Business-model-canvas-key activities

© 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 Software Development; 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.

  1. Based on our value propositions, what kinds of activities are key to our business?
  2. What kinds of activities are key to our distribution channels?
  3. What kinds of activities are important if we want to maintain our customer relationships?
  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 right design 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;
  • Create a branding strategy;
  • 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;
  • In the cloud;
  • 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;
  • Cloud-based enterprise architecture software 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;
  • Access to LinkedIn database though API’s and widgets.

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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