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Customers' World

The Service Logic Business Model Canvas responds to this need by including both the company’s viewpoint (value capture) and its customer’s viewpoint (value creation). This tool makes managers and developers systematically consider the customer viewpoint and their everyday problems in each element of the business model. The testing of this tool in several company settings shows that the Service Logic Business Model Canvas is a relevant and easy-to-use tool that can help companies implement customer-centered strategies focusing on customer value-creation. The development process of the canvas took over 18 months and more than 100 persons and 70 companies were involved in the process (read more in Ojasalo & Ojasalo 2015).

 

The Service Logic Business Model Canvas is composed of nine building blocks, like the original Osterwalder and Pigneur’s Business Model Canvas. It is designed to be applied to each customer profile separately while it highlights the importance of deep customer insight in each of its blocks.

1. Customer's World and Desire for Ideal Value

 

Before focusing on the value proposition and the other elements of a business model, it is very important to get a deep insight and holistic understanding of the customers' world, their contexts, activities and experiences. In this block, the customers' explicit and latent reasons for buying and the benefits that the customer desires are analyzed. The questions to be answered include:

  • How do we get a deep insight and holistic understanding of
    the customer’s world, their future strategies, and their own customers’ world?
  • Why does the customer buy?
  • What kind of benefits (functional, economic, emotional, social, ethical, environmental, symbolic) does the customer desire?

2. Value Proposition

 

This block highlights the importance of capturing what the customer really buys when the supplier sells their offering. The company’s offering should correspond with the customer’s needing: what the customer intends to get and achieve with the offering. The questions to be answered include:

  • What value are we selling?
  • What are the elements of our offering?
  • What is unique in our offering?
  • What value is the customer buying?
  • What are the elements of the customer's needing?
  • Which of the customer’s challenges and problems need to be solved?

3. Value Creation

 

Here, the focus is on analyzing how the value is created in the customers’ everyday lives and how the company is able to facilitate customers’ value creation. The questions to be answered include:

  • How is our offering embedded in the customer’s world?
  • How can we facilitate the customers to reach their goals?
  • How does the value emerge in customer’s practices?
  • How are customers’ long-term benefits accomplished?

4. interaction and co-production

 

This block focuses on the understanding of the customer’s participation in the company’s activities and utilization of its resources. The questions to be answered include:

  • How can we support customer co-production and the interaction between us and the customer?
  • What are the customer’s activities during the use and different use contexts?
  • What are the customer’s mental models of interacting with us?

5. Revenue Streams and Metrics

 

This block focuses on analyzing for which benefits the customer is willing to pay. The price is linked to customer value rather than costs. This block also shows the key performance indicators that verify the value created for the company and the customer. The questions to be answered include:

  • What is our earnings logic and how is our financial feedback generated?
  • How can we apply customer value-based pricing?
  • What else valuable do we get other than money?
  • What are the key performance metrics of our business success?
  • For which benefits is the customer actually willing to pay and how?
  • What is the financial value to the customer?
  • What are the key performance indicators of the customer’s business and how are we following them?

6. Key Resources

 

In this block the core competences as key resources are highlighted. The questions to be answered include:

  • What skills and knowledge do we need - from the customers and other stakeholders as well?
  • What other material and immaterial resources and tools are required?

7. Key Parters

 

This block analyzes partners beyond a company-customer relationship that are directly required in value creation, typically suppliers and other network partners. The questions to be answered include:

  • Who are our key partners and what are their roles?
  • How do the partners benefit from the cooperation?
  • How does the customer experience our partners?
  • What kind of partnerships does the customer have and how should they be taken into account?

8. Mobilizing Resources and Partners

 

This block focuses on the utilization and development aspects of resources and partners and indicates how knowledge and skills are generated by all the participants. The questions to be answered include:

  • How do we coordinate multi-party value creation?
  • How do we utilize and develop partners and resources?
  • How can the customer utilize and develop partners and resources?

9. Cost Structure

 

In addition to analyzing the company’s costs and other sacrifices inherent in the business model, the costs and other sacrifices induced for the customer are analyzed. The questions to be answered include:

  • What are the costs inherent in our business model?
  • What are our other sacrifices?
  • How would potential cost cuttings impact customer value and experience?
  • What costs and other sacrifices are required from the customer?
Authors:
References: Ojasalo, Katri and Jukka Ojasalo (2015), Adapting Business Model Thinking to Service Logic: An Empirical Study on Developing a Service Design Tool. In Gummerus, J. and von Koskull, C. (Eds.), The Nordic School – Alternative Perspectives on Marketing and Service Management, Hanken School of Economics, Helsinki, Finland.

Katri Ojasalo

Jukka Ojasalo

Director of Master Level Education

Manager of MBA-degree programme