Business Model Innovation Hub
... where visionaries, game changers, and challengers discuss business models
Confusion in Business Model Canvas: Customers or Partners
A recurring discussion occurs each time I present the canvas: how to position an actor who, at the same time, receives value and contributes to value (to another customer segment). Will you put it in"Key Partners" or "Customer segment".Example of co-creation, state agencies financing an event or project and benefiting from the visibility and potential economics.
If we understand the logic behind the classification, it is not alway easy to communicate efficiently on this topic.
An answer could be "It does not matter, as long as the business model story makes sense and contributes to the overall understanding of the business".
Do you have this type of discussion with your clients? Is there any rule that can be used to communicate and facilitate learnings?
Tags: canvas
Replies to This Discussion
-
Permalink Reply by John W Babiak on -
Yannick,
According to the definition of a partner relationship, it has the following attributes
Shared economics
Mutual success / failure
Co-development/invention
Common customer
IMHO: Based on that definition, your state agency would be a partner. Also, since your business' channels and value propositions are probably not focused on the state agency, that would rule them out as a customer segment.
John
-
Permalink Reply by Emile Silvis on -
Hi Yannick. I have no experience in explaining the Canvas to customers, but I would use the Multi-Sided Platform pattern to explain this. The Multi-Sided Platform pattern holds that an organisation tries to create a Value Proposition that enables two (or more) distinct but interrelated Customer Segments to exchange value. You need both to be successful. An example that springs to mind is fiverr.com. They allow anyone to sell or buy anything for 5$. In fiverr.com's case, both sellers and buyers are necessary for fiverr.com to create value. On the Canvas, both buyers and sellers will be placed in the Customer Segments block, because the Value Proposition applies to both of them. A Key Partner is someone who provides Key Activities or Key Resources. So, in fiverr.com's case, it could be the guys that built and maintains the website for them.
In your example, a "state agency" would be a Key Partner only if it contributes to doing a Key Activity or providing a Key Resource. If, on the other hand, the agency draws value out of the Value Proposition, it is a Customer Segment.
Hope this helps!
-
Permalink Reply by Yannick Mériguet on -
Thank you John and Emilie for your answers. It helps a lot. I guess one key example in Alex's book is REGA (p100) that is often subject to never ending discussions. In this example Sponsoring Patrons are at the same time Partners and Customers.
If I understand the reason of this specific positioning, people have hard time to understand the benefits (in term of model's clarification) of having sponsors define as Partner. What does it add in term of comprehension?
-
Permalink Reply by Mike Lachapelle on -
This is not always a clear division, and yes they are very often questions around which is which I have found a few factors help clear this up:
Job-to-be-done: The determination of who is helping whom is a productive question. Take the party in question and ask if the business is helping that party complete a job they have to do, or solve a problem they have. That is a client relation. If they are helping you, by providing resources the business needs, doing part of, or being involved in the business' activities, that is a partner relation ship.
Revenue: With a very few exceptions, if the party in question is providing a revenue stream for you, they are a client. Funders (e.g. venture capitalists, donators) could be considered partners as they have no ongoing vested interest in the business (other than long term payback). In the case of state funding or philanthropic funding, the funding body should be considered a client. They are giving you funds for a very specific reason, and the business has to deliver on that value proposition in order to continue the funding. When I work with government agencies and departments, I always make sure they include a client segment of the funding body, and spend time discussing the offer that is being provided to that body.
Criticality to the business: In a multi-sided platform will the business run without the participation of this party. Often in this business pattern one of the sides of the platform becomes a resource necessary for the other side(s). In the case of many platforms that rely on an advertising segment, the users (or members) is a resource necessary to attract the advertisers.
So yes, it can be an interesting discussion, but by asking some key probing questions you can usually sort out the roles.
-
Permalink Reply by John W Babiak on
-
Mike,
That's a great explanation.
It brings me back to the decisions that an early stage company I was involved in had to make.
In the days when government grants were easier to get than today, we had to make a decision as to whether our focus was on getting grants by meeting the various requirements of the government programs or to focus on the customer.
In our case we chose to focus on the customer (with a couple of exceptions where we opted for some government-assisted financing).
However, at the time, I knew of several companies who chose to actively pursue government grants. As a result, many of their business decisions were driven on the basis of maintaining this funding and their focus was split between catering to customer and to government agency needs. As some of these companies grew, their needs outpaced the revenues available from government and they found themselves with a business model with a weak foundation.
Looking at it now, in a business model perspective, and within the context of your explanation, we chose to NOT make the government agency a client, whereas the other companies chose to do so.
So, looking at all this with a bit of hindsight, it would seem that not only is the answer to the "is a government agency a client or partner" question a function of circumstances, but it can actually be a strategic business decision.
John
-
Permalink Reply by Brad Snyder on -
I'm new here... so forgive my silly questions... but it seems to me that my clients can be key partners... in fact that makes for a much better relationship for us... is there a reason that I cannot consider the same entity both a client and a key partner?... it is after all my reality.
Brad
-
Permalink Reply by Mike Lachapelle on
-
Brad
No one has ever said that if a entity is in one component of the business model, they can't be in any other component. On the contrary, in platform type businesses one of the client segments can be a critical resource to engagement of another segment.
However, I would be interested in how you see the dual relationship of being a client of the business and at the same time a partner of the business. If you would be wiling would you share your thoughts on this.
-
Permalink Reply by Marijn Mulders on -
Brad
I think it can.
Just for discussion purposes. Company A is a company that makes corrugated board boxes. Company B is a printing company and is a customer that orders those boxes at company A. These boxes should have printing on it. Company A is not able to to that so it outsources this activity to Comapny B making it a Key partner.
-
Permalink Reply by Bart Doorneweert on -
Interesting question here. I always work by the following idea relating to discerning customers from key partners: If your 'partner' appreciates the same value proposition as your customer, then your 'partner' is actually your customer
Bart
-
Permalink Reply by Valerie Kijewski on -
You might want to take an approach used by the Balanced Scorecard when dealing with Not-For-Profits, namely, separate customers from stakeholders (stockholders in for-profits).
For example, a public university has the state legislature and governor as stakeholders as well as the general public. Some parts of the general public may be customers - such as students and the businesses who hire trained students. The stakeholders not only have a beneficial interest (public good) - but they are also key enabling relationships/assets.
People with the same name can play different roles at different times.
-
Permalink Reply by Erwin Fielt on -
As stated by others, there are usually ways to critically examine this and sometimes there is no 'right' answer, it is a strategic choice.
But also notice that the Canvas is a meta-business model by itself including implicit assumptions making it sometimes maybe less suited for certain application, e.g. co-creation. Then you either use the Canvas creatively (see here for a few examples) or let go of the Canvas template (while possible still using most of the underlying concepts).
Or you may want to consider an alternative approach, i presented a few in this working paper.
-
Permalink Reply by Patrick van der Pijl on -
Hi Yannick,
I do see this happening in our workshop with clients. It is great to have a strategic conversation about your customers who are or have the potential to be partners. Sometimes we call the movement between customers and partners "shake your business model from right to left." Be careful though that mostly people put names in the partner box without really understanding what a partnership means.
Cheers, Patrick
Events
Groups
© 2013 Created by Alex Osterwalder.
