The Business Model Canvas: A Tool for Developing a Portfolio Strategic Plan.

In my Portfolio Management Professional (PfMP) certification training, I often cover lots of tools & techniques which are beyond the scope of PMIs Standard for Portfolio Management to explain the key Portfolio Management concepts and more importantly to add value for my trainees/mentees. These tools are very popular, practical and generally used by the strategic leaders to develop the Portfolio Strategic Plan. In my this newsletter, I will explain how the Business Model Canvas (BMC) can assist you the Portfolio Manager in developing a portfolio strategic plan.

In today's VUCA environment, every organization facing the constant challenge of adapting to change and staying competitive. Developing a robust strategic plan is crucial for ongoing business value realization, particularly when managing a portfolio of businesses or products. The BMC provides a comprehensive framework that enables executives to analyze, design, and refine their business models, thereby facilitating strategic decision-making and ensuring the alignment of resources and capabilities with the organization's goals.

Understanding the Business Model Canvas:        

The Business Model Canvas is a visual tool that captures the fundamental elements of a business model. It consists of nine building blocks that represent key aspects of a business, including customer segments, value propositions, channels, customer relationships, revenue streams, key activities, key resources, key partnerships, and cost structure. Each of these blocks interrelates and contributes to the overall strategic direction of the organization.

Identifying Customer Segments:        

An effective portfolio strategic plan requires a deep understanding of the target customers for each business or product. By utilizing the Customer Segments block of the BMC, you the Portfolio Manager can define and segment customer base, identify their specific needs, and tailor value propositions accordingly. This understanding allows for more targeted and effective marketing strategies, customer acquisition, and retention efforts.

Designing Value Propositions        

The Value Propositions block in the BMC helps to articulate the unique value their businesses or products offer to their customer segments. By mapping the value proposition against customer needs and desires, you can identify areas of differentiation, competitive advantage, and potential innovation. This enables the development of compelling value propositions that resonate with target customers and drive customer loyalty.

Crafting Channel Strategies        

The Channels block of the BMC focuses on how businesses reach their customer segments. You need to carefully design channel strategies that align with customer preferences and optimize the delivery of their value propositions. This may involve a combination of online and offline channels, direct or indirect sales approaches, or partnerships with distributors and resellers. The BMC facilitates the evaluation and selection of the most effective channels to ensure seamless customer experiences and maximize revenue generation.

Cultivating Customer Relationships        

Effective customer relationships are vital for long-term success. The Customer Relationships block of the BMC enables you to define the type of relationships you want to establish with customers. This may involve personalized services, self-service models, or community engagement, among others. By mapping out customer relationship strategies, you can ensure that businesses or products meet customer expectations and foster strong customer loyalty.

Optimizing Revenue Streams        

The Revenue Streams block in the BMC helps you identify and evaluate various sources of revenue for portfolio. By analyzing pricing models, revenue generation mechanisms, and potential upsell or cross-sell opportunities, you can optimize revenue streams. This analysis aids in resource allocation, investment decisions, and the identification of new revenue streams that align with the organization's overall strategic objectives.

Evaluating Key Activities, Resources, and Partnerships        

The Key Activities, Key Resources, and Key Partnerships blocks of the BMC collectively provide insights into the core operations of the business. You can analyze and prioritize key activities that create value, allocate resources efficiently, and leverage strategic partnerships to enhance competitiveness. This analysis enables you to identify areas for process improvement, cost reduction, and strategic collaborations to drive innovation and growth.

Managing Cost Structure        

The Cost Structure block in the BMC helps you to understand the cost drivers and structure associated with portfolio of businesses or products. You can evaluate cost optimization opportunities, identify cost-saving measures, and explore economies of scale or scope. This analysis ensures efficient resource allocation, profitability, and sustainable business operations.

Now let me map these nine building blocks of the Business Model Canvas (BMC) to pharmaceutical industry to provide a better understanding of its application:

Customer Segments: In the pharmaceutical industry, customer segments can include healthcare professionals (doctors, nurses, pharmacists), patients, hospitals, clinics, and government agencies. Different customer segments may have unique needs and requirements, such as specialized medications or specific healthcare services.

Value Propositions: Pharmaceutical companies provide value through their products, which include prescription drugs, over-the-counter medications, and medical devices. The value proposition lies in the efficacy, safety, and quality of these products, as well as their ability to address specific medical conditions or improve patients' quality of life.

Channels: Pharmaceutical companies utilize various channels to distribute their products. These can include partnerships with pharmacies, wholesalers, and distributors, as well as direct sales to hospitals, clinics, and other healthcare institutions. Additionally, pharmaceutical companies may leverage digital channels, such as online platforms and telemedicine, to reach patients directly.

Customer Relationships: Establishing and maintaining strong customer relationships is essential in the pharmaceutical industry. This involves providing healthcare professionals with relevant information, clinical studies, and support to ensure the appropriate use of medications. Moreover, building relationships with patients may involve educational programs, patient assistance programs, and personalized healthcare services.

Revenue Streams: Pharmaceutical companies generate revenue primarily through the sales of their products. This includes revenue from prescription drugs, over-the-counter medications, and medical devices. Additionally, revenue streams may include licensing agreements, partnerships, research grants, and royalties from intellectual property.

Key Activities: Key activities in the pharmaceutical industry encompass research and development (R&D) efforts, clinical trials, regulatory compliance, manufacturing, and quality control. R&D plays a crucial role in discovering and developing new drugs, while clinical trials are conducted to evaluate safety and efficacy. Manufacturing and quality control ensure the production of high-quality pharmaceutical products.

Key Resources: Key resources for pharmaceutical companies include intellectual property, research facilities, skilled scientists and researchers, manufacturing plants, distribution networks, regulatory expertise, and strong relationships with healthcare professionals and institutions. These resources enable companies to develop, produce, and distribute their products effectively.

Key Partnerships: Pharmaceutical companies often form partnerships with various stakeholders to enhance their operations. This can include collaborations with academic institutions for research purposes, licensing agreements with other pharmaceutical companies to access new technologies or compounds, partnerships with contract manufacturing organizations (CMOs) for production, and collaborations with healthcare providers for clinical trials and distribution.

Cost Structure: The cost structure in the pharmaceutical industry encompasses R&D expenses, clinical trial costs, manufacturing and production costs, sales and marketing expenses, regulatory compliance costs, and distribution expenses. Furthermore, investment in advanced technologies, intellectual property protection, and maintaining a highly skilled workforce contribute to the overall cost structure.

By mapping these building blocks to the pharmaceutical industry, it becomes evident how the Business Model Canvas can help pharmaceutical executives analyze and optimize their business models, understand their customers' needs, refine their value propositions, establish effective distribution channels, build strong customer relationships, manage revenue streams, allocate resources efficiently, cultivate strategic partnerships, and optimize their cost structures.

The Business Model Canvas serves as an invaluable tool, providing a holistic view of the key elements that shape a business model. The beauty lies in its iterative and agile nature. You can use the canvas as a visual representation of portfolio strategic plan and continuously refine it based on market feedback, competitive dynamics, and changing customer needs.

If you wants to reach deeper in understanding of how BMC can be applied in your industry then come be part of my upcoming portfolio management training.

For any queries on Portfolio Management Professional (PfMP) certification or training requirements do write to us at [email protected] or visit the link below.

Here is short video providing Portfolio Management concept, do check this out for sure.

Happy Learning

Kailash Upadhyay