Nowadays, software and IT companies are immersed in a competitive market, having to deal with a changing environment, different levels of competition, and varied needs and problems from clients, among other difficulties that may affect sustainability. In this context, companies must be able to form and evolve from a solid structure that allows them to develop, grow and face adversity. The development of a business model is the fundamental tool to be able to sustain the company in the long term, grow and achieve a return on investment for the partners.
What is the Business Model Canvas Methodology?
A business model represents how an organization or company generates value, provides that value to customers, and obtains a certain benefit in return. It represents the structure on which the organization is born, develops, grows, and even dies.
In this sense, various methodologies are used to develop a business model. However, the Canvas methodology, explained by Alexander Osterwalder and Yves Pigneur in their book “Business Model Generation,” can be a handy tool so that technology companies can capture their strategy and business model on a simple canvas.
Illustration by Osmoscloud
How is the Business Model Canvas built for an IT Company?
This model is a simple canvas made up of nine quadrants that demonstrate the foundations of a technology organization’s business model. These are closely related quadrants, which leverage each other seeking a synergy that allows the organization to offer a differential to the appropriate public and obtain in return a desired benefit. The nine quadrants are built as follows:
1. Segments:
These are the public or audiences the company focuses on and serves. In this instance, it is important to make a detailed description of the individuals or organizations that make up the target segments. And it is important to understand that we can target different types of audiences, such as the following:
- Mass markets, where the objective is to attract a large number of individuals without clearly specifying the inclusion criteria for the segment. For example, the Information Technology business is characterized by a wide variety of company profiles.
- Specific segments that share a certain characteristic but still represent large volumes of individuals or organizations. An example is the Retail sector, where software products are focused on the needs of companies in the market, which represent high volumes of participation.
- Niches, characterized by a lower volume of members and a specific unsatisfied need, such as the Government segment.
- Multilateral platforms, where users of software products are two or more independent segments that interact with each other. For example, the Telecommunications, Media, and Entertainment sector is characterized by the use of software products where both the service provider company and its customers interact.
2. Value proposition:
All organizations pursue a main objective which is to satisfy the needs of their customers or solve their problems. The value proposition is the means and the tool from which we can achieve this objective. As an example, we can mention Huenei’s value proposition. We provide our clients with IT services to guide them and help them achieve their business goals through our three business units: Dedicated Teams, Staff Augmentation, Turnkey Projects.
3. Channels:
Once we determine our segments and our value proposition, it is essential to define the channels by which we will reach our customers. This is related to the communication, distribution, and sales channels that the company will use. At Huenei we rely on different communication channels, both physical and digital, and we offer our clients personalized attention throughout the project.
4. Relationship:
It is extremely important to establish strategies that allow us to build a long-term relationship with our market segments. Technology companies can provide us with very illustrative examples in terms of building relationships with clients, based on personal assistance, automated support services and co-creation in software development projects.
5. Sources of income:
The sources of income represent how the company manages to capture the value of customers. The focus at this point is on recognizing the appropriate way to capture the value of our clients through our value proposition offer. In the case of technology companies such as Huenei, the focus is usually on charging for the services and developments provided.
6. Key resources:
In order to carry out its daily operations, be it production, marketing, relationship, or others, the company needs to have certain resources. The following may be mentioned as examples:
- Physical resources, such as workplaces or points of contact with clients, programs and software used for development, and so on.
- Intellectual resources, such as patents and industrial design registrations.
- Human resources, the work team, developers, key account managers, salespeople, etc.
- Financial resources that allow the daily operation.
7. Key activities:
At this point we focus on the activities that are the foundation of the business. Those that allow the company both the generation of an attractive value proposition, as well as its contact with the public and the construction of relationships with clients. The key activities of a technology company may be related to the production or development of software products, the solution of customer problems through an after-sales support and follow-up service, the establishment of a network or platform intuitive for customers, among others.
8. Key alliances:
Sometimes, technology organizations outsource certain activities or resources important to the operation. In these cases, the partners, suppliers and allies that add value to the business and to the company’s proposal represent key players for organizational and commercial development.
9. Cost structure:
This structure is made up of fixed and variable costs incurred in the daily operations of the organization. Beyond the focus of the organization, which can be oriented towards reducing costs or increasing the value perceived by clients, the correct control and administration of the cost and expense structure of a company is essential for its survival and growth.
After this analysis of the business model structure according to the Business Model Canvas methodology, we can understand the importance of proper administration and planning of each of the quadrants for technology and software companies. As we have seen, key alliances are essential for business development, and that is why at Huenei we focus every day on offering the best service for our clients, so that they can capture that value and offer it to the segments they target. The daily work and the focus on excellence allows organizations like Huenei to collaborate in the delivery of value that companies offer to their clients.