THE

ENTREPRENEURIAL MIND LEC #5 – 04/28/2021

THE BUSINESS MODEL
PROF. MARY ORINNE D. RAMOS

Different Types of Model Business

Models that are traditionally used:

1. Manufacturer
2. Distributor
3. Retailer
4. Franchise
5. Brick-and-mortar
6. Bricks-and-clicks
7. Direct Sales
8. High touch
9. Family-owned

Basic types of modern business models: Key Partners

1. Nickel-and-dime Key Partners are the relationships that you have with other
2. Freemium business, governmental, or non- consumer entities that help
3. E-Commerce your business model work. These can be the relationships that
4. Subscription your company has with your suppliers, your manufacturers,
5. Aggregator business partners, etc.
6. Online Marketplace
7. Hidden Revenue Key partners are not restricted to just supplychain partners.
Key partnerships can fall into oneof four broad categories.
8. Data Licensing/ Data Selling
9. Agency-based 1. Strategic alliances between non- competitors – As
10. Affiliate Marketing the name implies, this is a strategic partnership
11. Dropshipping between non- competitors. For example, your
12. Network Marketing businessmay choose to partner with a manufacturing
13. Crowdsourcing company to produce a sub-assembly. The tire
14. Blockchain company and the car manufacturer are not
15. Low Touch competitors. While the car company could choose to
16. Razor and Blade be vertically integrated and manufactureits own tires,
17. Consulting it is far more efficient to contract with a tire
18. Social Enterprise manufacturer to source its tires. Another great non-
competitor strategic alliance was when Edger
The Business Model Canvas Thompson, president of the Pennsylvania Railroad
partnered with Andrew Carnegie of Carnegie Steel to
• The business model canvas is one framework forsharing your create its railroad tracks.
story, or business model, with potential investors. This 2. Coopetition – This is the strategic partnership
strategic management framework was first developed by between direct competitors.
Alexander Osterwalder in the mid-2000s.
For example, as an oil and gas guy, it is not very efficient
• A Business Model Canvas is a strategic management for every oil and gas company to try to sway public opinion
template used for developing new business models and about fracking. Instead, many oil and gas producers
documenting existing ones. It offers a visual chart with pooled their money to create a series of public service
elements describing a firm's or product's value proposition, announcements (PSA) to debunk many of the claims that
infrastructure, customers, and finances, assisting businesses fracking technology is bad for the environment and is
to align their activities by illustrating potential trade-offs. responsible for polluting water supplies. While the oil and
gas companies are in directcompetition with each other,
that does not mean that they may not have a key
partnership with other oil and gas companies to cooperate
on some things.
THE ENTREPRENEURIAL MIND LEC #5 – 04/28/2021
THE BUSINESS MODEL
PROF. MARY ORINNE D. RAMOS

3. Joint Ventures to develop new businesses Customer Value Proposition

– This is where two companies combine their technology
to create a new business. For example, Google had a
robust internet delivery mechanism, while NASA had a
defense mapping database with images of the planet.
Through ajoint venture, they created Google Earth.
4. Buyer-supplier relationships – Last but not least is the
buyer-supplier relationship. Key partners in a buyer-
supplier relationship can build mutually beneficial and
reliable relationships withPorter’s five forces. There is a
bit of a distinction that can be made between a simple
supplier and a true partner. A “supplier” is a company
that you chooseto provide a needed product or service
and is more of a commodity-based provider.
Communications with suppliers are primarily one way
and can be easily replaced with another supplier if
needed. A “partner” can be a key upstream supplier or
downstream customer that has a greater interest in your
success. Partners are more engaged in your process
and help you provide a better product or service.
Key Activities
In marketing, a customer value proposition (CVP) consists of the
sum total of benefits which a vendor promises a customer will
receive in return for the customer's associated payment (or other
value-transfer).
Customer value proposition is a business’s way of generating
value in their product or service when targeting potential
customers. This is oftencalculated by working out the total sum of
benefits that vendors put forward to theirconsumers.
Factors that are considered in the development ofthe CVP:
1. Functional value
2. Emotional value
3. Economic value
4. Symbolic value
Customer value proposition is a business’s way of generating
value in their product or service when targeting potential
customers. This is oftencalculated by working out the total sum of
benefits that vendors put forward to their consumers.

Different Types of CVPs

To be successful, a company must carry out key actions By matching the customer segment to the value proposition, a
that are primarily dictated by its businessmodel. As we company can gain more profit.
studied with the key resources building block, key • Therefore, it is basic for the company to know exactly the
activities are similarly pivotalin an organization fulfilling its trade-off amongst different customer segments and then
value proposition, reaching its customer segments, choose which one to target and serve.
sustain itscustomer relationships and ultimately create • Then, the company should form its customer value
long-term revenue streams. Key activities are different proposition and adopt the best business model that could
according to the business model of the organization best serve the needs of the selected segment.
carrying out the activity.
There are various CVPs for every customer segment for all
Categories for key activities are: businesses. The reason for this is because each segment has its
own way of meeting the needs of its customers.
1. Marketing
2. Sales Value All Benefits Favorable Resonating
3. Design Proposition point of focus
4. Development difference
5. Operations Consists of All benefits All favorable The key point
6. Distribution customers points of of difference
receive from difference a whose
7. Customer Experience
a market market improvement
offering offering has will deliver
Key Resources relative to the the greatest
next best value to the
Key Resources are the main assets that your company alternative customer for
needs to create the end product. How and what the
resources you need and how you source them can foreseeable
dramatically affect your overall business model. Key future
resources depend entirely on the type of business. Answers the “Why should “Why should “What is the
customer our firm our firm most
The four categories of Key Resources are: question purchase purchase worthwhile
your your offering for our firm to
1. Physical offering?” instead of keep in mind
2. Intellectual your about your
3. Human competitors?” offering?”
4. Financial Requires Knowledge of Knowledge of Knowledge of
own market’s our own her own
offering market market
offering and offering
delivers
THE ENTREPRENEURIAL MIND LEC #5 – 04/28/2021
THE BUSINESS MODEL
PROF. MARY ORINNE D. RAMOS

next best superior e.g., In the banking industry, each big account is provided an
alternative value to individual banker.
customers
compared 3. Self-service
with next bet • Basically there is no direct relationship that exists here,
alternative although all the essential things to assist customers help
Has the Benefit Value Requires themselves are given.
potential assertion presumption customer
pitfall value 4. Automated services
research • This is a combination of customer self-service and
automated processes.
1. All Benefits – The company in this type of CVP just list all the ex. Automated services are able to identify individual
benefits or solutions that a product and/or service offering can customers and their characteristics, hence they can be given
deliver and serve to target customers. information about their orders.
** The more benefits that can be listed down, the better. • Said relationship can even kindle a personal relationship
- This approach needs only small knowledge about such that a customer could be proposed of a book or
customers and competitors from the company but it is movie.
disadvantageous.
- This may lead to managers claiming entitlement to 5. Communities – User communities can be used by
advantages for solution features that in reality offer little companies to be more close and connected with their
actual benefits to target customers. current and potential customers. It is a trend now to keep
2. Favorable Points of Difference – The company using this online communities to exchange information and help
CVP tries to differentiate their solution by conveying its point solve each other’s problems.
of difference compared to the customer’s next best e.g., Tsikot.com is the leading automotive website and community
alternative. in the Philippines. It offers auto classifieds, forums, reviews,
- Here, there must be a complete understanding of customer’s galleries, and a lot more. It has a user-friendly interface, location
requirements and preferences, and what it is worth to fulfill based search with map and mobile responsiveness. Also, it is the
them. most popular car users community in the country.
- Sometimes, the points of difference that has been
emphasized could be of little importance to the target 6. Co-creation
customers. • Basically, this is an extension of the traditional customer-
vendor relationship.
3. Resonating focus – The company making use of this CVP • Here, customers have the chance to co-create value with
identifies the one or two points of difference between its the company such as in designing and innovating
solution and its competitors that provide the best value to the products.
target customers. • Writing reviews and soliciting ideas from customers are
- Companies that use resonating focus value propositions are examples of engaging customers to become co-creators.
able to create tailored-fit value propositions for different Ex. IKEA, a Swedish furniture and home goods retailer. In 2018, it
customer segments. launched “Co-Create IKEA”, a digital platform that promotes the
- The elements of value that are important may vary from participation of customers and fans to design new products. There
customer to customer, hence tailor-fitting is necessary. are even cash rewards whose ideas are chosen. IKEA also opted
to provide test labs and prototype shops so that customers may
Customer Relationships hone their suggestions.

Customer relationships are the types of relationship a company Customer Segments

forms with its particular customer segments. These relationships
are essential in order to gain customers, keep them, and grow
sales with them. Some types of customer relationships include the
following:
1. Personal Assistance
• Founded on human collaboration, the customer can
communicate with a real salesperson to provide help
during and after the sales process.
• Ways of communication may include onsite at the point
of sale, using call centers and even emails, among
others.
2. Dedicated personal assistance
• This is the deepest and most intimate type of relationship
that involves assigning a salesperson to an individual
customer.
• This kind of relationship usually develops over an
extended period of time.
Shared needs, behaviors, and other traits can be the basis for
customer segmentation.
Customer segmentation refers to the demographics such as age,
ethnicity, profession, and/or gender; or psychographic factors
which include spending behavior, interests, and motivations.
A company may select a single group or several groups to target
with its products and services.
Various Types of Customer Segments
1. Mass
• An unsegmented market in which products with mass
appeal such as aspirin, orange juice, soft drinks,
paperback romances, and the like are offered to every
customer.
THE ENTREPRENEURIAL MIND LEC #5 – 04/28/2021
THE BUSINESS MODEL
PROF. MARY ORINNE D. RAMOS
• The customer value proposition for this segment must be
for a bi number of people who has similar problem or
need requirements.
• Refrigerator manufacturers should target the mass
market because there is little differentiation needed by
customers who are interested to buy a refrigerator.
2. Niche
• This market speaks of a customer segment with very
distinct characteristics and extremely specific needs.
• This segment necessitates a highly customized product,
custom made to fit their needs. Hence, the customer
value proposition for this segment should be strictly
defined based on the preferences of this specific
customer segment.
• This type of market is common amongst automobiles part
suppliers who are really reliant on automobile
manufacturers for sale of their products.
3. Segmented
• There are businesses that select to offer products and/or
services to customer segments that have very small
differences in their need requirements.
• In this segment, the company forms various customer
value propositions based on these small differences in
the customer segments.
• In retail banking, for instance, the distinction lies on the
net worth of customers, which is small yet substantial.
This type of bank finds it profitable to make investment in
forming distinct customer value proposition for every type
of customer segment it has.
4. Diversified
• Some companies often select differentiated customer
segments.
• Basically, these customer segments have very diverse
needs and wants.
• Although there may be some overlaps among the profiles
of customers, the company still see it is profitable to
invest in attracting these customers.
• One of the diversified companies in the Philippines is
San Miguel Corporation.
5. Multi-sided platforms
• This type of customer segment is used when customer
segments are reliant with each other, which makes it a
necessity to serve both sides of the balance.
• This is true with credit cards. It is vital for customers to
use their credit cards. At the same time, it is also
important that stores accept these credit cards of
customers for transaction. If one end of the equation
fails, the other one shall have the same fate.
Channels
The touch points through which a company communicates with its
target customers. Hence, they play a big role in defining the
customer experience and providing value.
An entrepreneur should understand which channel is appropriate
to reach his target consumers.
There are five phases that a channel may pass through but it may
cover more than one of these phases at a time.
1. Awareness
• This is the marketing and advertising phase.
• Entails educating the target customers about the features
of the products and/or services and how these offerings
shall be of value to them.
• e.g., Google and other search engines plus YouTube,
Instagram, and Facebook.
2. Evaluation
• In this phase, the customer evaluates, read about or
uses the product or avail of the service in order to
formulate an honest opinion about it.
• In order to form a good evaluation of the offering, it is
best for the entrepreneur to educate the customers also
about the company’s competitors.
• This way, the customers are assisted in evaluating their
options.
• Similarly, customers are able to see clearly why the
product and/or service of the entrepreneur’s company is
the best choice.
• e.g., Google My Business, Social media accounts, and
the company’s website may be used for evaluation.
3. Purchase
• This phase is the actual sales process.
• Here the customers buy their chosen product and/or
service.
• The sales process represents the exchange of a
particular product and/or service for money.
• Stripe and PayPal can be used for purchase.
4. Delivery
• Also known as the fulfillment stage of the process.
• The phase when the promised value proposition has
reached the customers.
• Simply, the way the offerings shall reach the customers
to solve their problems.
• E.g., Postage/mails such as UPS, FedEx, and USPS
5. After Sales
• This phase centers in giving customer care and support
after purchase.
• It offers the customers to call when they have a problem
or make queries about the product.
• Email service providers and Chat platforms like
Facebook Messenger can be utilized.
There are also different channel types, which are:
1. Direct channels
• Those that the entrepreneur owns or has control over.
• This could be his physical store, website, or salesforce.
• Owning the channel could mean added costs but may
provide a direct and strong relationship with the customer
and could give higher profit margins.
2. Indirect channel
• Also known as partner channels where the company
makes use of intermediary and places its products or
makes the service obtainable at the partner store.
• Wholesalers are considered partner channels.
• Ex. Winegrowers partner with wholesalers in various
countries to sell their wines.
THE ENTREPRENEURIAL MIND LEC #5 – 04/28/2021
THE BUSINESS MODEL
PROF. MARY ORINNE D. RAMOS
• Quick to reach the market and less investment in
infrastructure are some of the advantages of an indirect
channel. However, it is expected that there will be lower
margin on the product.
Value Proposition Canvas
• It was Alexander Osterwalder who developed this value
proposition canvas.
• His aim is to guarantee proper fit of the product and the
market. Simply, the value proposition canvas makes
certain that a product and/or service takes into
consideration the values and needs of the customers.
• The canvas appears to be a detailed relationship of the
customer segments and value propositions.
• This canvas can be a tool also to upgrade a product
and/or service offering or to develop an entirely new
offering.
• The value proposition canvas consists of two building
blocks namely the customer’s profile and a company’s
value proposition.
Customer Profile
• Points to the customer segment that the company shall
serve the product and/or service offering.
• A customer profile should be created for each customer
segment, as each segment has distinct gains, pains, and
jobs.
• The company needs to understand the customer’s jobs
and make an assessment as to their pains and gains.
• Before making a customer profile, the various archetypes
customers typically fall into must be evaluated.
• Customer archetypes also known as personas, are
those dry demographic portrayals of customers
transformed into living, breathing, people which the
audience can comprehend.
• Customer archetype is an idea of Steve Blank which he
popularized in his Lean Launchpad.
Customer Gains
• Customer gains include 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.
• Upon buying a product or being provided by a service,
some gains are given less attention by the customer.
• Although, there are cases that customers are delighted
by some surprises for which they are fully satisfied.
Some types of customer gains are the following:
1. Required gains – When buying a product or being
provided by a service, these are the very basic
expectations by the customers.
- An individual buying a Smartphone has the least
expectation that his new bought phone can allow him to
make and receive phone calls.
2. Expected gains – These gains are beyond the basic
ones, but even these are not present in the product
and/or service, said offering can still provide its basic
purpose. Hence, for a Smartphone, it is expected that it
should be visually attractive and fashionable.
3. Desired gains – These are the customer’s preference
when it comes to product and/or service.
- These are the most sought after and cherished gains by
the customer.
- Obtaining these gains can result to the complete
satisfaction of the customers.
- In the case of Smartphone, having no trouble in the
synching of the phone with other gadgets is a desired
gain of any user.
4. Unexpected gains – These gains are the potential
benefits of the product and/or service for which the
customer is unaware until these are introduced to him.
- Although these ideas and innovations are not articulated
by the customer, they are able to transform the
customer’s experience with a product and/or service.
- A touch screen capability of a Smartphone is a type of an
unexpected gain for customers.
In order to be successful, an entrepreneur should be able to clarify
identify his customer’s gains and how important are these gains to
the latter.
Tailor-fitting the customer gains to a product and/or service offering
is the key to the product’s and/or service success.
The better the value proposition will appeal to the customer
segment depends on the bulk of customer gains information the
company has.
Customer Pains
Customer pains are situations which 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.
This includes the following:
1. Productivity pains
• These pains include the inefficiency of the businesses
that a customer experiences.
• Majority of customers practice time management that
they felt annoyed when additional steps would occur in
the buying process.
2. Support pains
• These are pains felt by a customer when he is not
assisted during the buying process.
3. Financial pains
• These are pains that involve money in particular that
often a customer spends too much for a product and/or
service when his intention really is to spend less.
4. Process pains
• These pains are those that create friction to buyers
because of the substandard processes of the business.
THE ENTREPRENEURIAL MIND LEC #5 – 04/28/2021
THE BUSINESS MODEL
PROF. MARY ORINNE D. RAMOS

It is vital to dig deeper into the causes of customer’s pain/s in order
to know the importance and urgency of these pains for them.
A long waiting queue is an example of a customer’s pain that an
entrepreneur should resolve.
Making this pain unbearable for the customers is the obligation of
the entrepreneur.
Customer Jobs/Jobs-to-be-done
Customer jobs describe the 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.
It shifts the focus from a hypothetical or aggregate user to what
actual users want to accomplish by using the product. Here, the
perspective must be taken from the angle of the customer to
understand him fully. The following are the type of these jobs:
1. Functional jobs
• These are the regular and particular jobs that a customer
is trying to do and is working towards.
• These are easy and simple things like cooking a menu,
finishing an essay for the English assignment, eating
balanced diet, and similar ones.
2. Social jobs
• These consist of the manners a customer desires to
reflect his image in a social environment.
• Some examples include fitting in with a group of friends
or praising a co-employee in his sales presentation.
3. Personal/emotional jobs
• These include how a customer works towards feeling a
certain way.
• Some people feel they can rush from a tough task and
then do another task after like having a gym practice
before dinner time.
4. Supporting jobs
• Often customers also purchase value, hence doing a
supporting task. Here are three roles of customers that
may assist in supporting jobs:
a. Buyer of value – This task is any purchase of value that
may cover from evaluating choices at hand up to paying
for the product that had been chosen.
b. Co-creator of value – These are jobs for which a
customer has a direct hand in the manufacture of the
product with the company. Such jobs include providing
ideas for product design, product testing, and giving
product and/or service reviews online.
c. Transfer of value – These are jobs at the end of the
product use such as disposal of product trash or giving
the ownership of the product to another person because
it has no value anymore to the original owner.
In the same way that it is vital for the entrepreneur to understand
which jobs are vital to the customers and those that the customer
can simply abandon or replaced.
Certainly, not all jobs are of the same significance for the customer
based on a job’s impact and the priorities of the customer.
Value Proposition
After really understand the customers, including their gains, pains,
and jobs, then it is time to reflect on the gain creators, pain
relievers, and the products and/or services to offer them.
Gain Creators
• Gain creators explicitly outline how the products and
services may create customer gains and offer customer
added value.
• An entrepreneur may form benefits that a customer
supposes, desires, or may came as a surprise.
• Gain creators may include a functional utility, social
gains, positive emotions, and cost savings.
Pain Relievers
• Pain relievers explicitly outline how the products and/or
services lighten, avoid, or solve the particular customer
pains.
• An entrepreneur must provide details on how his offering
of product and/or service could lessen or completely
eradicate the annoyance of his customers before, while,
and after they are trying to get a job done.
Products and Services
• These are the products and/or services which create gain
and relieve pain and built around the value proposition.
• These offerings may help customers obtain a functional,
social, or emotional job done or just satisfy the basic
needs.
• In addition, these products and/or services could be in
the form of tangible, digital/virtual, intangible or financial
which are essential to the customers.
• Achieving fit between the value proposition and customer
profile is the intention of creating the value proposition
canvas.
• Both the value proposition side elements and the
customer profile elements should fit in.
• A fit is realized once the products and services offered as
a part of the value proposition address the most
significant pains and gains from the customer profile.

As the entrepreneur makes assessment of the customer jobs, he

needs also to assess the job context in which the job was done.
Said job context is equally important because it has the power to
influence the job type. The Lean Canvas: A Business Model Canvas
Alternative
Ex. There is a big difference when a customer dines in a restaurant
with his friends and that when he is with his friends. The Lean Canvas as proposed by Ash Maurya is a developed
version of the Business Model Generation.
THE ENTREPRENEURIAL MIND LEC #5 – 04/28/2021
THE BUSINESS MODEL
PROF. MARY ORINNE D. RAMOS

It outlines a more problem-focused approach and appropriate to • The entrepreneurs needs to think about what the
use by small entrepreneurs especially those creating startup business has that no else can buy such as dream team,
businesses. expert endorsements, and existing customers.

The focus is more on customers’ needs, on actionable metrics and 5. Customer segments
offer a fast idea-to-product transformation. • This is similar with the business canvas model.
• The problem and the customer segments must be
The Lean Canvas is also primarily meant for entrepreneurs and not connected.
the customers, consultants, investors, or advisors.
6. Channels
• These are the ways to reach the customer segments.
• Channels, which are free as well as paid, can be used to
reach your customer directly.
• They can be email, social, CPC ads, blogs, articles, trade
shows, radio, and TV plus webinars which are also the
same with the business model canvas.

ELEMENTS OF THE LEAN CANVAS MODEL:
1. Problem
• It is important to understand the problem first that the
business will address.
• Every customer segment that has an entrepreneur wants
to serve has a set of problems that require solving.
• In this box, the entrepreneur shall list the three high
priority problems that the customer segment is
experiencing.
• This is to ensure that the right product and/or service
shall be met based on the existing needs of the customer
segment being served.
2. Solution
• Once a problem has been identified, the next step is to
look for the effective solution. However, this is not an
easy task to do.
• According to Steve Blanks, the Godfather of Lean
Startup, the entrepreneur needs to “get out of the
building”. The phrase was coined by Blanks to mean
going out in the streets and interview the customer
segment.
• The customer should be asked questions in order to
learn from them regarding their problems.
• The solution here must be concisely written and specific.
7. Revenue streams
• This is the money matter of the business just like in
business model canvas.
• It is common for startups to lower their cost or even offer
it for free in the beginning to gain attraction.
• Getting people to sign up for something for free is not the
same than asking them to pay as they are more
interested in free products.
8. Cost structure
• These are the operational costs that the business needs
to pay in bringing the product to the market such as
salaries, cost of the materials, cost of maintenance.
• The complete variable costs and fixed costs are to be
listed here.
9. Key Metrics
• All businesses, whether big or small have some metrics
with which to monitor their performance.
• The metrics consist of the assortment of products and/or
services the business wants to deliver.
• For a startup business though, one metric is good
enough and then just build on it. It is important that the
correct metric is recognized.

3. Value Proposition
• This block contains a marketable promise to the target
user that the business will solve their problem.
• This is similar with the business canvas model.

4. Unfair Advantage
• A startup should recognize if it has the competitive
advantage that cannot be copied and cannot be bought
or it has an unfair advantage over others.
• Basically, this block is hard to answer, but essential
especially when looking for partners and investors.