Chapter 4
BUILDING BUSINESS
MODELS
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
ANGELITA C. SERRANO, PhD-BM
OBJECTIVES
The learners shall be able to:
1. Understand the concept of a business model.
2. Design a business model canvas for a startup.
3. Select the network of key partners.
4. Choose key activities essential to the value proposition.
5. Formulate a good customer value proposition.
6. Recommend the relationship the startup should form with the customer
segments.
7. Select the customer segment/s to serve.
8. Propose for the channels to use to communicates with customer segments.
9. Prepare a lean canvas for a startup.
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
INTRODUCTION
 good product and/or service does not automatically turn
into a commercial success
 business model makes the difference between success
in the laboratory and success in the marketplace
 business model involves:
1. the product or service offering
2. the targeted customers
3. the economic engine for profitability and growth
objectives
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
WHAT IS A BUSINESS MODEL?
“how does it plan to generate money”
who your
customer is
what value
you can
create/add for
the customer
how you can
do that at
reasonable
costs
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
Traditional business models
ManufacturerAjinomoto Philippines,
Alaska Milk and Century
Pacific Foods
Brick-and-mortarGrocery stores, dentists,
gas stations, local
grocery and walk-in
banks
Distributor-Auto dealers
Retailer-Best Buy, WalMart and Target
Franchise-Jollibee
McDonald’s and Pizza
Hut
Bricks-and-clicksbusinesses selling
apparel and shoes items
in Divisoria
Direct Sales-Avon,
Boardwalk, Dakki, Fern
and Forever Living
High Touch-Hair salons
and auto dealers
Family-owned-National
Bookstore, ShoeMart,
Jollibee and Robinsons
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
Modern business models
Nickel-and-dime-Cebu
Pacific
Online MarketplaceAmazon and Alibaba
Dropshipping-Doba,
Oberlo, Dropship
Direct, and Wholesale
2B
Freemium-Zoom,
Spotify and Dropbox
E-Commerce-Amazon,
Flipkart, Shopify,
Myntra, Ebay, Quikr,
Olx and Alibaba
Subscription-Netflix,
LinkedIn, Amazon
Prime, Dollar Shave
Club
Aggregator-Airbnb,
Zillow and Oyo for
Hotels; Uber for taxi
service; and Yodlee for
financial service
Hidden RevenueGoogle, Facebook,
Instagram and Twitter
Data Licensing / Data
Selling-Twitter sells
real-time data to third
party users
Agency-Based-Leo
Burnett Company is an
agency that services
United Airlines,
McDonald’s, Kellogg’s
Affiliate MarketingNerdWallet, Capterra,
MoneySavingExpert.co
mand and the
Wirecutter
Network MarketingAvon, H and Mary Kay
CrowdsourcingWikipedia, YouTube,
Kickstarter, LEGO ideas,
Unilever, Coca Cola
Blockchain-Bitcoin,
Ethereum, and Litecoin
Low Touch-Ikea and
SurveyMonkey
Razor and Blade-Razor
Consulting-Deloitte,
Mckinsey, BCG,
software
Social EnterpriseBayani Brew, Coffee for
Peace, First Harvest
and Liter of Light
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
THE BUSINESS MODEL CANVAS
•“Business Model Ontology” Alexander
Osterwalder, the Business Model Canvas
consisting of nine segments for its building blocks
business model
can be written
in a one-page
canvas
focus on every
segment or
blocks of the
business model
systematically
until the gaps
close
a block
describes the
factor that a
startup business
needs to study
modify each
block as the
need arises
When one block
is change, the
other blocks are
required to be
revisited and
changed
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
Key Partners
1. vendors of
organic raw
materials
2. packaging
suppliers
3. retail partners
Key Activities
1. introduce organically
produced bread
2. marketing and sales
3. branding
4. consumer education
Key Resources
1. team cooperation
2. raw materials
3. social media
4. retail network
Value Propositions
1. freshly baked breads
2. specialized in organic bread
3. breads of constant quality
4. breads are served quickly
5. competitive priced breads
6. Halal certified
7. The “Finsbury bread” of
Manila
Cost Structure
1. equipment and facilities
2. staff salaries
3. product ingredients
Sample Business Canvass
Model For A Small Bakery
Customer Relationships
1. Hotline number
2. E-mail for questions
3. Facebook page
4. Loyalty discounts
Customer Segments
1. neighborhood
communities
2. healthy life stylist
3. neighborhood
supermarkets
4. neighborhood
bakeries
Channels
1. social media
2. rider delivery
3. on call delivery
4. direct selling using own
website
5. physical store
6. events planner
Revenue Streams
1. volume sales from supermarkets
2. sales to customers
3. sales to events such as weddings, birthdays, anniversaries, etc.
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Servicesand Publishing Inc
template of the business model canvas of Osterwalder
Key Partners
Identify your company’s key partners.
This can consist of
important suppliers in your supply
chain. What key
resources does the company receive from
these partners? What key activities are
performed by these partners? Think about
why your company works with these key
partners and the motivations behind them.
Key Activities
What specific key activities are
necessary to deliver
your value proposition? What
activities set your
company apart from others? Consider
how your company’s unique
differences in its revenue streams,
distribution channels, or customer
relationships. Do you need to procure
specific niche
resources? Do you need to keep costs
and prices low?
Value Propositions Identify the core
value of the company provides to
customers. What exactly is the
company trying to give to customers?
What problem is your company trying
to solve and what needs are your
company satisfying? How do you offer
something different that satisfies the
demands of your customer segments
(like price, quality, design, status)?
Key Resources
What specific key resources or assets
are necessary to deliver your value
propositions? Consider what resources
your distribution channels and revenue
streams may require to function.
Additionally, think about what resources
are needed to maintain customer
relationships. Does your company
require a lot of capital or human
resources?
Cost Structure
Identify they key costs in your company’s business model. What are the major drivers of costs? How do your
key activities and key resources contribute to the cost structure? How do your costs relate to your revenue
streams? Are
you properly utilizing economies of scale? What proportion of costs are fixed and variable? Is your company
focused on cost optimization or value?
Customer Relationships What type
of relationships do you have with
your customers? How do you interact
with customers and how does this
differ amongst customer segments?
Do you communicate with your
customers? How much support does
your company provide?
Customer Segmen Identify
who is your value
proposition targets. Who
are yo creating value for?
What are they like? What do
they need? What do they
enjoy What is the custom
market like? Are yo targeting?
a small niche community or e
u
small market?
Channels
How do you deliver your value
proposition? How do you reach your
customer segments? What channels
are used? Consider your supply,
distribution, marketing and
communication channels. Are they
well-integrated and cost efficient? Are
they being utilized effectively?
Revenue Streams
Identify the ways your value proposition generates money for your business. Does your
company have multiple methods of generating revenue? What is the pricing strategy for the
products offered by yo
company? Through what channels do your customer pay? Does yo company offer multiple
forms of payment?
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
KEY PARTNERS
Key partners are the network of suppliers and
partners
Partner with other
business,
governmental, or nonconsumer entities
Partnerships could
be a tool to a
business success
Partnering can be
for optimizing the
use of resources,
forming new
resource streams or
lessening risks
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
• two
businesses
because of
their mutual
interest
• for a
completely
different
company
Buyer-supplier relationship
• agreement
between
competitors
to help share
the risk
• to gain new
users
Joint-ventures
• between noncompetitors
to help each
other do an
equally
advantageous
task
• but retaining
their
independence
Coopetition
Strategic alliances
types of partnerships
• the most
usual type of
partnerships
• dependable
spring of
supplies
coming in
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
KEY ACTIVITIES
Key activities are the most essential activities in
achieving a company’s value proposition
a bridge between the
value proposition and
the customer
segment
consider channels reliant on business
model type
and customer
relationships
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
categories of key activities
Marketing
Operations
Sales
Design
Distribution
Development
Customer
Experience
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
KEY resources
Key resources describes the most important assets
required to make a business model work
resources that allow
an enterprise to
create and offer a
value proposition
resources to reach
target markets
resources that can
maintain good
relationships with
customer
segments, and gain
revenues
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
four categories of resources
Physical-tangible
resources that a
company make
use of to form its
value
proposition
Intellectual –
These are nonphysical,
intangible
resources
Human –
Employees are
the biggest and
most vital
resources
Financial – All
businesses have
key resources in
finance
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
CUSTOMER VALUE PROPOSITION
Customer value proposition (CVP) is a business’s way of generating
value in their product or service when targeting potential customers
value proposition is a value proposition CVP is a description
statement consisting computed through
of the user’s
of the reason/s
adding all the
experiences
someone should do
benefits
that
the
business with the
product
company
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
factors considered in the development of the
customer value proposition
Functional value-product and
or service offers the solution
to a particular problem
(phone competence offered
by an iPhone)
Emotional value-sentimental
reasons (purchasing locally
produced or organic brands)
Economic value-offers a
financial advantage
Symbolic value-a certain type
of status given to the
customer (Italian Ducati
motorcycle /a cup of
Starbucks coffee)
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
Different Types of CVPs
Value proposition
All Benefits
Favorable point of difference
Resonating focus
Consists of
All benefits customers
receive from a market
offering
All favorable points of difference The key point of difference whose
a market offering has relative to improvement will deliver the
the next best alternative
greatest value to the customer for
the foreseeable future
Answers the
customer question
“why should our firm
purchase your offering?”
“why should our form purchase
your offering instead of your
competitors?”
“What is the most worthwhile for
our firm to keep in mind about
your offering?’
Requires
Knowledge of own market
offering
Knowledge of our own market
offering and next best
alternative
Knowledge of how own market
offering delivers superior value to
customers compared with next
bet alternative
Has the potential
pitfall
Benefit assertion
Value presumption
Requires customer value research
Table 7: Types of CVPs
Source: https://en.wikipedia.org/wiki/Customer_value_proposition
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
CUSTOMER RELATIONSHIPS
Customer relationships are the types of relationship a
company forms with its particular customer segments
To gain
customers
To keep
them
To grow
sales with
them
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
types of customer relationships
Personal assistancecommunicate with a real
salesperson
Automated services-a
combination of customer
self-service and automated
processes
Dedicated personal
assistance-assigning a
salesperson to an
individual customer
Self-service-no direct
relationship
Communities-online
communities to exchange
information
Co-creation-customers
have the chance to cocreate value with the
company such as in
designing and innovating
products
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
CUSTOMER SEGMENTS
Shared needs, behaviors and other traits can be the
bases for customer segmentation
customer segment refers
to demographics such as
age, ethnicity, profession
and/or gender, etc.
company may select a
single group or several
groups
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
types of customer segments
Mass- an unsegmented
market
Niche-a customer
segment with very
distinct characteristics
and extremely specific
needs
Diversifieddifferentiated customer
segments
Segmented-customer
segments that have
very small differences
in their need
requirements
Multi-sided platformscustomer segments are
reliant with each other
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
CHANNELS
Channels are the touch points through which a
company communicates with its target customers
play a big role in defining
the customer experience
and providing value
entrepreneur should
understand which channel
is appropriate to reach his
target consumers
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
five phases that a channel may pass
through
Awarenessmarketing and
advertising
phase
Evaluationcustomer
evaluates, read
about or uses
the product or
avail of the
service
Purchase-the
actual sales
process
Delivery- when
the promised
value
proposition has
reached the
customers
After Salesgiving customer
care and
support after
purchase
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
channel types
• Direct channels
• the entrepreneur owns or
has control over
• could mean added costs
• provide a direct and strong
relationship
• Indirect channel
• use of intermediary
• wholesalers are considered
• partner channels
• quick to reach the market
and less investment in
infrastructure
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
VALUE PROPOSITION CANVAS
Value proposition canvas aims is to guarantee proper fit
of the product and the market-Alexander Osterwalder
takes into
a detailed
tool also to
consideration the relationship of the upgrade a product
values and needs
customer
and/or service
of the customers
segments and
offering
value propositions
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
two building blocks-value proposition canvas
•The customer profile points to
the customer segment that the
company shall serve
Value proposition is a statement
consisting of the reason/s
someone should do business with
the company
• created for each customer
segment, as each segment has
distinct gains, pains and jobs
• before making a customer
profile, the various archetypes
customers typically fall into
must be evaluated
• reflect on the gain creators, pain
relievers and the products
and/or services to offer them
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
Value Proposition
Canvas-Diagram
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
• either avoid the
customer from
getting a job done
or the negative
experiences
• emotions and risks
that the customer
experiences before,
during or after a job
Customer Jobs/Jobs-to-be-done
• all the expectations
and needs of
customers
• things that may
delight them and
other stuffs that
may intensify the
possibility of these
customers
embracing a value
proposition
Customer Pains
Customer Gains
CUSTOMER PROFILE
• functional, social
and emotional tasks
customers are
trying to do
• challenges they are
attempting to
resolve and needs
they desire to
satisfy in their
personal and
professional lives
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
Customer Gains
Required gains- the very
basic expectations by the
customers (Smartphone to
make and receive phone
calls)
Expected gains- beyond the
basic ones (Smartphone
expected to be visually
attractive and fashionable)
Desired gains-sought-after
and cherished gains by the
customer (Smartphone,
having no trouble in the
synching the phone)
Unexpected gains-potential
benefits of the product
and/or service for which the
customer is unaware (touch
screen capability of a
Smartphone)
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
Customer Pains
Productivity painsinclude the inefficiency
of the businesses that a
customer experiences
Support pains – felt by a
customer when he is
not assisted when
buying
Financial painscustomer spends too
much
Process pains-create
friction to buyers like
substandard processes
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
types of Jobs-to-be-done
Functional jobs – regular and particular jobs that a customer is
trying to do and is working towards
Social jobs -the manners a customer desires to reflect his image
in a social environment
Personal/ emotional jobs –how a customer works towards
feeling a certain way
Supporting jobs – customers also purchase value, hence doing a
supporting task
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
three roles of customers that may assist in
supporting jobs
Buyer of value-from
evaluating choices at hand up
to paying for the product
Co-creator of value-has a
direct hand in the
manufacture of the product
with the company
Transferor of value-the end of
the product use such as
disposal of product trash or
giving the ownership of the
product to another person
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
• how the products
and/or services
lighten, avoid or
solve the particular
customer pains
Products and Services
• how the products
and services may
create customer
gains and offer
customer added
value
• functional utility,
social gains, positive
emotions, and cost
savings
Pain Relievers
Gain Creators
Value Proposition
• products and/or
services which
create gain and
relieve pain and
built around the
value proposition
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
The Value Proposition Canvas of the Bakery
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
THE LEAN CANVAS: A BUSINESS MODEL CANVAS
ALTERNATIVE
proposed by Ash
Maurya
a developed version
of the Business
Model
more on customers’
needs, on actionable
metrics
more problemfocused approach and
appropriate to use by
small entrepreneurs
offer a fast idea-toproduct
transformation
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
The Lean Canvas
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
elements of the Lean Canvas Model
Problemproblems that
require
solving
Solution-look
for the
effective
solution by
“getting out of
the building”
Value
Proposition-a
marketable
promise that
the business
will solve
their problem
Unfair
Advantagethe
competitive
advantage
that cannot
be copied and
cannot be
bought
Customer
segmentsproblem and
the customer
segments
must be
connected
Channelsways to reach
the customer
segments
Revenue
streams-the
money matter
of the
business
Cost structurethe
operational
costs that the
business
needs to pay
Key Metricsthe
assortment of
products
and/or
services the
business
wants to
deliver
ANGELITA C. SERRANO, PhD-BM
ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
Unlimited Books Library Services and Publishing Inc
THANK YOU
• ANGELITA C. SERRANO, PhD-BM
• ENTREPRENURIAL MINDSET ISBN 978-6000-000-000-0
• Unlimited Books Library Services and Publishing Inc