This month, we are covering ‘Key Activities’, the seventh of the nine building blocks in the Business Model Generation as developed by Alexander Osterwalder and Yves Pigneur. ‘Key Activities’ refers to the most important things a company must do to makes its business model work.
Key activities focus on operations. While a CEO focuses on the future and strategic vision of an enterprise, the COO (chief operating officer) is in charge of making sure the vision of the company is realized through operations. Key activities can be summarized in three segments:
- Production – Production activity is typically seen in manufacturing operations. These activities relate to designing, making, and delivering a product in substantial quantities or of a superior quality.
- Problem Solving – The operations of professional service firms and hospitals are generally dominated by problem solving activities. Their key activities usually center around developing solutions to individual client or patient problems. Their business models call for knowledge management and continuous learning.
- Platform/Network – Some businesses operate off of a platform or a network. Many software companies operate off of a platform to coordinate action between customers on both the purchase and sales side of the business. Key activities in this category relate to platform management, service provisioning and platform promotion.
Now that we have covered the segments of key activities, let’s dive into a few different businesses and determine what their key activities are:
- Metal Manufacturing Plant – Let’s use the example of a company that produces metal components that are then sold to a company who uses those parts in a machine that they assemble. In this example, the manufacturing company must be concerned with the following key activities:
- Design – they may be provided with a design that they have to adhere to, or begin with a design that they can then improve upon.
- Quality – they will need to produce the components with high quality standards.
- Timely delivery – they will need to produce the right volume of components within the time frames specified by their clients.
- CPA Firm – Let’s use the example of a CPA firm as it relates to the problem-solving aspect of a professional services firm. Our clients compensate us for solving certain problems, whether it is tax, accounting or strategically related. Our key activities are managing knowledge and continuous learning. We manage knowledge in that we assign certain team members to certain types of engagements and at certain times of the year. Another key activity for us is continually learning. In our profession the tax laws and accounting rules are ever changing. We must make sure that our team’s knowledge stays relevant and competitive in the marketplace.
- Software Developer – many software developers operate off of a platform. Within their platform, they have different types of customers. As an example, the travel site Kayak has built a software platform where consumers can come to purchase travel-related services such as airfare, hotels and rental cars. They must make sure that their software platform is up to date and working flawlessly. On the consumer’s side, they must advertise to drive consumers to their site as opposed to Expedia or another competitor. From the provider side, they have to demonstrate to the airlines, hotels and rental car agencies that their offer to bring them revenue is competitive in the marketplace. So, Kayak needs to promote the platform with the consumers as well as the service providers, and they need to make sure the software platform is working properly and the technology is the best it can be.
Think through your business and consider the key activities that drive your business. Look for places that you can improve and create more value for your customers, both internally and externally.