Business modeling

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Business modelling is the process of translating a business model into financial results, or other required outputs, using input variables together with logical arguments for how outputs are derived from inputs. Spreadsheets are often developed with software such as Microsoft Excel, to forecast the future outcome given different potential scenarios.
Based on an extensive literature research and real-world experience we define a business model as consisting of 9 building blocks that constitute the business model canvas (readers of this blog will realize that this is an updated and slightly adapted version of the model):

1. The value proposition of what is offered to the market;
2. The segment(s) of clients that are addressed by the value proposition;
3. The communication and distribution channels to reach clients and offer them the value proposition;
4. The relationships established with clients;
5. The key resources needed to make the business model possible;
6. The key activities necessary to implement the business model;
7. The key partners and their motivations to participate in the business model;
8. The revenue streams generated by the business model (constituting the revenue model);
9. The cost structure resulting from the business model.

Business modelling forces the business model designer or analyser to identify key variables, make and verify important assumptions, test for different scenarios and by that understand the complexities of the business model and how different attributes and factors relate to each other. In some cases, the business modelling process may not produce an answer to a specific business question, but may be constructed simply to enhance the understanding of the business model and its environment.