Business Model & Value Chain

Describe the business you actually run on one page, pull it apart into activities, and find the activity customers choose you for, the one that costs most and the one where value leaks.

Practice, not research: no peer-reviewed validation of the Business Model Canvas has been found, and the value chain is a conceptual tool, not a tested model. Their value is a shared language and the questions they force. Cost shares are rough estimates until you check them against the accounts.

Use it when:

• You redesign a business model, or explain it to a partner, investor or new colleague.
• You decide what to do yourself and what to outsource.
• You adapt your model for a new country or customer group.

Skip it when:

• You want to know whether an advantage lasts: do this page first, then 7.5 Resources & Capabilities.
• You need the money flow in detail: use 5.1 Value Flow Map.

Both halves of this page are practitioner tools. The Business Model Canvas (Osterwalder & Pigneur, 2010) claims that a business model can be described in a small set of linked choices, so a team can see the whole logic on one page and argue about it. Its value is as a shared language, not as tested theory. The value chain (Porter, 1985) adds a sharper mechanism: advantage lives in specific activities, so you understand cost and difference only by pulling the business apart into the activities that create them.

One limit: the chain's left-to-right shape was drawn for product businesses. Stabell and Fjeldstad (1998) argue that firms solving unique problems or running exchanges work differently, so treat the rows as prompts, not as a required anatomy.

The steps run the two tools in sequence on purpose. Step 1 states what you believe the model is; Step 2 tests it activity by activity against cost and difference; Step 3 asks where value is created and where it is captured, because they often diverge. The activity customers choose you for is frequently the one you discount away.

Describe the business you run today, not the one you plan. One or two lines per row.

Strong answer: "Customer segments: cafes and restaurants within 200 km that serve filter coffee. Value proposition: coffee roasted within a week, with a roast date on every bag and a barista visit at launch." Specific enough that a stranger could picture the customer.

Illustrative example: the business and its numbers are made up.

A small coffee roaster in Tampere, Finland sells to cafes and runs a small webshop.

• Value proposition: coffee roasted within a week, roast date on every bag, and a barista visit when a cafe launches the coffee.
• Revenue: price per kilo to cafes, plus a small online subscription.
• Value chain insight: roasting is the largest cost share and differentiating. The barista visit costs little but is the main reason cafes switch to the roaster. Delivery is a cost with no difference.
• Value leak: the visit is given away in most deals. The hardest work is the least paid.

Decision: keep roasting in-house, hand delivery to a local courier, and price the visit as a fee in the next contract round. Check the cost shares against last year's accounts first.