Business Model Canvas: a tool for defining Business Models (part 9)

This is one of last posts of this series devoted to the Bisiness Model Canvas tool developed by Alexander Osterwalder and Yves Pigneur. During the progress of this subject I introduced the tool and presented seven of the nine building blocks of it: customer segments, value proposition, channels, customer relationships, revenue streams, key resources and key activities. Before you continue reading this article I recommend you to read those posts because they are very important in order to understand how the tool works.

Stated the above, in this writing I will talk about the next building block of the Business Model Canvas: Key Partnerships. Partners have been very important since a long time ago, but today when business models have a core business and try to outsource everything that does not belongs to this business, they have become much more important. This is the reason why it is basic to define the different partners that will hold up the operation of our model. In this way we must ask ourselves whoa are our partners and suppliers taking into account which key resources and key activities are hold by them.

¿What type of alliances can we make and why?

As I mentioned earlier we might decide to make alliances so that some other company performs some of our activities or that it provides resources that are primary for our business. However not all the alliances are the same. Osterwalder and Pigneur distinguish between four types of societies that I mention next:

• Strategic Alliances between companies that do not compete
• Coopeticion: are strategic alliances between companies that compete
• Joint Ventures in order to develop new businesses
• Relationship between buyers and sellers to assure a good relationship between them

Before a company determines a type of alliance it must first analyze what is what it needs and which type of alliance will provide the highest benefit. The idea is that both firms get the most out of the alliance. Among the reasons that may move the firms in order to create an alliance we can mention the following:

• Optimization and economies of scale: the companies are cannot always own every resource or perform every activity they need. This is the reason why sometimes they decide to create alliances in order to optimize the operation or reduce their costs generally by outsourcing it or by sharing infrastructure.
• Reduce risk: when companies compete on an environment without certainty sometimes they prefer to share the risk involved in the business. If something negative occurs the consequences will be shared but also if they have excellent results they will share it. This is the reason why companies that compete may end up making alliances.
• Acquisition of activities and resources: As I wrote before, companies don’t own all the resources and activities they need for their business. This is the reason why a good way of extending their capacities is to contract other firms that might perform these activities.

Taking into the account what was just stated, and the blocks I have been describing, I just only need to explain the last building block: cost structure. Expect it in my next post.

Image taken from Flickr.com