[MUSIC] Here's the beginning of section two, where we take a look at a number of frameworks and tools around business models. In this section, we'll take a look at three different ways, three different methodologies and frameworks that we can use to really evaluate business models and their different components, test them, and innovate with them. The first one is the Business Model Canvas, which may be the most well known of any of these three. And it was developed by Alexander Osterwalder. And we're going to come back to that in our next section, section three, when we look at how we can break business models down, deconstruct them and then reconstruct them as we test them. The second is the Business Model Navigator, which provides a range of different business models that you can apply to your business and enables you to really compare current business models with a broad range of existing ones. And then finally, we have Freehand illustration of business models. And I'll share this with you. It's an approach that I find extremely valuable, because it forces the entrepreneur, the innovator, to think about who all the stakeholders are, and how they interrelate with one another, with regard to the creation and exchange of value and consideration. We'll start with a look at the Business Model Canvas. And, as Alexander Osterwalder puts it, the Canvas is a template that helps you document existing business models, and develop new business models. And what it really is, is it's a visual chart that outlines elements that describe a firm's products or services across a broad range of different activities and elements. Here's what the Business Model Canvas looks like. There are nine elements in it, and I am going to review them as we go back to our initial three components of what a business model does. So we going to break it down a little bit. So, here's our familiar slide around the three elements, the three objectives that an effective business model does. And let's take a look at the Business Model Canvas from the perspective of each of those. So, first of all, we're going to take a look and see how a business model creates value for customers in one of the elements on the Business Model Canvas that address that particular activity, how we create value for customers. Well, first of all, we certainly want to take a look at the customer segment. For whom are we creating value? Who are our most important customers or our most profitable customers? And what are the customer archetypes or personas? As we look at this we identity, specifically, who our customer is, and we go out and we test which of those are the most important customers. Certainly, as we look at this, we also have to think about our customer relationships. How do we get our customers? Which customer relationships have we already established? And which new customer relationships do we wish to establish? What does it cost us to acquire that customer? And how valuable are those customers, as well. And in the third area that we address with this first element, is the value proposition, right? How do we create value for customers? Well, certainly, we have to deliver that value proposition. What is the value that we deliver to our customers? Which one of our customers' problems are we really helping them to solve that they care the most about? Do we bundle some of our solutions as well? All elements that we look to address. Second, how do we deliver value to customers? And the Business Model Canvas helps us in this regard as well. In the Business Model Canvas, we asked these questions. What are the channels that we use to deliver value to customers? And we take a look not just at ours, but how do other companies or competitors reach customers as well. Which ones are the most cost efficient? Which ones work best? A range of questions that we investigate on our business model around channels. We also want to take a look at, we take a look at how we deliver value. What are the key resources that we need to employ to make that happen? What are the key activities that we need to undertake to deliver that value? And who are our key partners? So in this element, when we evaluate business models, and say, how do we deliver value to our customers? Channels, resources, activities, and partners, are all elements as to how we deliver that value. Now let's get to that third element. And that third element is how we capture value for the organization. And in that, we take a look at two key areas, how do we develop the best possible revenue streams? And how do we manage our cost structure most effectively? Because when we talk about capturing value for our organization, those elements, as influenced by some of the other elements, of course, on the Canvas, are crucial to ensuring that the revenues that we gain from that customer are greater than the cost that we have in order to acquire and service the customer. So, this is the Osterwalder Business Model Canvas. And it's a very useful tool when you take a look at the broad spectrum of your product offering, and the competitive environment that you operate in, to say which is working and what's not working. How do we take that out to the market place, and start to test each of these different elements? And this particular version of the tool has in it many of the questions that you want to ask, which really represent assumptions about your existing or your potential business model.
