According to key resources business model canvas is, how your company makes money. It’s an important part of any business because it helps to make decisions about what you sell, who you sell it to, how much to charge, and why customers should buy from you.
However, this post will tell you everything you need to know about the key resources business model canvas. The goal of the canvas is to get your team on the same page about how to best approach your business idea. Read More.
It has six components that will help guide your strategy for success: customer segments, value proposition, channels, customer relationships, revenue streams, and costs. If you want to learn more about these six components and how they work together in a business model canvas, read on!
Section 1: What is a business model?
The term business model refers to a company’s plan for making a profit. It describes the products or services the company plans to sell, the target market, and the projected costs.
Business models are important for both new and established businesses. They help new, developing businesses attract investment, recruit talent, and motivate management and employees.
Established companies should update their business plans regularly or they will not be able to anticipate future trends and challenges. Business plans help investors evaluate companies they are interested in.
KEY TAKEAWAYS OF A BUSINESS MODEL
- A business model is a company’s core strategy for doing business profitably.
- Models typically include information such as the products or services the company plans to sell, target markets, and expected expenses.
- The two levers of a business model are pricing and costs.
- When evaluating a business model as an investor, you should ask yourself if the idea makes sense and if the numbers add up.
Section 2: The key resources of a business model canvas
The key resources business model canvas is the key inputs and assets that the business needs to operate effectively. In other words, it’s what you need. For example,
- Equipment and Plants
- Intellectual property
- Programs for computers
- Connections to politics
Key resources overlap to some degree with tangible and intangible assets on the balance sheet. However, it goes much further than that. In the Business Model Canvas, we only specify the resources that make you unique in the marketplace compared to your competitors. Read More.
Key Resources Examples
Suppose you have a fashion business. You sell large quantities of overcapacity merchandise outside the city center. Your main resources are:
- Located in a cheap location
- Accessible and convenient
- A contract with a fashion producer.
Our analysis of the Google Business Model reveals the following key resources of Google:
- The algorithm, and
- Its computing power.
Computer power included – hardware, software. And the engineers who write the code and configure the software and hardware.
In all three cases, companies have far more resources than they use. The resources we focus on are the ones that are critical to the success of the business model. If you do not have them, you are lost.
- Oil Fields – British Petroleum, Exxon
- Car Factories – Ford, Toyota
- Planning Permission – Property companies
- Patents – GlaxoSmithKline, Bayer
- Monopolies – British East India Company
- Customer Data – Google, Facebook
The Physical Key Resources
These are material resources. For example, equipment, buildings, machinery, transportation, or distribution networks. Dell’s distribution network was a key resource, that enabled the company to deliver PCs to homes years before others did the same.
An example of a key resource in the Business Model Canvas is Tesla. Tesla’s business model includes the Gigafactory, where a significant portion of the world’s large batteries are manufactured. This gives Tesla the advantage of economies of scale in the cost of producing electric cars.
In physical resources, you can feel and touch tangible objects. In rural Kenya, a distribution company that distributes beer could rely on the following resources:
- The lorry, and
- The reliable supply of petrol.
In contrast, key resources for a logistics company in the UK could be:
- Software for route planning, and
- Automation system for warehouses.
Both companies do something similar, but the market and competitive environment mean that the key resources they consider important are quite different.
The Human Key Resources
Human resources are the people you need to get the job done. People are often how you turn-key resources into a value proposition through activities. In most cases, human resources are either bodies or knowledge.
When I ran a grocery delivery service, we needed a lot of motorcyclists to make deliveries. We did not worry about the quality or skill of the people. We just needed enough people who could ride a motorcycle and had insurance.
An even more glaring example is the sugar plantations in the West Indies. Slaves were imported from Africa and used to work on the plantation. The yield depended on the number of slaves on the plantation, not on their will, strength, or knowledge.
In contrast, knowledge is about specific expertise or relationships. A consulting firm’s most important resource might be the senior consultant’s business knowledge, acquired over 30 years and for which he won a Nobel Prize.
Conversely, it could be another consultant’s Rolodex. Which lists all the property developers with whom he has drunk whisky and played golf over the same period.
The Financial Key Resources
Many businesses need cash for operations or capital projects. If you are going into chip manufacturing or jet engine development. Then you need a lot of money to invest in research, development, and construction of equipment. Read More.
If you are a startup entering a new category. Like Uber, then money becomes a critical key resource. Because you can use your wall of cash to capture market share ahead of the competition.
The Intangible Key Resources
It is also important to remember that key resources can be rather intangible. A patent that gives you a monopoly on the manufacture of a drug or blocks a competitor’s access to a market is also a key resource. Trade secrets and know-how are also important. Read More.
A good example of know-how that is a key resource is the Toyota Production System. Which has enabled Toyota to continuously improve its productivity and quality through process improvements over decades.
Another example is Audible’s business model. In this case, some of Audible’s key resources business model canvas is the network effects resulting from the number of audiobooks. On its platforms and the sunk costs of many customers having access to hundreds of books.
Your key resources: How to identify them
You need to ask four key questions
- Does the value proposition require any key resources?
- How much do our marketing and distribution channels require in terms of resources?
- To maintain a successful customer relationship, which resources are necessary? Specifically,
- What are the key resources that support our revenue streams?
This exercise is often useful for understanding the user journey of the customer.
Let’s take a look at the Rent-the-Runway business model for instance
- The customer goes to the website – we need a website – and,
- Chooses a dress – we need a stock of dresses, then
- Has it been delivered – do we deliver it ourselves or get this outsourced
- Wear it out for the night, and
- Returns it to be drycleaned – another requirement
So from the user journey, we can see that we need
- Cleaning and Repair
Next, you need to ask
Exactly how do we deliver all of these?
When creating a business model, there are two or three ways to determine the key resources business model canvas.
The first is the simplest. You need to look at what other similar companies are doing and look at their key resources. Then, adapt the current business model to reflect how other companies in the industry operate. This is safe middle ground. It’s not particularly interesting, but you’ll have a reliable result.
The Key Activities are Worked Backwards
You work your way back from the key activities of the business model. Here you have worked out what you need to do to deliver the value proposition.
Then work on what you need to do the key activities. You can think of this as building a bridge. You know you need to design and construct the bridge. What do you need to design it? Engineers and architects. What do you need to build it? Construction materials, building permits, construction equipment, and more engineers.
In startups, you can use this to great effect by thinking of different ways to deliver the most important activities. For example, in Apple’s business model, all manufacturing is outsourced and Foxconn is a key partner that provides the manufacturing resources. Read More.
Starting with the Value Proposition
The final approach is to look at your value proposition and decide what resources you need to make it happen. If I wanted to build a search engine for recruiters. The main resources would be a search engine and a large number of resumes. My main activity would then be how to source these and make them available to recruiters to generate revenue.
A Business Model Canvas Playing with Key Resources
One of the things I love about the Key Resources Business Model Canvas is that it makes it easy to open your eyes to more possibilities. The key resources are great for this. As an entrepreneur, you always have the choice of making, hiring, or buying. This depends on your risk appetite, expected returns, and available cash. It also has a big impact on your cost structurea
If you were designing the Airbnb business model. You could choose to create your own website and set everything up exactly how you want it.
Alternatively, you could pay another company a monthly fee to white-label their commercial product. Alternatively, you could buy an existing room rental website and rebrand it.
Airbnb has chosen to build its own website. Uber’s business model is based on the fact that Uber does not manufacture or own its cars. Instead, it rents them and the drivers out.
You can make this decision with all your important resources. If you do not make these decisions, you are missing a trick and could greatly improve your business as a result.
It can be applied to all of your key resources business model canvas.
You can also use these Key Resources. Just add them to your canvas.
The Business Model Innovation
Business model innovation is about combining all of these factors with the other nine segments of the Business Model Canvas. And finding potential patterns that fit the problem you are trying to solve. You also need to provide great value to your customers and solve their problems. Read More.
Designing a business model is often much harder than many entrepreneurs think. It’s good to have a guide to help pull things together. It’s also important to have a clear idea of how you are going to test your business model. That way you can validate it early on and save time and money. However, you can reorient while you still have a runway.
Section 3: How to create a business model canvas
The Business Model Canvas is a great tool. It helps you understand a business model in a simple and structured way. With the help of this Canvas, you can get insights into the customers you serve, what value propositions are offered through which channels, and how your business makes money.
You can also use the Business Model Canvas to understand your own business model or that of a competitor! The Business Model Canvas was developed by Alexander Osterwalder of Strategyzer.
A Guide to Using the Canvas
The Business Model Canvas is a common language for describing, visualizing, evaluating, and changing business models. It describes the rationale for how a business creates, delivers, and captures value.
1. The Customer Segments
List the three most important segments. After that, look for the segments that provide the most revenue.
2. The Value Proposition
What products and services do you offer? What is the work you perform for your customers?
3. The Reveue Streams
List your top three revenue sources. If you offer anything for free, include it here as well.
What is your communication strategy with your customers? Can you describe the value you deliver to them?
5. The Customer Relationships
What are your strategies for sustaining the relationship?
6. The Key Activities
In order to run your business, what do you do every day?
7. The Key Resources
You need the right people, knowledge, means, and money to run your business.
8. The Key Partners
Identify the partners you cannot do business with (not suppliers).
9. The Cost Structure
Take a look at activities and resources to determine your top costs.
Section 4: Conclusion
So the key resources business model canvas could be everything you are vertically integrated for, or it could be the few things you need to be horizontally integrated. And as you scale, your key resources might change and evolve. Your key resources typically support your key activities and all of that typically works with your key partners to deliver your value proposition.