16 Mar Building Key Partners: Business Model Canvas
Over the past month, I have been digging into the different parts of the Business Model Canvas–an essential tool to starting any business. Thus far we’ve covered only the right side of the business model canvas, and I want to start talking about the left side now. While the right side (Value Proposition, Customer Segments, Channels, and Customer Relationships) really tackles the Who, What, and Why, the left side of the canvas covers the When, Where, and How! Key Partners are the suppliers and co-laborers who you use. Eventually you will build relationships and, if things work out, they will become your Key Partners.
To gain key partners, you need to look at who your current suppliers are. Can they become your partners? Are they really important enough to become a partner? Are they really the best option?
Determine what resources or activities you need to get from this supplier. And finally, ask yourself the big question: Can my team deliver value to our customer segments without this supplier? Most of the time the answer is no, so you want to build “redundancies” in your supplier chain.
At the end of the day, competition rules. Many companies are suppliers, customers and competitors with each other. They are working in the same space. So you need to be wise when looking at key partnerships. Don’t get trapped thinking that your supplier is the only one. If you get a huge contract or jump in your business (which we are always hoping for!) then all of a sudden your supplier becomes critical!
For example, say you run a coffee shop and you suddenly get a contract to serve coffee daily at a university. Will your roaster be able to handle the order? It’s key to make sure that whatever you are doing, your business is scaleable and ready to grow.
A food company I know was using a local manufacturing plant without question. I challenged them to find other plants so that they could scale up. In their quest they actually found a plant on the east coast that would produce the food to their specifications for half the cost they were paying! You can call that optimization! All of a sudden their profit margin just went way up.
Another thing to consider is that partnerships come in many forms: strategic alliances, joint ventures, buyer-seller. Your partnership could have to do with capital, manufacturing, service, supplies–anything that is necessary for your business to run.
For example, my non-profit Tricord Global takes money in and out of various countries quite often as a part of offering microfinance loans. Right now we use certain partners in the banks that actually hedge our currency and how we’re holding it. Their ability to do that helps us be sustainable so we can help people in third world countries. Tricord Global’s other key partners are obviously our investors. But they are also the people we invest IN. Those people are not just customers. They make money, are sustainable and help people at the same time. They cause social impact, and that’s what Tricord is all about.
Here are the core issues of Key Partners:
- Economies of scale
- Economies of scope
- Risk management
Is your business scaleable? Let me know your questions in the comment section below!
Join me next week to hear the next bit about the Business Model Canvas: Key Resources!