Now that we've walked through the business model and

all its minute details, let's recap on what we have learned so far.

There are nine sections in the traditional business model canvas,

plus the one that we inserted in there.

First up is our value proposition.

A business's value proposition is our product or

service through which we offer value to our customers.

We create this value by solving a problem for

the customer, or by satisfying a need or want.

This is very important.

Our value proposition can be a mix of different elements.

Including newness, performance, convenience, design, and so on.

A customer segment is a group of people or

organizations that you aim to reach and serve with your value proposition.

There are different types of customer segments.

The main ones we talked about are mass market,

niche, segmented, diversified, and multi-sided markets.

The goal of this section of the business model canvass is to get you exploring your

customer segments, and defining who your hypothetical customers are.

Once you have identified the type of segment, develop your customer

archetypes to get a better sense of how you can gear your business model to them.

Next, we have channels.

Channels cover three very important aspects of our business.

Communication, distribution, and sales.

There are two types of channels, owned or partner channels.

Owned channels have higher margins, but are harder to manage.

Partner channels have lower margins, but allow easy distribution and greater reach.

In addition, owned channels can be broken down into direct and indirect.

However, all partner channels are by their nature, indirect.

Regardless of the type of channel you choose,

all channels have five main stages.

It is crucial that you think through your approach for each stage.

There's awareness, evaluation, purchase, delivery, and post purchase.

Keep in mind that starting out, your aim should be to pick one channel that

you think will maximize your return, and focus on that channel.

Don't waste you resources by trying to simultaneously deliver through

multiple channels.

Customer relationships cover any communication we

have with our customers throughout our business model.

These relationships can be broken into three main groupings: acquisition,

retention, and up selling.

When starting out, we're going to focus on our customer acquisiton and

activation strategies, and how we can maximize our revenue stream.

Remember that your customer relationships are closely tied to your channels, so

develop them in parallel.

Next we have key activities, resources, and partnerships.

To execute our business model,

we have a certain set of activities we need to complete.

Some of these activities are crucial to our business model.

These are our key activities.

Most of our efforts should be dedicated in making these key activities a reality.

And our key resources are the intellectual, human, financial and

physical capital that we harness to execute on it.

For the activities outside of our key activities list,

we don't necessarily need to handle all the activities ourselves.

We can work with key partners who would help reduce the risk, uncertainty and

costs of executing our business model.

Allowing us to focus on our core product.

Next we have revenue.

There are two main types of revenue streams, transaction revenues,

resulting from the one time sale of your value proposition, and recurring revenue

streams, obtained by continuously delivering your value proposition.

Your chosen revenue model is closely tied to the pricing structure you implement.

There are two main pricing categories, fixed and dynamic pricing.

Fixed pricing is a pricing methodology based on static predefined variables.

Fixed pricing can be further broken down into different types: list pricing,

product future dependent, customer segment dependent, and volume dependent pricing.

The second main type of pricing is dynamic pricing.

Under dynamic pricing,

your price constantly changes based on certain market variables.

Dynamic pricing is seen in instances of negotiation, yield management,

real time markets, and options.

Remember that the price you implement must not only take into account your

value proposition and customer segments, but also accommodate the cost of doing

business, highlight the value that your product delivers, respect the practices

and expectations of your market, and keep an eye on competitive prices.

Your revenue model is very closely linked to your customer segments and

channels, so explore those sections before you start on this one.

Then there is costs, a company's cost structure building block

describes the major costs incurred to make the business model a success.

In a cost driven business model,

the focus is on minimizing costs as much as possible.

This is reflected in the value proposition,

where low cost is heavily emphasized.

In a value driven model, the main focus is on value creation, rather than cost.

This type of business model is accompanied by personalized customer relationships and

premium value propositions.

In this section of the business model, don't worry about the nitty gritty.

Instead, focus on the large cost drivers.

The last section of our business model, is the industry analysis.

The industry analysis should focus on two things.

The type of market we're entering and how that drives our marketing and

sales spending.

As well as the speed of product development and customer expectations.

The second thing you should focus on is your competitors.

What are they doing well, what aren't they doing for customers.

How do they earn revenue and how are we competing with them.

We've covered quite a bit of information in this section, so

watch it as many times as you need to, until you get a good grasp of things.

Above all, what I want you to take away is that at this stage in your company,

we still don't have a business model.

We're still looking for one, and

we're using this canvas to come up with a set of hypotheses for our undertaking.

In the next stage, we're going to look at how we can test these hypotheses.

And use a method of iteration and

experimentation to validate our business model until we find something that works.