Breaking Down Our Business

Well, let's go back to my idea for a bit. 0:00 I said I wanted to build project management software. 0:03 Now, I may think that I know how to start a business around this idea, but 0:06 in reality, I've probably just scratched the surface from using some of 0:10 the products out there. 0:13 While that gives me good insight on the pain points and 0:15 what's lacking from existing solutions, 0:18 I need to understand the business before starting my own venture. 0:20 By this, I don't mean that we spend a lot of time reading, planning and 0:24 accounting for every scenario. 0:28 No. 0:30 We want to spend just a bit of time planning and 0:30 more time actually doing things. 0:33 A perfect tool for our needs is the Business Model Canvas, 0:35 developed by Alexander Osterwalder and his team. 0:39 As described on their site, 0:42 the Business Model Canvas is a strategic management and entrepreneurial tool. 0:43 It allows to you to describe, design, challenge, invent and 0:48 pivot your business model. 0:53 If that sounds complicated, don't worry. 0:55 We're going to walk through each part. 0:58 The Business Model Canvas takes an idea, whether it's a new business or 1:00 even a re-imagining of an existing model, and 1:04 breaks it down into nine different sections. 1:07 We then ask some important questions in each section to help us 1:10 understand our model. 1:13 This is what the canvas looks like. 1:15 First up, we have our value proposition. 1:17 [SOUND] Here, we talk about our [SOUND] idea. 1:20 What makes it unique? 1:22 What problems does it solve? 1:23 In our next [SOUND] section, customer segments, 1:25 we're going to paint a picture of what our different customer segments look like. 1:28 [SOUND] Next, we have our channels. 1:32 How do we deliver our product or service? 1:33 Channels connect our value proposition to our various customer segments. 1:36 There can be multiple channels for 1:41 a single business model and it's important to know the characteristics of each one. 1:42 [SOUND] Customer relationships. 1:48 In this section, we explore our interactions with our customers. 1:49 [SOUND] How do we communicate with them, make them aware of our product and 1:53 keep them happy? 1:57 What activities [SOUND] are absolutely essential to running our business? 1:58 This section lists our key activities. 2:02 [SOUND] Similarly, we have key resources. 2:05 What resources do we need to make sure we complete these key activities? 2:07 [SOUND] We also have [SOUND] key partners. 2:12 Are there any parts of our business model that others can do [SOUND] better? 2:15 If so, who are these key partners and what can they do for us? 2:18 The bottom sections are quite important. 2:23 [SOUND] First, we start with revenue. 2:25 How do we make money? 2:27 What kind of revenue model should we explore, and 2:29 what pricing scheme should we [SOUND] implement? 2:32 And last, we have our costs. 2:34 [SOUND] What will it take to run this company that we're proposing? 2:36 [SOUND] That is the basic canvas and covers all aspects of our business model. 2:39 I'm also going to insert one more section to this list, and 2:44 that's an industry analysis. 2:47 There are a lot of players in this space and 2:49 we can learn from what they've done and what they're doing wrong. 2:51 Now, the authors of the book highly recommend using a large 2:55 physical canvas and a bunch of post-it notes to work through your business model. 2:58 Each point that you come up with is jotted down on a post-it note and 3:03 added to the relevant section. 3:06 This exercise serves a very useful purpose, but 3:08 we won't get into that just yet. 3:11 In the following videos, you may see or 3:13 me someone else running around sticking post-it notes on a canvas. 3:15 If you are working through an idea yourself, do this too. 3:19 I'll explain it all in due time. 3:22 There's another crucial point I want to highlight about the Business Model Canvas 3:25 before we move on. 3:29 Traditionally, when you prepare a business model, 3:30 it is with the intention of using it as your operating model. 3:33 The document, the business model that you write, serves as your North Star, 3:37 your guide as you run your business. 3:41 That is not what this business model is about. 3:43 When you start a company, 3:46 contrary to traditional advice You have no idea what you're really getting into. 3:48 The Business Model Canvas helps you search for 3:52 a viable business model that is known to produce results. 3:54 Once this business model is known, then we can convert the model into a plan. 3:58 What we're going to write down is nothing but a set of hypotheses or assumptions. 4:03 We then test these assumptions and 4:08 validate until we find a business model that's repeatable and scalable. 4:10 Keywords, scalable and repeatable. 4:15 A strategy that gains you a few customers once in a while isn't a winning strategy. 4:18 We're going to keep discovering, testing and 4:23 validating until we have a working model. 4:25 All right. 4:28 Let's start right away by digging into the value proposition. 4:29