What is a business model

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What is a business model, and what does it look like?

You may know that Alex Osterwalder and his team at Strategyzer came up with the Business Model Canvas.

Their team defines a business model as a way that your company, or that you, create, deliver and capture value from your customers.

So to create a business model, first off, we need an idea or a concept. This is really our value proposition. This is what we create and look to pass on to our customers. Second, we need customers. These are a segment of people or people with a specific need or problem that are looking for your product or service. The business model then goes to explain exactly how you're going to deliver your solution to your customers, and in exchange receive some kind of reward or benefit from that.

So let's go through a couple of case studies. 

 

Let's look at McDonald's. The way McDonald's creates, delivers, and captures value is in the following ways: McDonald's creates fast food, quick meals, and it does so for fast-food lovers and busy people, and in exchange for delivering these services to those people, get paid in cash or through transactions in their retail shops.

Most of you will be familiar with Spotify. Spotify, one of the world's largest, if not the largest music provider, will provide music anywhere at any time through their apps and online services. And it does so for music lovers in exchange for a monthly recurring fee.

You'll most likely be familiar with a bunch of different business models. These could be E-commerce, like Amazon or Trade Me. They can come in the form of franchises, like Starbucks, McDonald's, Subway and so on.

There’s also software as a service, or applications. They all require a different business models and are unique in their own different ways.


Learning

To create a business model, first of all, you need to have an idea or a concept. Second, you have to look for your customers, these are the people who need your product. Then the business model will help you figure out how you are going to deliver the product to your customers.

As an exercise, write down what you your idea does in 2-3 bullet points. Then go on to write who your solution targets and where your customers can get your solution from. Lastly, how they will pay for it.