The business model consists of eight key building blocks that deliver your value proposition.

On the right-hand side of the model, you identify your target customer segments, how you develop relationships with those customers and the channels by which you reach them, supported by the revenue streams generated from that interaction.

On the left-hand side, you think through what key partners, key activities and key resources you need to deliver your value proposition to your customers and the cost structure to do so. Putting value in your value proposition is key to organizations differentiating themselves from the competition. According to the sales performance Miller Heiman, “to survive in this experience economy, businesses must orchestrate memorable events for their customers; and that experience itself becomes the product.”

Alexander Osterwalder is a guru in business model generation and provides concrete descriptions and questions for each building block below.

• Customer Segments – Defines the different groups of people or organizations a company aims to reach or serve. Which customer segments will you be targeting? What problem will you be solving for those customers? For whom are we creating value?
• Value Proposition – Describes the bundle of products and services that create value for a specific customer segment. What value will you deliver to your targeted customers? What package of products and services will we deliver? Why will customers buy from us?
• Channels – Describes how the company communicates with and reaches its customer segments to deliver the value proposition. How will you reach your customers? Through which channels do our customer want to be reached?
• Customer Relationships – Describes the types of relationships a company establishes or wishes to establish with a specific customer segment. What type of relationship does each of our customer segments expect us to establish and maintain with them?
• Revenue Streams – Represents the cash a company generates from each customer segment. What will customers pay for? How much will they pay? How will they pay?
• Key Resources – Describes the most important assets required to make a business model work. What are the key resources required, to deliver and execute your value proposition?
• Key Activities – Describes the most important things a company must do to make its business model work. What key activities does our value proposition require?
• Key Partners – Describes the network of suppliers and partners that make the business model work. Who are our key partners? Who are our key suppliers?
• Cost structure – Describes all of the costs incurred to operate a business model. What are the costs of your business model? Which resources and activities are the most expensive? Are your costs less than your revenue?

Assessing and possibly redefining your business model, no matter what type or organization you are, can be a powerful and enlightening part of your strategic management process. Many organizations today are redefining how they deliver value to customers yielding unprecedented success.

You may also be interested in:

• Does Your Business Model Need Change? (12 mins) Does your business model need change? Use the consulting exercise...
• Innovation Strategies: Part 3 – Business Model and Behavioral Innovations (30 mins) This is part of a 3 part series covered in...
• Customer Segments Customer-focused companies recognize that they cannot appeal to all buyers...

Tommy Smith is our guest speaker for this segment of the Strategy Huddle. He presents his method for developing a strong team by using FOCUS in creating your mission, vision, and values statements.

You may also be interested in:

• Keeping Your Team Improving (Part 3 of 3) This is part 3 of a 3 part series from...
• Keeping Your Team Engaged (Part 2 of 3) This is part 2 of a 3 part series from...
• Lessons from the Successes of Steve Jobs: Focus, Focus Focus Does the pressure of business get to you? Do you...

So, you’re right about to begin crafting your strategic plan, but you don’t know the difference between all the different components. Especially your mission, vision, values or principles? Do we really need so many different statements? Are they just something to get everyone to memorize? Are they different from each other? What are they really supposed to do?

Yes, they are all different. Do you need them all? Probably not all of them, but you need to know what they do. Not only do the statements that you craft have immediate effects, but they also work to guide the rest of your plan.

Mission Statements: What you’re here to do

Your mission statement is a declaration of an organization’s core purpose. A mission statement answers the question, “why do we exist?” They are essential for your strategic plan. Your mission statement needs to be easy to remember and it needs to provide actual direction. There’s nothing worse than a mission statement that is just a jumble of business speak.

Once you have your mission figured out, you have the core that all of your objectives will be drawing their direction from. Your employees will know, “this is what we do.” Additionally, your public will know what to expect from you.

Vision Statements: Where you’re going

A vision statement is a declaration of where you are headed – your future state. To formulate a picture of what your organization’s future makeup will be and where the organization is headed. We always explain your vision as “knowing what mountain you’re climbing,” and your mission as “how you’re going to get there.” Your vision is the ambitious future Point B to your current Point A.

Having a clear vision in place tells your employees where they’ll be if they stick around. If you want to craft a powerful vision, first ask, what will your organization look like 5 to 10 years from now?

Values Statements: What you will or won’t do to get where you want

Your values statement should explain what you stand for and what you believe in. Organizations that want to stick around can’t be heartless, money hungry institutions- they reflect the priorities of those who lead them, so it’s important to take the time to examine your own principles- and lend them to your organization.

For more on these subjects, check out our other articles on the topics:

• Vision
• Mission
• Values

You may also be interested in:

• Updating your vision statement and vivid description Updating or creating a new vision statement can be one...
• Vision Statements Talk of being a visionary goes hand-in-hand with talk of...
• Articulating Your Mission and Vision Earlier I shared that successful strategic planning is a continuous...

You may also be interested in:

• Whiteboard Video: How to Write a Values Statement It’s Whiteboard Thursday again, and this time we’ve got Erica...
• How To Write a Vision Statement ...
• How to Write a Mission Statement ...

In addition, if you have any requests for subjects, please let us know in the comments.

You may also be interested in:

• Whiteboard Video: How to Write a Mission Statement MSP is extremely proud to announce our new weekly installment...
• Have you checked out MyStrategicPlan’s Whiteboard Video Series? Each week, we here at MSP have been toiling away...
• How to Perform A SWOT Analysis: A Whiteboard Video This week in our White Board Session, Erica Olsen explains...

You may also be interested in:

• Whiteboard Video: How to Write a Values Statement It’s Whiteboard Thursday again, and this time we’ve got Erica...
• How to Write a Values Statement ...
• Mission Statement Definition: A declaration of an organization’s core purpose. A mission...

You may also be interested in:

• Growing natural All the government legislation doesn’t hold a candle to the...
• Growing up (and down) Another potential way to grow is through vertical integration –...
• Marketing Plan Definition: How a business plans to communicate with their stakeholders...