Key Activities KP Key Partners Key Resources Cost Structure
18 Kr Key Resources KP Key Partners KA Key Activities C$ Cost Structure bmgen_final.indd 18 6/15/10 5:31 PM
CR 9 Customer Relationships CS Customer Segments Value Propositions Channels R Revenue Streams
19 CS Customer Segments Cr Customer Relationships VP Value Propositions CH Channels r$ Revenue Streams bmgen_final.indd 19 6/15/10 5:31 PM
1 Customer Segments The Customer Segments Building Block defines the different groups of people or organizations an enterprise aims to reach and serve Customers comprise the heart of any business model.Without Customer groups represent separate segments if: (profitable)customers,no company can survive for long.In order Their needs require and justify a distinct offer to better satisfy customers,a company may group them into They are reached through different Distribution Channels distinct segments with common needs,common behaviors, They require different types of relationships or other attributes.A business model may define one or several They have substantially different profitabilities large or small Customer Segments.An organization must make They are willing to pay for different aspects of the offer a conscious decision about which segments to serve and which segments to ignore.Once this decision is made,a business model can be carefully designed around a strong understanding of specific customer needs
The Customer Segments Building Block defi nes the diΩerent groups of people or organizations an enterprise aims to reach and serve Customers comprise the heart of any business model. Without (profi table) customers, no company can survive for long. In order to better satisfy customers, a company may group them into distinct segments with common needs, common behaviors, or other attributes. A business model may defi ne one or several large or small Customer Segments. An organization must make a conscious decision about which segments to serve and which segments to ignore. Once this decision is made, a business model can be carefully designed around a strong understanding of specifi c customer needs. Customer groups represent separate segments if: • Their needs require and justify a distinct oΩer • They are reached through diΩerent Distribution Channels • They require diΩerent types of relationships • They have substantially diΩerent profi tabilities • They are willing to pay for diΩerent aspects of the oΩer Customer Segments CS 1 bmgen_final.indd 20 6/15/10 5:32 PM
For whom are we creating value? 21 Who are our most important customers? Diversified An organization with a diversified customer business model serves two unrelated Customer Segments with very different needs and problems.For example, There are different types of Customer Segments. in 2006 Amazon.com decided to diversify its retail Here are some examples: business by selling"cloud computing"services:online Segmented storage space and on-demand server usage.Thus Mass market Some business models distinguish between market it started catering to a totally different Customer Business models focused on mass markets don't segments with slightly different needs and problems. Segment-Web companies-with a totally different distinguish between different Customer Segments. The retail arm of a bank like Credit Suisse,for example, Value Proposition.The strategic rationale behind this The Value Propositions,Distribution Channels,and may distinguish between a large group of customers, diversification can be found in Amazon.com's powerful Customer Relationships all focus on one large group each possessing assets of up to U.S.$100,000,and IT infrastructure,which can be shared by its retail sales of customers with broadly similar needs and problems. a smaller group of affluent clients,each of whose net operations and the new cloud computing service unit. This type of business model is often found in the worth exceeds U.S.$500,000.Both segments have consumer electronics sector. similar but varying needs and problems.This has Multi-sided platforms(or multi-sided markets) implications for the other building blocks of Credit Some organizations serve two or more interdepen- Niche market Suisse's business model,such as the Value Proposi- dent Customer Segments.A credit card company,for Business models targeting niche markets cater to tion,Distribution Channels,Customer Relationships example,needs a large base of credit card holders specific,specialized Customer Segments.The Value and Revenue streams.Consider Micro Precision and a large base of merchants who accept those credit Propositions,Distribution Channels,and Customer Systems,which specializes in providing outsourced cards.Similarly,an enterprise offering a free news- Relationships are all tailored to the specific require- micromechanical design and manufacturing solutions. paper needs a large reader base to attract advertisers. ments of a niche market.Such business models It serves three different Customer Segments-the On the other hand,it also needs advertisers to finance are often found in supplier-buyer relationships.For watch industry,the medical industry,and the industrial production and distribution.Both segments are example,many car part manufacturers depend heavily automation sector-and offers each slightly different required to make the business model work (read on purchases from major automobile manufacturers. Value Propositions. more about multi-sided platforms on p.76)
21 There are diΩerent types of Customer Segments. Here are some examples: Mass market Business models focused on mass markets don’t distinguish between diΩerent Customer Segments. The Value Propositions, Distribution Channels, and Customer Relationships all focus on one large group of customers with broadly similar needs and problems. This type of business model is often found in the consumer electronics sector. Niche market Business models targeting niche markets cater to specific, specialized Customer Segments. The Value Propositions, Distribution Channels, and Customer Relationships are all tailored to the specific requirements of a niche market. Such business models are often found in supplier-buyer relationships. For example, many car part manufacturers depend heavily on purchases from major automobile manufacturers. Segmented Some business models distinguish between market segments with slightly diΩerent needs and problems. The retail arm of a bank like Credit Suisse, for example, may distinguish between a large group of customers, each possessing assets of up to U.S. $100,000, and a smaller group of aΩluent clients, each of whose net worth exceeds U.S. $500,000. Both segments have similar but varying needs and problems. This has implications for the other building blocks of Credit Suisse’s business model, such as the Value Proposition, Distribution Channels, Customer Relationships, and Revenue streams. Consider Micro Precision Systems, which specializes in providing outsourced micromechanical design and manufacturing solutions. It serves three diΩerent Customer Segments—the watch industry, the medical industry, and the industrial automation sector—and oΩers each slightly diΩerent Value Propositions. Diversified An organization with a diversified customer business model serves two unrelated Customer Segments with very diΩerent needs and problems. For example, in 2006 Amazon.com decided to diversify its retail business by selling “cloud computing” services: online storage space and on-demand server usage. Thus it started catering to a totally diΩerent Customer Segment—Web companies—with a totally diΩerent Value Proposition. The strategic rationale behind this diversification can be found in Amazon.com’s powerful IT infrastructure, which can be shared by its retail sales operations and the new cloud computing service unit. Multi-sided platforms (or multi-sided markets) Some organizations serve two or more interdependent Customer Segments. A credit card company, for example, needs a large base of credit card holders and a large base of merchants who accept those credit cards. Similarly, an enterprise oΩering a free newspaper needs a large reader base to attract advertisers. On the other hand, it also needs advertisers to finance production and distribution. Both segments are required to make the business model work (read more about multi-sided platforms on p. 76). For whom are we creating value? Who are our most important customers? bmgen_final.indd 21 6/15/10 5:32 PM
2 Value propositions The Value Propositions Building Block describes the bundle of products and services that create value for a specific Customer Segment The Value Proposition is the reason why customers turn to one company over another.It solves a customer problem or satisfies a customer need.Each Value Proposition consists of a selected bundle of products and/or services that caters to the requirements of a specific Customer Segment.In this sense,the Value Proposi- tion is an aggregation,or bundle,of benefits that a company offers customers. Some Value Propositions may be innovative and represent a new or disruptive offer.Others may be similar to existing market offers,but with added features and attributes
The Value Propositions Building Block describes the bundle of products and services that create value for a specifi c Customer Segment The Value Proposition is the reason why customers turn to one company over another. It solves a customer problem or satisfi es a customer need. Each Value Proposition consists of a selected bundle of products and/or services that caters to the requirements of a specifi c Customer Segment. In this sense, the Value Proposition is an aggregation, or bundle, of benefi ts that a company oΩers customers. Some Value Propositions may be innovative and represent a new or disruptive oΩer. Others may be similar to existing market oΩers, but with added features and attributes. 2 Value Propositions of a specifi c Customer Segment. In this sense, the Value Proposition is an aggregation, or bundle, of benefi ts that a company oΩers customers. Some Value Propositions may be innovative and represent a new or disruptive oΩer. Others may be similar to existing market oΩers, but with added features and attributes. VP bmgen_final.indd 22 6/15/10 5:32 PM