvas: Business Model Foundry AG by Strategyzer.
