Using the Business Model Canvas is a great way to start planning your business. I will be taking you through my experience of creating a Business Model Canvas. There are two common templates used for writing a Business Model Canvas. Firstly, the original model by Alexander Osterwalder, and secondly, the Lean Startup version. Both templates are quite similar to their core framework, which helps the entrepreneur to describe their strategy for value addition in the market. We will be focusing on the original Business Model Canvas that covers nine sections: value proposition, customer segments, customer relationships, distribution channels, key activities, key partners, key resources, cost structures, and revenue streams. I am going to unpack how these sections can be populated using the Joco business case. Joco is a mobile payments company based in South Africa helping small businesses accept card payments. Starting off with the value proposition. A value proposition refers to the value your company offers to deliver the customer if they buy your product or service. There are important questions that you must answer in populating this section, what problem is your business solving? What customer needs are we satisfying? Looking at our example, what problem is Joco solving? In South Africa, 75 to 80 percent of adults in 2012 had access to some bank issued purchasing card to make a payment. But less than 10 percent of businesses in the market could accept card payments. The process of getting a card machine as a business owner was complex and expensive. The problem that Joco identified is that small businesses in the country have limited access to card machines for customer payments. Their solution is to provide a product that makes card machines easily accessible to small business owners. Which customer needs is Joco satisfying? It's a move away from cash payments in small businesses and informal traders, customers not having cash on the spot payments, affordable card machines for small businesses, faster processes of attaining a card machine. Once you've answered these questions, you can develop the value proposition statement. In this case, Joco provides portable card machines that could be ordered online and delivered to the business owner's door within 48 hours. The customer segment section helps you have a deeper understanding of who your customers are. Without customers, your business will not make any money. To build an effective business model, a company must identify which customers they are trying to serve. Important questions to answer include, who are your most important customers? Who are the early adopters? Knowing who your customers are will assist in designing the product to suit the needs of your target market. Customers can be segmented by income, geography, education, and etc. Your product design must incorporate the preferences and desires of your most important customers. For example, Joco was specifically targeting small business owners from street vendors to restaurant owners. Although card machines can be used by any business, they were working towards giving access to business owners in under-resourced communities. Now, this means that the product must be useful in a range of different environments from street markets where there might be no access to electricity to formal settings. This affects the size of the card machine, the battery life, and more while keeping it cost-effective. The next question is to answer, who are your early adopters? An early adopter is any customer who is likely to try your product before it's popular. These people set the trend in the market. With Joco, young entrepreneurs who are already using smartphones in digital platforms are the early adopters. Since they now know what their business on a day to day looks like, it's time to put down the key partners required to make your business successful. Key partners refer to the network of suppliers and partners and make your business to work. Our key questions are, who do we need to work with to produce our product? Who are our suppliers? What resources do we require from suppliers? Some of Joco's partners are manufacturing houses who are producing the hardware of the product. The National Credit Regulator which gives their business the license to operate as a financial products company and a PR agency to drive brand awareness. At this point of the business model, you know who your customers are and you know what problem you are solving for them. The next step is to identify key activities that are to be performed daily in your business to make sure you achieve your value proposition. Here the key question is, what activities occur daily. On a day-to-day basis, Joco will be selling and delivering card machines, adopting the current product for high customer satisfaction, marketing the brand to attract new customers. Other activities are research and development, marketing and PR, sales and customer service. Next, we have key resources which describe the assets needed to make the business model work. Here we ask, what resources are required such as distribution channels and talent? Some resources Joco requires are warehousing for the machines ready to be posted to customers, a website for customers who want to buy and find out more about Joco, and talent including software developers and marketing staff. Here, we also need to establish the distribution channels of the business. Distribution channels tell us how in a way the customer will be getting the product. It details the customer journey. Here, the questions are, through which channels do we want to reach our customers and how do other companies reach them now? Business owners will probably hear about Joco from word of mouth or an advert, then go to the company's website. From the website, they can buy the product and it will be delivered to their door step. Joco therefore needs a warehouse where all the products that are ready to be shipped to customers will be stored. The product will move from the manufacturing houses to the warehouse and then the customer. Other distribution channels include billboards, radio, and social media. Now that we know who the customer is and we have established the distribution channel, we need to answer, how will Joco establish and maintain relationships with the customer? This takes us to the customer relationships section, where we have to detail the strategy to be used to acquire and keep customers. How will you create and maintain relationships with your customer? Generally, a good quality product with good customer service will yield high customer satisfaction. With that said, buying behavior is also influenced by marketing. Joco needs to firstly provide quality and affordable machines and excellent customer service. The process of buying a Joco card machine should be simple for the customer. At this stage, the business model is almost complete. Moving on to the cost section, here we ask, what are your most important cost for your business? These include operational costs such as salaries, computers, office space, productive development costs such as manufacturing, and any other relevant cost you know your business will incur. For Joco, the most important costs include talent for R&D and marketing, resources for manufacturing, advertising, warehousing, and door-to-door deliveries. The section on revenue streams should capture how your business will generate money from every product or service offered. This is basically your pricing strategy. There are multiple ways in which you can price their products so that it generates revenue. One of them is adding a profit margin percentage on top of the cost of production. In this section, we need to ask, what value are your customers willing to pay? For example, Joco generates money from card machines by adding a 50 percent profit margin to the cost of production price. Joco will also receive a two percent transaction fee. Each business is different and your revenue model will depend on the products you have. We have now completed an entire Business Model Canvas for our Joco business case. In this week's assignment, Copia has provided you with your own task to work on your own business model. We have provided a template but there are many formats available on the internet that you can make use of because it is a widely used and recognized tool for business planning. Creating your own Business Model Canvas can take some time but you should find it a useful exercise to think through all these aspects of your business idea. It is a crucial step for preparing to present your startup idea for funding or support.
