As we move into Week 4 of our business accelerator, our focus has shifted to the left side of the Business Model Canvas—a critical area that often determines whether your business will thrive or merely survive. This week, we've zoomed in on two essential components: Key Resources and Key Activities.
In this article we highlight unpacking the left side of the Business Model Canvas.
Understanding these elements is vital to ensuring your business model not only works but works efficiently and effectively.
Key Resources: The Backbone of Your Business
Every successful business is built on a solid foundation of resources. But what exactly are these resources, and how do you determine which ones are key to your business model?
1. Physical Resources
These include tangible assets such as equipment, inventory, buildings, and technology. Depending on your business, these could be anything from manufacturing facilities to servers and software.
Identifying the right physical resources means asking: What physical assets are absolutely necessary for our business to operate?
Retailers like Wal-Mart and Amazon rely heavily on physical resources, which are often capital-intensive.
2. Human Resources
The people behind your business are often your most valuable resource. This includes everyone from your core team to contractors, advisors, and even key partners. Consider what skills, expertise, and knowledge are essential to delivering your product or service.
Ask yourself: Who do we need on our team to make our business model work?
There is no greater asset to an organization than their employees. Every enterprise requires human resources, but people are particularly prominent in certain business models.
For example, human resources are crucial in knowledge-intensive and creative industries. A pharmaceutical company such as Novartis, for example, relies heavily on human resources: its business model relies on a team of seasoned scientists and a highly skilled sales force.
3. Financial Resources
Cash flow is the lifeblood of any business. Financial resources encompass capital, credit, grants, or revenue streams that sustain operations. Understanding your financial needs is crucial.
You need to know: What financial resources are required to launch and scale our business?
Some business models call for financial resources and/or financial guarantees, such as cash, lines of credit, or a stock option pool for hiring key employees.
Ericsson, the telecom manufacturer, offers a clear example of leveraging financial resources within a business model. To secure more orders, Ericsson may borrow money from banks and capital markets. They then use part of these funds to offer financing to their equipment customers. This strategy encourages customers to place orders with Ericsson instead of choosing competitors.
4. Intangible Resources
These are often the hardest to quantify but can be the most powerful.
Intangible resources include intellectual property (like patents or trademarks), brand reputation, customer relationships, and company culture. Reflect on what intangible assets are key to your business's success and how you can leverage them effectively.
Microsoft and SAP depend on software and related intellectual property developed over many years, while consumer goods companies like Nike and Sony rely heavily on brand as a key resource.
Key Activities: The Heartbeat of Your Business
While key resources are the backbone, key activities are the heartbeat of your business. These are the actions your company must perform regularly to deliver on its value proposition, reach customers, and generate revenue. Let’s break it down:
1. Production
For product-based businesses, production is often the most critical activity. This includes everything from designing and manufacturing to packaging and delivering your product.
Ask: What production activities are essential for creating our product?
Overproductions kills profitability.
A great example of overproductions killing profitability is The Coolest Cooler that came with a blender and a bluetooth speaker. The project initially raised over $13 million from 62,642 backers, setting a Kickstarter record at the time; however, more than 20,000 people ended up not receiving the reward they paid for, which cost $185 plus $15 for shipping and handling.
According to the CEO Ryan Grepper, the U.S. tariffs on many products imported from China ultimately became the final “insurmountable challenge.”
Producing the coolest cooler with a sales price of $185 plus shipping was no longer profitable to do production costs, ultimately shutting down in December of 2019.
2. Problem Solving
Many businesses exist to solve specific problems for their customers. This might involve providing consultancy, technical support, or creative solutions. Identify the core problem-solving activities that your business must excel in to meet customer needs.
Stripe simplified the way developers of early-stage startups accept payments online, Salesforces helps end-users store confidential information, similar to a data room.
3. Platform/Network Management
If your business model relies on a platform or network, managing this infrastructure is a key activity. This could involve maintaining an online platform, ensuring smooth operations, and continuously improving the user experience.
Consider: What activities are crucial for managing and growing our platform?
Etsy is a great way for entrepreneurs to leverage a platform to build their business. Farmers markets, trade shows, pitch competitions - these are all ways to grow a business.
Bringing It All Together
Understanding and defining your key resources and key activities is not just an exercise in planning—it's about ensuring your business has the capacity and capability to deliver on its promises.
Without the right resources and activities, even the most innovative business ideas can falter.
As we continue to refine our business models, remember that clarity on these components will enable you to build a stronger, more resilient business. This week is about more than just identifying what you need and what you must do; it's about ensuring every aspect of your business is aligned with your goals and your value proposition.
Keep refining, keep questioning, and keep building. The work you do now on the left side of your Business Model Canvas will be crucial in laying the groundwork for sustainable success.
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