Understanding the 9 Building Blocks of Business Model Generation

A business model describes the rationale of how an organisation creates, delivers and captures value. Alexander Osterwalder and Yves Pigneur revolutionized the way we think about business models with their book “Business Model Generation” and the introduction of the Business Model Canvas. At the heart of this canvas are nine essential building blocks that help entrepreneurs and business leaders visualise, assess, and innovate their business models.

Let’s explore these nine building blocks and understand how they work together to create a comprehensive business model.

1. Customer Segments

This block defines the different groups of people or organisations an enterprise aims to reach and serve. Questions to consider:

• Who are your most important customers?
• What are their characteristics and needs?

2. Value Propositions

The Value Propositions block describes the bundle of products and services that create value for a specific Customer Segment. Key questions:

• What value do you deliver to the customer?
• Which customer problems are you helping to solve?

3. Channels

This block outlines how a company communicates with and reaches its Customer Segments to deliver a Value Proposition. Consider:

• Through which channels do your Customer Segments want to be reached?
• How are you reaching them now?

4. Customer Relationships

The Customer Relationships block describes the types of relationships a company establishes with specific Customer Segments. Ask yourself:

• What type of relationship does each of your Customer Segments expect you to establish and maintain with them?
• How are they integrated with the rest of your business model?

5. Revenue Streams

This represents the cash a company generates from each Customer Segment. Key questions:

• For what value are your customers really willing to pay?
• How would they prefer to pay?

6. Key Resources

The Key Resources block describes the most important assets required to make a business model work. Consider:

• What Key Resources do your Value Propositions require?
• What Resources are important the most in distribution channels, customer relationships, revenue streams?

7. Key Activities

This block describes the most important things a company must do to make its business model work. Ask:

• What Key Activities do your Value Propositions require?
• What Activities are important the most in distribution channels, customer relationships, revenue stream?

8. Key Partnerships

The Key Partnerships block describes the network of suppliers and partners that make the business model work. Questions to ponder:

• Who are your Key Partners?
• Which Key Resources are you acquiring from partners?
• Which Key Activities do partners perform?

9. Cost Structure

This describes all costs incurred to operate a business model. Key considerations:

• What are the most important costs inherent in your business model?
• Which Key Resources are most expensive?
• Which Key Activities are most expensive?

Conclusion

Understanding and effectively implementing these nine building blocks can help you create a strong, flexible, and innovative business model. The Business Model Canvas provides a visual and collaborative tool for mapping out these elements, allowing you to see how they interact and influence each other.

Defining the Business Model for your business is one of the key building blocks in The 90 Day Program and in fact in all programs that I deliver. The concept must be simple, relevant and easily understandable. The nine building blocks show the logic of how your business intends to make money. In its design, we cover of the four main areas of a business – customers, the offer, infrastructure and financial viability. It really is the blueprint for a strategy to be implemented through organisational structures, processes and systems.

Mastering these nine building blocks will give you a powerful framework for analysing, designing, and refining your business model for sustained success.