07
Key Activities Block in Business Model Canvas
© Entrepreneurial Insights based on the concept of Alex Osterwalder
In this article, we
will look at the “Key Activities” block in the Business
Model Canvas. We will cover, 1) an introduction to key activities,
2) questions to consider, 3) typical activities, 4)categories for key
activities, and 5) a case study on LinkedIn.
KEY
ACTIVITIES
As the title suggests,
these are the most important tasks a company must carry out in order to fulfill
its business purpose. To be successful, a company must carry out key actions
that are primarily dictated by its business model. As we studied with the key
resources building block, key activities are similarly pivotal in an
organization fulfilling its value proposition, reaching its customer segments,
sustain its customer relationships and ultimately create long-term revenue
streams. Key activities are different according to the business model of the
organization carrying out the activity. Hence, an organization that relies
heavily on its 3rd party contracts
will list channel management as a key activity. A product-driven business will
lend more significance to activities such as continuous research to understand
their users better as well as constant innovation in technology.
Hence, it is safe to
assume that a key activity for software giant Microsoft is SoftwareDevelopment; similarly, for computer manufacturer
Dell, supply
chain management may be a key activity, and a consulting business like
McKinsey probably lists solving client problems as its key activity.
QUESTIONS
TO CONSIDER
When evaluating your
business through the Key Activities building block it is essential that you
take a holistic view of the business and evaluate related building blocks as
well, to understand how they will contribute to your key activities.
2. What kinds of
activities are key to our distribution channels?
4. What kinds of
activities are fundamental to our revenue streams?
Our Value Propositions
will obviously have the most profound impact on the kind of activities we carry
out. However, as the business flourishes, we may begin to include unnecessary
activities within this block as well. To prevent this, we use a method called
the Minimum Viable Product or MVP, which is the most basic version of your product made through a
single cycle of the build, measure and learn loop. Most entrepreneurs will
resist the Minimum Viable Product because everyone believes that for a product
to be a success, it must provide maximum value to its customers. This brings us
back to the Customer Segment and Value Proposition building blocks where we
learnt that we have to be selective about the customers we target and the kind
of value we provide by relieving their pains and giving them gains. Creating a
bloated product with tons of extra feature that are of no value to your
customer but which add to his investment, is not the way to go. A product is a
combination of its form and function, function being what it does and form
detailing how it does it. This form is crucial to the customer experience and
helps in determining the key activities. Similarly, the kind of customer
relationship you want establish will also entail certain key activities to
bring it about and so on.
TYPICAL
ACTIVITIES
As mentioned earlier
the Key activities building block creates a bridge between your value
propositions and the customer segments’ needs. Some typical key activities that
are commonly practiced by most organizations are listed below;
Research &
Development
The research and development department is required to
liaise with all other functions of the company whether it be production,
marketing or sales. The typical functions of a research department are
mentioned below;
·
New Product Research: Before a new product can be produced,
it must first go through the research and development department which will
explore what the design of the product should be, the expected production costs
and how long it will take to produce sufficient amounts of the product. R&D also looks into
how much customers want or need the product.
·
New
Product Development: the research phase naturally leads to the product being
developed due to the results achieved from the research phase.
·
Existing Product Updates: R&D must also look into
existing products to see if they require an upgrade based on evolving consumer
needs or new entrants into the product category in the market. These changes
can additionally be attributed to product glitches that need resolving.
·
Quality Checks: Companies can ask their R&D departments
to conduct quality checks or they may require the department to collaborate
with the Quality Assurance team since they are well versed in the
specifications of the product and are ideal for evaluating whether all products
are up to the quality standards set by the company.
·
Innovation: The R&D team is also responsible
for keeping an eye on innovations and new trends within the industry and
ensuring that their product stays abreast of these trends.
Production
Production management consists of a number of activities which
are outlined below;
·
Selection of product and design: the first step is to
select the right product and the rightdesign for the product. This is a crucial
decision because the combination of the right product (Value Proposition) and
the right design (Key Activities)will dictate the success or the failure of the
company. Value engineering and value analysis are parts of this activity.
·
Selection of Production Process: this stage consists of
deciding what production process the organization will be using including the
right technology, machines, inventory management system, etc.
·
Selecting Right Production Capacity: The production
management must have full knowledge of the expected demand for the product and
set the production capacity accordingly, since either a dearth or a surplus of
the product may lead to problems for the company. Break-even analysis is the most
popular tool used by production managers to predict capacity.
·
Production Planning: The production manager must decide on
the routing and scheduling of the product. Routing is aimed at creating a
smooth flow of work by discovering the easiest and most economical flow of
work. Scheduling, on the other hand, refers to the timing of activities by
mentioning a start and end time for each.
·
Production Control: The production manager is also
responsible for monitoring and controlling the production process. This is done
by comparing planned production with actual production, exploring deviations if
any and ultimately correcting these deviations to meet planned production.
·
Quality and Cost Control: In today’s economically driven
world, consumers won’t the maximum quality for the cheapest price and access to
the internet and a world of options make them more discerning and fickle.
Hence, it falls on the production manager to not only ensure that he is continuously
improving the quality of the product but also to reduce costs so their product
can remain competitive in the market in terms of price.
·
Inventory Control: Inventory Control is fundamental to a production
driven business because it prevents overstocking or understocking. Overstocking
means the company will be spending more money on materials that will ultimately
go to waste. Understocking will effect production and result in late
deliveries.
·
Maintenance and Replacement of Machines: The production
manager must be on top of the condition of the machines under his function by
constantly monitoring them and scheduling regular maintenance like oiling,
replacing worn parts, cleaning, etc. This function ensures that there are no
unexpected breaks in production.
Marketing
The Marketing department is responsible for the growth
of the company by getting word of the company’s existence and the value it
provides to its customers. The functions of the marketing department are
explained below;
·
Strategy: The senior members of the marketing team are
responsible for drafting and getting approval of a marketing
strategy for
the company, based on its overall goals and missions before cascading this
strategy throughout the department and creating goals based on it.
·
Market
Research: The
Marketing department must have full knowledge of the market the company is
operating in including the strengths and weaknesses of the product according to
the customer, potential competitors in the market to whom the company may lose
market share or weaker competitors from whom company can get market share.
·
Product Development: The marketing team works in
conjunction with the product development team constantly. This is done by
identifying possible gap areas in the market for which the company can develop
a product to address an unmet need. They are the ones with their fingers on the
customer pulse and are a source of insight into consumer needs and feelings.
Once the product is developed, the marketing team is also involved in pricing
the product.
·
Communications: The marketing team is responsible for all
communication to go out in the market regarding the product. The nature of this
communication varies from press releases to online product reviews,
advertisements, e-mails, etc.
·
Sales Support: Marketing also works closely with the Sales
team by providing them with customer leads, as well as promotional materials
for potential customers.
·
Events: Marketing is also responsible for organizing and
executing events such as seminars, product launches, exhibitions, etc. they
will typically call key or prospective customers to such events as well.
Sales & Customer
Services
Sales and customer service play a key role in the purchase and post
purchase behavior and experience of your customer. This department is key to
ensuring that you build a cadre of repeat customers who will become your
advocates in the market and drive more business in through word of mouth.
Conversely, these customers can also be extremely vocal if they have suffered a
bad customer experience with you and can just as easily drive business away.
Hence, one of the most crucial weapons in your arsenal is your sales and
customer services team. They fulfill the following responsibilities on behalf
of your company;
·
Handling Problems: Customer service representatives generally spring into
action when customers call in with complaints. The breadth of their authority
is dependant on company policy but their core task is to ensure that when an
irate customer calls, they do everything, within the scope of their job
description, to leave him happy or satisfied when he hangs up. Some customer
representatives are empowered to solve the problem on the spot by providing a
replacement or returning the money. Others may act as gatekeepers who take
information and then route it to the relevant departments.
·
Assisting in Sales: Customer representatives are also
depended upon to help increase the sales of the organization. They may do this
by educating customers on the value propositions the product offers. Others may
use upselling by telling customers who call in to upgrade their services for
improved quality.
·
Clerical Tasks: some companies may include administrative
and clerical tasks within the ambit of the role of the customer services
representative. So representatives may be routing calls to relevant support
departments, maintaining a record of customer accounts including new customers
and recording any changes that may occur in these accounts.
·
Job Specific Responsibilities: though the general spirit of
the role remains the same, the details may vary according to the organizational
context and industrial realities facing the organization. Hence a customer
services representative at an FMCG company may be responsible for a big account
like Metro. A customer representative at a bank may also be doing some duties
that a bank teller typically does such as counting money, etc.
CATEGORIES
FOR KEY ACTIVITIES
Production
These activities are
generally a characteristic of manufacturing firms and entail the design,
creation and delivery of significant quantities of the product.
For a company that
manufactures and sells pantyhose, typical value propositions are listed below;
·
This pantyhose lasts longer and, therefore, saves consumers the
money they would spend on frequent replacements.
·
It provides resistance, so feet don’t slip in heels.
·
The product is machine washable.
·
Easy to store packaging.
The Key activities
would then be;
·
Control of production and manufacturing;
·
Manage website, online orders and the distribution of the product;
·
Marketing and promotion of the product;
·
Product and packaging design.
Problem-solving
Some consumers or
customers have chronic problems. Organizations that list problem-solving as a
main activity are usually aiming to find unique solutions to these individual
problems. Consultancies, hospitals, and most service organizations typically
are trying to solve customer problems uniquely. These organizations are
characterized by lots of knowledge management and a focus on continuous
learning.
Jiffy Lube is a chain
of over 200 businesses in North America which offers oil change and other
automotive services to its clientele. Hence, it is a service firm that aims to
provide a solution to a recurring problem its target customers may have.
Jiffy’s value propositions are:
·
Keep cars healthy;
·
Keep clothes clean and garages tidy;
·
Save customers’ time and help them avoid the hassle of their
cars breaking down.
Based on these, the
key activities performed at Jiffy can be as follows;
·
Change the oil of cars;
·
Perform other maintenance work;
·
Promote their services to customers through upselling and other
marketing activities.
Such organizations
will have detailed records on repair work done on the automobiles of their
repeat customers and will be able to handle the car with full knowledge of its
history, much like a doctor with a regular patient.
Platform/ network
A business model where
the platform is a key resource usually has platform or network-related key
activities. Networks, brands, and software can all be a part of a platform or
network-related business.
Agile Enterprise Architecture or AEA offers
its services to companies experiencing a surge of work or a cascade of models
that need to be done within a limited amount of time. The company’s value
propositions are as follows;
·
Low-cost architecture modeling;
·
Agile and available when needed by customers;
·
Its environmentally friendly especially if the client company is
willing to forego travel;
·
Efficient and effective;
·
Involves minimal risk.
Based on these the key
activities for this organization are;
·
Cloud-based architectural modeling as a service;
·
Frequent health checks for the architecture to make sure it
remains robust with changing environment.
CASE
STUDY – LINKEDIN
LinkedIn is one of the
world’s premier business networking websites. The value propositions it
provides to its customers are as follows;
·
Manage professional profile and build a robust professional
network;
·
Target and reach the right talent;
·
Communicated with the right audience;
As you can see
LinkedIn is a platform/ network based company characterized by a high focus on
providing sharing capabilities to its customers. The Key activities performed
at LinkedIn would then be;
·
Platform Development
Hence, LinkedIn spends
a majority of its budget and time in ensuring that its platform remains
scalable and usable as the consumer base grows rapidly.
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