Over last few weeks, I have started reading an excellent book on business models – Business Model Generations – A handbook for Visionaries, Game Changers and Challengers – This book is must read for all buddying investors

The book is logically structured right from providing canvas for depicting business models of the company then moving on to patterns, design and strategy

BM-1

I will do few posts on the book as there is enormous ground to be covered, In this post focus would be on what authors call as building business model canvas using key nine building blocks

A business model describes the rationale of how an organization creates, delivers and captures value

There are nine building blocks of a business model – While at first I found this to be another fuzzy MBA thing which has lot of academic value but no practical value 🙂

However once I started practising it and drew the canvas of a business which I thought I knew, I realised that there were quite a few areas of business were I had little or no knowledge, This was truly an humbling experience

Let’s first understand what are the key nine building blocks (Note most is below is captured via my handwritten notes so drop in a comment if something is not readable)

  1. Customer Segments – An organization serves one or multiple customer segments

BM-2

  1. Value Proposition – Bundle of benefits that a company offers its customers, principal ones are listed belowBM-33. Channels – Through which value proposition is delivered, they can be own or partner channels

BM-44. Customer Relationship – The motivation and type of customer relationship

BM-5

typesBM-6

  1. Revenue Streams – The type of revenue, ways to generate it and pricing

BM-7BM-8

  1. Key Resources – Resources required to deliver value to client, They can be owned or leased

BM-9

  1. Key Activities – The key activities to operate successfully, primarily are three

BM-10

  1. Key Partnerships – Some activities are outsourced and some are kept in house

BM-11

  1. Cost Structures – All costs incurred to operate a business model , They are driven two fold

BM-12

The cost structure depict following broad characteristics

  • Fixed costs
  • Variable costs
  • Economies of scale – Decrease in cost with increasing scale
  • Economies of scope – Cost advantage due to large operations

Having read through the nine building blocks of business models, Next I took upon an humbling exercise of doing it for a business I thought I understood – GRUH Finance

Here is the result

BM-13

I must confess while putting this up I realised that there are many areas of the business that I need to shore up my knowledge on and I am sure this would be a living document which I would go back to often

The other thing it did was to bring some structure to the business model analysis in my investing checklist process, prior to this I always to use put down business models randomly see the one from my paid research note on The Byke hospitality here

I strongly recommend that you download this template and do this for the business you like and are contemplating to invest, this will bring amazing insights