Business Models and Product-Market Fit: *Videos*

The key for a highly successful business is to provide the right product for a large market. This is referred to as Product-Market fit. Understanding Business Models is a valuable resource to reach Product-Market Fit.

Here are three short videos and the text of the videos that will introduce you to Business Models, Pipes and Platforms, the Business Model Canvas and Product-Market Fit.


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Here’s the link for the first video of this series, The Rise of Software and Startups.

Thanks to the folks at Strategyzer for their work on the Business Model Canvas.

Here is the graphic of the material we are covering in the course:

Business Models

What Is a Business Model
A Business Model describes how a Company profits by selling their Product into a Market of Customers.
The Business Model is part of the Business Plan, which describes why and how the model will be successful.
Business Models can be divided into 2 main groups, Pipes and Platforms.

Retail Pipes
The pipe is the oldest and most prevalent model and is often referred to as a supply chain.
In retail pipes such as stores, the company:
– Buys products from suppliers.
– Adds value to the product by stocking, shelving and giving service in their stores.
– Promotes and delivers them to a market of customers.

Service Pipes
In service pipes such as accounting, legal and business consulting, the company:
– Develops expertise.
– Packages this expertise into a service for sale.
– Promotes, sells and delivers the service to a Market of customers.

In a platform business model, the company develops a network and
– The company creates a cloud based network of producers and consumers of goods or services.
– Both producers and consumers are offered a value proposition to use the network.
– Fees are charged to the producers, consumers or third parties like advertisers.

Since the mass adoption of cloud computing and mobile, the most successful startups use platforms.

Example Amazon
A book store is a pipe that selects books from publishers and makes them conveniently available to their customers in their stores for browsing and purchase.
The Amazon Website is a pipe that makes any in print book available to it’s customers on it’s Website and delivered via mail.
The Amazon Book Seller platform enable books sellers to offer their books to Amazon customers via Amazon’s Web Site and software platform.

Elements of a Business Model
A Value Proposition is the group of products and services a company offers to its customers.
To offer the Value Proposition, the company must have Key Resources like employees.
Key Activities like purchasing and sales describe the most important things the company does.
In many situations, Key Partners like suppliers are involved.
The Cost Structures are the costs incurred to run the business.
The Customer Segments targeted by the Value Propositions are reached through Channels.
Customer Relationships describe the ongoing services customers will receive.
The Revenue Stream is the money the company receives from its customers.
Financial viability is achieved if the Revenue Streams exceed the Cost Structures.

Business Model Canvas
biz canvas

Business Model Elements
A Business Model describes how a Company profits by selling their Product into a Market of Customers.
A Business Model can be described using nine elements.
The Business Model Canvas is a tool that graphically depicts these nine Business Model Elements.

Business Model Canvas
The Customer Segments describes the groups of customers a company serves.
The Value Proposition is the bundle of products and services that create value for a Customer Segment.
The Channels describe how the company communicates with and reaches its Customer Segments to deliver its Value Proposition.
The Customer Relationships describe the types of relationships a company establishes with its Customer Segments.
The Revenue Stream represents the money a company generates from each Customer Segment.
The Key Resources describe the most important assets necessary to make the business model work.
The Key Activities describe the most important things a company must do to make the business model work.
The Key Partners describe the suppliers and partners that make the business model work.
The Cost Structure describes all the costs incurred to operate a business model.

Example Instacart
Let’s take Instacart as an example.
Instacart delivers groceries to consumers.
It’s a platform business with two Customer Segments, Consumers and Supermarkets.
The Value Proposition to the Consumers is grocery delivery in an hour.
These Consumers uses the Channels of Mobile and Web Apps.
Supermarkets are the Producer Customer Segment.
The Value Proposition to the Supermarkets is that Instacart will list and deliver the products in their stores at no cost to the Supermarket.
The Key Partners are the Independent Contractors making the deliveries.
The Key Activities are picking and delivering the orders on time and tracking the information in the database.
The Key Resources are their Software Platform and their employees.
The Revenues Stream comes from the Consumers ordering groceries for delivery.
The Cost Structure is paying the contractors who make the deliveries and running an enhancing their software platform.

Product-Market Fit

Business Model Canvas Elements
Customer Segments the company serves.
Value Proposition it offers.
Channels with which it communicates.
Customer Relationships it maintains.
Revenue Streams it receives.
Key Partners of the company.
Key Activities it performs.
Key Resources it uses.
Cost Structures it Incurs.

Product Market Fit
The most critical component of a highly successful business is providing
the right product for a large market.
This is referred to as Product-Market fit.
The business model elements that address Product-Market fit are the Customer Segments and Value Propositions.

Customer Profile
Jobs are the things the customers are trying to get done in their lives.
Pains are the annoyances and risks the customers encounter.
Gains are the outcomes and benefits the customers want to achieve.

Value Map
Products & Services are what you offer to address your customer’s needs.
Pain Relievers are how your products and services alleviate specific customer pains.
Gain Creators are how your products and services create customer gains.

Achieving Product-Market Fit
You’ve achieved Product-Market Fit when your customers get excited about your Value Proposition because:
– it addresses important jobs
– alleviates extreme pain
– creates essential gains

Example: Uber’s Customer Profile
Jobs are people getting from place to place
Pains are it’s often difficult to get a taxi
Gains are getting around without driving or using public transportation

Example: Uber’s Value Map
Products and Services are getting a taxi quickly with the tap of an App
Pain Relievers are alleviating the pain of getting a taxi
Gain Creators are saves time and aggravation

Uber’s Product-Market Fit
To achieve Product-Market fit you need a Value Proposition that excites Customers in a large market.
– Customers love Uber
– They use it often and recommend it
– It’s a very large market
– Great product-market fit
– Uber has reached a $40 billion valuation faster than any company in history!