SoC and the Business Model Canvas (part 1)

Byadmin

The BMC is fundamentally a model of how the business works. SoC is a lens for analysing the customer’s stake within that business model. This distinction is important to highlight that SoC is not a customer-centric rebranding of the BMC. Let’s dive into that.

The Business Model Canvas building blocks

The BMC gives you a structured picture of the business model through nine building blocks:

  • Customer segments
  • Value propositions
  • Channels
  • Customer relationships
  • Revenue streams
  • Key resources
  • Key activities
  • Key partnerships
  • Cost structure

Its fundamental question is essentially:

How does this organisation create, deliver and capture value?

It forces an organisation to look at the whole business model, and avoids getting stuck in product, marketing or customer-experience thinking. It also makes dependencies visible:

If we change the value proposition, what happens to channels, resources, activities, partnerships, costs and revenues?

That systemic view is a major strength.

SOC: a lens on the BMC

With SoC, we apply a fundamentally different analytical question to the BMC:

What is the customer’s stake in each part of this business model, and how does the business model reflect that stake?

This means SoC is potentially a lens on the BMC. The BMC tells you:

What is the business model?

SoC asks:

What does this business model mean for the customer, what does the customer have at stake in it, and how is that stake reflected in the model?

That is where I think there is real added value.

The BMC blocks one by one

Let’s look at the blocks:

1. Customer segments

BMC asks:

Who are our customers?

SoC asks:

What is actually at stake for these customers?

The BMC can identify a segment such as:

“SMEs with 10–50 employees.”

But that doesn’t tell you:

  • what they are trying to accomplish;
  • what context they operate in;
  • what they risk;
  • what they value;
  • what they need to protect;
  • what they are trying to avoid;
  • what they stand to gain or lose.

SoC adds the human/economic significance behind the segment.

2. Value proposition

Here is the strongest overlap.

BMC asks:

What value do we offer?

SoC asks:

What customer outcome is actually at stake, and how important is it to the customer?

That is a subtle but important difference.

A value proposition can describe:

“Fast, convenient and affordable banking.”

SoC pushes further:

What does “fast, convenient and affordable” actually mean in the customer’s context?

And:

What happens to the customer if we fail to deliver it?

The latter gets much closer to stake.

3. Channels

The BMC asks:

How do we reach and deliver to customers?

SoC asks:

What does the choice of channel mean for the customer’s ability to achieve their desired outcome?

For example, moving a service from human interaction to self-service might improve economics while increasing customer effort.

The BMC can represent the channel change.

SoC exposes what the customer has at stake in that choice.

4. Customer relationships

Here SoC adds another layer.

BMC:

What kind of relationship do we establish?

SoC:

What does the customer need from this relationship, and what does the customer risk or gain from the way the relationship is structured?

Trust, dependency, transparency, autonomy, continuity, support, switching costs, etc.

5. Revenue streams

This is about making money.

BMC:

How do we make money?

SoC:

What is at stake for the customer in the way we make money?

For example:

  • subscription
  • transaction fee
  • commission
  • advertising
  • data monetisation
  • usage-based pricing
  • freemium

The BMC tells you the economic mechanism. SoC can expose the customer implications of that mechanism. And sometimes those implications are deeply consequential.

6/7. Key resources / Key activities

BMC:

What do we need to make the model work?

SoC:

Which capabilities and activities exist because they matter to the customer’s stake?

And conversely:

Which stakes of the customer are not supported by the capabilities we have?

That is potentially a very useful diagnostic.

8. Key partnerships

BMC:

Who do we need?

SoC:

How do those partners affect what the customer has at stake?

An organisation might outsource customer support, payments, logistics, data processing, manufacturing, etc. The customers don’t necessarily care who performs the activity. But they absolutely care about the outcome. SoC allows you to follow the customer’s stake across organizational boundaries.

9. Cost structure

BMC:

What are the major costs?

SoC:

Where does the business deliberately spend or not spend money on things that matter to customers?

This is an interesting connection. Suppose a company removes human support because it is expensive. BMC sees:

lower cost structure.

SoC asks:

What customer stake is affected by that cost decision?

This doesn’t mean the answer must be “restore human support”. It means the customer implication becomes visible.

The customer’s side

Even though the BMC contains Customer segments and Value proposition, the overall canvas remains a representation of the business model.

SoC explicitly asks:

What does this model mean from the customer’s side?

That’s different. A segment doesn’t reflect the customer’s context.

For instance, ‘young professionals’ tells you very little about what is at stake for someone trying to accomplish something under particular circumstances. SoC introduces: context → need → desired outcome → consequence into business-model analysis. And SoC can also expose customer/company tension . Imagine:

Customer wants flexibility.
Company wants standardisation.

The BMC can represent standardisation as part of the operating/business model.

But SoC asks:

What does the customer have at stake because of that standardisation?

And then:

How significant is that stake relative to the company’s reasons for standardising?

And last but not least, SoC can explicitly distinguish customer value from customer sacrifice. A business model can create value while also imposing:

  • price
  • time
  • effort
  • data sharing
  • dependency
  • lock-in
  • risk
  • reduced choice

SoC can make both sides visible:

What does the customer gain?

and

What does the customer put at stake?

That’s particularly useful for digital/platform/subscription models.

More about this in another post!

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