Hello again and welcome back to How to Start Your Business. This is module 2, about business models, and in this session we're continuing with the canvas methodology that we have been looking at in previous sessions. We'll talk about resources, activities and key partners and the structure costs of a business model. Let's begin. Let's start with key resources. Let me remind you that we've already looked at value propositions, customer segments, how to distribute our propositions to our customers via channels, what relationships we hope to build with our customers and how we monetise this value we're delivering. Let's talk now about key resources and to understand this... What makes up the key resources block? It basically describes the most important assets that a company needs to work its business model. Depending on the business activity, the key resources will differ. They can be physical resources, especially the manufacturing industry, for example, they can be financial, they can be intellectual if the R&D is very intensive, or they can be human. The resources can be owned or hired by the company from other strategic partners. So. Some questions we'll need to ask ourselves. What key resources do our value propositions require? We need to identify them. Will they be the distribution channels? Will it be our relationship with our customers? Or do we articulate our value proposition via our business model? We'll need to identify all of this. Here are some examples. In this case, a company such as Walmart, the largest supermarket in the world, its key resources are physical. It's the logistical centres, the points of sale... On the other hand, a business like Microsoft is a business whose key resources are intellectual, based on intellectual property of its software. A company like Novartis' key resources are human. Its human resources are the experienced scientists who have the experience in researching new drugs. And finally, a very clear example of a company whose key resources are financial would be capital risk funds. We know they invest in other companies and other assets to re-evaluate them and they end up being sold to obtain profit. Their key resource are investors. If a capital risk fund doesn't have investors who offer funds for acquisitions that need to generate profit the company doesn't make much sense. Here are some examples: Microsoft, Walmart, Novartis or Accel Partners, the world's largest capital risk fund, very prestigious in Silicon Valley. The next point I'd like to talk about are key activities. And talking about key activities describes the most important things a business must do for its business model to work. If we consider the business model we have there's something that makes that activity different from the rest. That's what we need to identify. What are the key activities that our value propositions require? Is our key activity through distribution channels? Is it through the relationship with our customers? Or through the methodology we use to obtain revenue from our customers? We need to figure it out. Here are some examples of key activities. In the case of production, Ford, for example, its key activity is production of high quality cars at a very efficient cost. Another example of key activity would be problem solving. In this case, a consultancy firm such as Accenture Consulting, which is specialised in resolving individual problems of its clients. One more example of key activity is an online platform. For example Ebay, which is a very well-known internet company which wouldn't work without it's key activity, a technological platform on the network that is usable and delivers value for its customers. It has identified its activity, based on the technological platform, which makes its customers have a perception of value. Let's go to the key partners section within the <i>canvas</i> methodology. The key partners block describes the network of suppliers and partners that ensure that a business model works. Remember that we're talking about suppliers and partners, and in this sense we need to remember that it's very difficult for the businesses themselves to optimise their business models. They need to generate alliances to help them reduce the risk and acquire resources that they need to activate their business model and offer value. Examples of alliances with key partners would be strategic alliances between non-competing businesses that partner together to commercialise the same market segment or to enter other countries at a reduced cost. Examples of competition, which are strategic alliances between competitors, especially in the tech industry, when creating businesses or brands that we might see as ultracompetitors, they may join to access better advantages in terms of costs and economies of scale. Another example would be business associations to develop new businesses, such as UTE for constructions. A last alliance would be the relationship between buyer and supplier to ensure stock availability. These relationships often come with the signing of exclusivities, in exchange for the guaranteed purchase of x materials and which give stability to a relationship as one ensures supply and the other ensures the purchase and a long-term relationship between a customer and a supplier. So, questions we need to ask ourselves. Who are our key associates? Who are our key suppliers? If we find a supplier who differentiates and whom we have access to we should ensure their loyalty. What key resources are we acquiring from our partners? What is it that we cannot do and which our partners can help us obtain? What key activities do our partners perform that help us complement our value proposition that ensure our customer comes to us? Let's look at the last block of the <i>canvas</i> methodology, cost structures. We could talk a lot about this but just so you understand the main concepts what the cost structure block does is describe all the costs we need to assume to operate a business model. Within these costs, we need to ask ourselves which are inherent to what we do, which are the most important, which are the most costly key resources that we need to activate our business model and which are the activities which are the most costly? To define them we'll need to separate them between fixed and variable costs and here's an example. The manufacturing industry has very high fixed costs. A music festival has many variable costs and few fixed costs. Depending on the methodology of the business model that we deliver, we'll have more fixed or variable costs and we'll have to keep tabs on them for the business to be profitable. Another concept we need to know is economies of scale. In tech it's very clear. If I sell software licences, the fact that I can replicate them doesn't imply greater costs so it's a highly scalable business model and the resources I will need to fund it will be very different. In this case it's easier to go to the investment market. Let's look at the economy of breadth which is the last concept, and the example are bank offices that grow as the business grows, and once the business grows the bank office also sells more services, such as insurance and other services that are not associated with the bank, but which exploit the customer to sell more to them. So, these are the concepts to understand, to study carefully for our business model to be profitable as well as deliver value. Thank you and see you in the next one.
