All business models call for key activities. These actions are necessary to deliver value propositions. Without one or more of these critical processes, a business is bound to have a difficult time.
On a Business Model Canvas, Key Activities is the seventh block. It comes after defining Key Resources and precedes Key Partnerships.
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What Are Business Model Key Activities?
Key activities, in essence, are activities that a company needs to operate. All other blocks of a business model rely on these critical processes, such as:
Administration and operations
Value creation and delivery
Marketing and sales
Maintaining customer relationships
Generating revenues
Keep in mind that key processes do not have to be in-house. In some cases, it may be more beneficial to use key partners.
E-commerce companies, for example, may build their platforms. But the capital needed may be too much. As an option, they may use the existing infrastructure of companies like Amazon.
Types of Key Activities
A company carries out key activities as dictated by its business model. But the actions vary. For example, a business relying on third-party contracts would focus on channel management. In the case of product-driven companies, their focus would be on continuous innovations.
While key activities vary, one could group them into three categories:
1. Production
Startups planning to manufacture products would have key activities centered on production. Typical activities in the industry sector include design, mass production, and distribution.
Some of the key activities of businesses engaging in production are:
Controlling the production and manufacturing of products
Developing a branding strategy
Marketing and promoting products
Managing website, online sales, and delivery of products
2. Problem-solving
The core activities in this category are to seek solutions to specific problems. Most entrepreneurs think of a business idea after identifying customer problems. After segmenting the market, they create a value proposition. Among the businesses in this category are hospitals, consultancies, and service providers.
Knowledge management is one of the key activities of these companies. They may also include continuous training and learning.
3. Platform or Network
Some business models intend to offer products or services through proprietary platforms. Card networks, for example, provide transaction platforms for banks, merchants, and consumers.
Businesses in this can only offer their services after building an infrastructure. But their core activities, besides marketing and promotion, are to enhance their platforms. Not only does it include maintenance, but also continuous upgrades. Such actions ensure smooth operations and keep the system safe and secure.
Examples of Key Activities
Here are some examples of key activities undertaken by different businesses.
1. Research and Development
Companies that engage in production may have a research and development (R&D) section. Besides developing new products, R&D needs to liaise with other departments. Its activities, for example, need to be in coordination with production and marketing.
The typical functions of the Research and Development department include:
Product Research. R&D solves customer problems by designing and testing product ideas. They also study the amount of time needed to produce a certain number of products, costs, and customer demand.
Product Development. After research, the product goes into development. During this phase too, the new products undergo extensive testing.
Product Updates. Based on customer feedback or competitors, the R&D department checks their products to see if they require updates.
Quality Checks. From time to time, the Quality Assurance (QA) team may ask R&D to conduct product quality checks. One of the purposes for doing so is to ensure that the products conform to their quality standards.
Innovation. One of the main tasks of R&D is to stay updated on industry trends. In technology, for instance, the competition is fierce. Tech companies, as a result, keep pushing the boundaries of engineering to produce better products.
2. Production
Managing production requires several key activities, some of which are as follows:
Product Selection and Design. This activity comprises value engineering and value analysis. During this phase, the company chooses the right product or value proposition. They need to balance it with the right design or actions.
Production Process Selection. During this phase, the company decides on the production process. These activities not only include choosing the methodology but also equipment and materials. It also includes other activities such as the inventory management system.
Production Capacity Selection. The production team must be aware of the expected demand for a product to make the necessary preparations and schedule. One of the most popular tools to determine capacity is using a break-even analysis tool.
Production Planning. The activities in this phase include deciding on routing. It is to ensure a smooth and the most cost-effective workflow. At the same time, they also need to create a schedule.
Production Control. The ultimate responsibility of monitoring and controlling the entire production process rests on production managers. One of the measures they take is comparing the planned production with the actual output. They also check to see any deviations throughout the process and implement corrective measures if needed.
Quality and Cost Control. One of the most challenging activities is balancing quality and cost. Customers want cheap but high-quality products. Hence, the production team needs to find ways to create products that meet consumers’ expectations. At the same time, they also need to reduce the production costs to be competitive.
Inventory Control. Overstocking and understocking are problems that can hamper production. In some cases, it may also lead to economic losses. Hence, the production team needs to establish a solid inventory management system.
Equipment and Machinery Maintenance. The production of products may come to a halt if a machine fails. Hence, the team must ensure that all the necessary equipment is functioning. Regular maintenance is needed to keep them in good condition.
3. Marketing
The marketing team creates brand and product awareness. If they do their jobs well, the reasonable expectation is that the business would prosper.
Among the many functions of the marketing department are:
Marketing Strategy. Usually, the marketing team begins by drafting a general plan. Once approved, this plan is used to develop goals and activities for implementation.
Market Research. The marketing team must not only know their products, including their strengths and weaknesses. More importantly, they should also know their customer segments and competitors. They can create or revise marketing plans to maintain or expand their market share using the information gathered.
Product Development. The R&D team needs information so they can enhance or develop new products. In this regard, the marketing team can provide crucial data. They can, for example, help in identifying gaps in the market. Most importantly, they can provide insights into customer thoughts, feelings, and needs. They can also help in the pricing of products.
Communications. The marketing team is also responsible for most communications about their products. These messages include press releases, reviews, advertisements, emails, among others.
Sales Support. After developing a general marketing strategy, the team works with the sales team. They provide them with promotional materials and leads.
Events. The marketing team organizes events for the company. These activities include product launches, exhibitions, and seminars. They also communicate and invite key people like the press and customers to attend these functions.
4. Sales and Customer Services
The role of sales and customer service teams is to assist customers in buying products and providing after-sales support. Besides enticing and persuading consumers to buy products, they are also instrumental in maintaining customer relationships.
Assist in Sales. Companies can task customer representatives to assist in selling products or services. In this case, it is their job to educate customers about their value propositions. Another activity they do is sales expansion or upselling.
Handle Problems. Customers can be very picky. In some cases, a product or service they bought may not meet their expectations. It is the job of customer representatives to handle customer issues. Their goal is to appease angry customers and offer them the best possible solutions.
Clerical Tasks. Some companies assign clerical tasks to customer representatives. For example, sales reps may have to answer and route phone calls. They can also be in charge of maintaining and updating customer records.
Job Specific Tasks. Customer representatives have specific roles. But beyond the standard job description, companies may also ask them to perform other jobs. A bank rep, for example, may have to do some of the jobs assigned to tellers.
Critical Considerations for Key Activities
The four factors that merit considerations when deciding on key activities are:
1. Requirements to Fulfill Value Propositions
Customer segments are among the most important factors to consider. For example, a startup intends to create a value proposition for wealthy consumers. As such, the products or services must be of excellent quality. But more than that, the key activities should also deliver the highest quality of consumer experience.
Mainstream marketplaces are not the same. In this case, the prices of goods are the primary consideration. Hence, the company should focus on only essential activities. Any non-essentials that add to the costs of products are not included.
2. Activities Required for Distribution Channels
Some companies may have only a single distribution channel, while others have several. Regardless, each channel, for sure, will have different activities.
E-commerce companies, for instance, may market products through their website. Alternatively, they may also use platforms like Amazon. In this case, much of their key activities would revolve around technology.
Retail stores, on the other hand, require physical locations. As such, the activities would include hiring employees to operate the stores.
3. Activities to Build Positive Customer Relationship
Customer relationships encompass different key activities. In general, they include:
Sales
Marketing
Customer service
Companies should reconcile these activities with Customer Relationships as defined in the business model canvass.
4. Required Activities of Revenue Streams
Each revenue stream defined in the business model would have unique associated activities. B2B companies that offer credits, for instance, would have to have a collection department. Regardless, startups should include all the necessary support.
Questions About Key Activities You Need to Know
In the key activities block, you must ensure a smooth workflow between different departments. As it is, many activities involve two or more departments.
As you ponder on identifying critical activities, consider these questions:
For each value proposition, what key activities do you require?
What are the key activities of your distribution channels?
What key activities do you need to enhance customer relationships?
What key activities does each of your revenue streams require?
Once you have ironed out the core activities of the relevant blocks, next up is determining key partners.