Key Resources Building Block in Business Model Canvas

Key resources in Business Model Canvas

In the Business Model Canvas, Key Resources appear within the Operating Model. They also play a large role when you’re examining innovation’s risks.

Within the Business Model Canvas, the Key Resources Building Block plays an important role in understanding what model resources we have available to fuel our innovation, as well as understanding where a key resource is missing.

By using the Unite extended Business Model Canvas, you can gain a deeper understanding of the potential risks linked to specific Key Resources. It helps shed light on dependencies and provides strategies to mitigate these risks. Download the Unite extended Business Model Canvas now to leverage its benefits and enhance your grasp of the role of Key Resources in innovation and risk management.

You can learn much more about innovation in our new book, How to Create Innovation, which describes comprehensive approaches including mindsets, structures, and strategies to innovate in less time, with fewer resources, and more success, you’re invited to register for the download now!

What are Key Resources?

In any business, the Key Resources are the essential inputs used to create a compelling value proposition, serve the targeted customer segment, and deliver products or services effectively. These resources are the cornerstone of a successful business model and can be both tangible and intangible resources.

Identify and list your Key Resources, which can be categorized into physical, financial, intellectual property, and unique people skillsets. Particularly focus on the core and differentiating strengths or capabilities that you may be able to leverage.

Every business model succeeds or fails on how key resources are found and used. In short, we can use our Key Resources to build our value proposition by best utilizing our talented human resources and other assets. At Digital Leadership, we offer Business Model Strategy service to empower companies in identifying their strengths, unique selling points, and key activities that deliver exceptional value to customers. By aligning your resources, capabilities, and processes with your value proposition, you can distinguish your business and attain a sustainable competitive advantage. Our strategic guidance is aimed at optimizing resource allocation, streamlining operations, and enhancing value delivery for long-term success.

Related: Business Capability Map: A Practical Business Approach

Examples of Key Resources:

1. Fashion Outlet:
   Imagine you own a fashion outlet that specializes in selling large quantities of overcapacity stock outside the city center. Your key resources are:
   a) Cheap location with good access: A strategic location that allows easy access to suppliers and customers, minimizing transportation costs and attracting bargain-hunting customers.
   b) Contracts with fashion producers: Exclusive partnerships with fashion producers that provide a consistent supply of overstocked items at discounted prices, ensuring a competitive edge in the market.
2. Google Business Model:
   When analyzing Google’s business model, several key resources emerge as essential components:
   a) Index: Google’s vast index of web pages and content forms the foundation for its powerful search engine, enabling users to find relevant information quickly and efficiently.
   b) Algorithm: Google’s proprietary search algorithm, constantly refined and improved, ensures accurate and relevant search results, enhancing the user experience and increasing user loyalty.
   c) Computing power: Google’s robust infrastructure, encompassing hardware, software, and a team of skilled engineers, supports its data centers and complex computations required for various services.
3. British Petroleum (BP) and Exxon:
   In the oil industry, companies like British Petroleum and Exxon rely heavily on key resources such as:
   a) Oil fields: Access to vast oil reserves and expertise in extraction and refining processes is vital for their operations and revenue generation.
   b) Advanced drilling technologies: Investment in cutting-edge technologies for efficient exploration and extraction of oil reserves gives them a competitive advantage.
4. Ford and Toyota:
   Automakers like Ford and Toyota require specific key resources to maintain their competitiveness:
   a) Car factories: State-of-the-art production facilities that enable large-scale manufacturing of vehicles, ensuring timely delivery and cost optimization.
   b) R&D capabilities: Investments in research and development to innovate and improve vehicle designs and technologies, catering to evolving customer demands.
5. Google and Facebook:
   Tech giants like Google and Facebook rely on key resources like:
   a) Customer data: Extensive user data collection and analysis allow personalized experiences and targeted advertising, driving user engagement and attracting advertisers.
   b) Computing infrastructure: Massive data centers and computational capabilities are essential for handling vast amounts of user data and delivering seamless services.

Types Of Key Resources

The types of Key Resources include Human resources, Financial resources, Physical resources, and Intellectual resources. They are each outlined below.

Every model template includes Key Resources, Key Resources can look differently depending on the focus of each specific template, to make conceptualizing your Key Resources easier, however, we usually think about them as falling into one of four categories.

Human Resources

These are your people. Someone has to enact innovation. Ultimately, your human resources do the work of transformation. You’ll need to ensure that your workforce has the skills necessary to move the business forward. Don’t ignore your key partners at this stage, outside organizations may have human resources that you can use with only minor investments.

As you complete a Business Model Canvas, you reflect on the people you’ll ask to do your work. Simply, do you have the bodies in place necessary to put your innovation plans in motion? 

Managers can influence the performance of their human resources in a number of ways. An incentive system rewards performance, though it can be controversial in how they’re applied, be sure to completely think through the incentives you offer, and how employees can obtain them because a poorly-applied incentive system can ruin morale and negatively impact performance.

Human resources can also be influenced through organizational schemes. Innovation teams, specifically formed, can have a tremendous effect on the direction a company takes. Other types of organizational designs can funnel talent toward specific tasks or challenges. Good managers know how to best leverage the human resources they have, encouraging the creativity and insight it takes to be truly innovative, they also recognize when an organization would benefit from hiring key employees who will help plans move forward productively.

Human Key Resources Examples:

• People who create the product or service
• Truck drivers who deliver products
• Customer service agents
• Managers who oversee production
• Salespeople
• Human resources employees
• Information technology staff

Financial Key Resources

The numbers are the numbers. The funds you have available, either on hand or at reasonable interest, are your Financial Resources.

When considering your Financial Resources, don’t neglect your access to capital markets. Can you borrow funds? Does it make sense to go into debt? Properly applying credit might give you the opportunity to begin innovation that promotes lasting growth. As a startup venturing into a new market segment, such as Uber did with ride-sharing, financial capital emerges as a critical key resource. Having substantial financial resources allows you to embark on a “land grab” strategy, rapidly capturing market share ahead of competitors as you strive to establish a dominant presence.

Financial Key Resources Examples:

• Cash: money or its equivalent.
• Bank Deposits: money placed into banks, including checking accounts and money market accounts.
• Holdings of Stocks: publicly traded stocks can be easily converted to cash, and are considered financial resources of an organization. These stocks are traded on stock exchanges, like the NASDAQ or the NYSE. It takes only a few minutes to sell stocks on the market.
• Holdings of Publicly Traded Bonds: There are various types of bonds that can be included in the financial resources of an organization: U.S. government securities, mortgage bonds, foreign bonds, corporate bonds, etc…,
• Foreign Currency Holdings: These are currencies issued in another country. Foreign currencies can be held in a local or in a foreign bank. Foreign currency can be quickly converted to local currency, thus they are considered part of the financial resources of an organization. Also, many international companies need to hold amounts of foreign currency to carry out their operations, like selling abroad or paying foreign suppliers.
• Checks: checks are instruments that contain an order that directs a bank to pay an amount of money to the check holder. Checks can be easily converted to money, and sometimes, checks can be used to pay suppliers: checks are financial assets.

Source: https://economicpoint.com/financial-resources-examples

Physical Resources

These are your tangible resources, including capital-intensive production facilities, materials, supplies, property, and equipment. Maybe you have storage areas full of raw materials, or pallets loaded with products. Or maybe you have a point of sales system shared across distribution networks. Consumer goods companies are likely to have vast physical resources, while creative industries might rely heavily on their human resources and less on manufacturing facilities or warehouses.

Infrastructure-driven businesses are likely to have materials other businesses lack by the time they’re considering innovation. While that sort of investment can be a signal of a successful business model, it can also have the effect of paralyzing management decisions. “We have all this stuff,” decision-makers think, “and so much capital wrapped up in it, all our solutions have to justify those prior purchases.”

Clearly, that’s not a path toward innovation. It takes a brave visionary to change directions sometimes. Your physical resources don’t have functional value if they are holding you back.

This is a good place to consider some common intangible resources, also. Software, for example, would often not be thought of as a “physical resource” but purchased computer applications in the business world behave like material objects more than truly intangible resources. Related intellectual property often behaves more like a physical resource than an intangible one. Potentially substantial licensing fees for software and other technology must also be evaluated to see if it works in your business model to add value.

Physical Key Resources Examples:

• Machinery and equipment: This includes the tools you use to make your product, as well as any machinery and equipment that goes into the manufacturing process (for example, a CNC machine).
• Buildings and office spaces: If your business requires a physical location, this may be one of your biggest expenses.
• Vehicles and trucks: If you’re selling a service or product that requires shipping, or if you have an on-demand delivery service for customers, vehicles are an important part of your business.
• Point-of-sale systems: These are useful for businesses that accept in-person payments from customers.

Tesla provides a compelling illustration of the significance of key resources in the Business Model Canvas. Central to Tesla’s business model is the Giga Factory, a facility that holds a crucial role in manufacturing a substantial share of the world’s large batteries. This strategic asset affords Tesla a competitive edge by capitalizing on economies of scale, resulting in cost efficiencies throughout the production of their electric vehicles.

Intellectual Key Resources

Your business is smart, and within its material and its people rests a vast collection of proprietary knowledge acquired through years of hard work and investment. How can you leverage what you know? In other words, what are your Intellectual Resources?

Your business model no doubt relies on what your human resources know. It’s important, then, to have a clear view of the members of your organization’s specialties, education, and experience. They are potentially untapped key resources that can add to your value proposition.

Knowledge management must be part of your overall innovation strategy. Your customer databases must be properly protected and utilized. What kind of information do you keep in those customer databases, and are you properly taking advantage of what you know about your customers? Are you similarly tracking other key partners so you can work with them in the most productive ways?

You should also consider how you’re developing your Intellectual Resources. Many successful business enterprises install a corporate university to educate and train their human resources in-house. That’s a cost-effective way of growing from within that isn’t necessarily capital intensive. An exemplary illustration of a Intellectual resource rooted in know-how is the Toyota Production System. This invaluable expertise has been instrumental in driving Toyota’s consistent enhancement of productivity and quality for several decades through continuous process improvement.

Intellectual Key Resources Examples:

• Systems and processes
• Customer knowledge
• Customer databases
• Branding
• Copyrights and patents

How to Determine Your Key Resources

Steps	Description
Step 1	Start with your Value Proposition: Understand what your business offers to customers. Identify the problem your product or service solves and unique benefits provided.
Step 2	Identify Critical Activities: List all essential activities your business must perform to create, produce, and deliver your product or service.
Step 3	Breakdown Resources Needed for Each Activity: Identify the resources required for each critical activity. Resources can be physical, financial, or intellectual.
Step 4	Categorize Resources: Organize identified resources into different categories such as physical, financial, human, intellectual, and network resources.
Step 5	Determine Resource Criticality: Assess the importance of each resource in relation to your business’s value proposition and critical activities. Rank them by importance and potential impact if lost or unavailable.
Step 6	Consider Resource Interdependencies: Analyze how different resources may rely on each other or work together. Recognize resource dependencies for efficient operation.
Step 7	Evaluate Resource Scarcity and Alternatives: Identify scarce resources and explore potential alternatives or backup plans to mitigate associated risks.
Step 8	Assess Resource Competitiveness: Evaluate which resources provide a competitive advantage and make your business stand out from competitors.
Step 9	Plan for Resource Growth and Flexibility: Consider future growth and evolving needs. Ensure key resources can scale and adapt to changing market conditions.
Step 10	Regularly Review and Update: Periodically review and update your list of key resources to align with business goals and adapt to changing environments.

The Interconnection of Key Resources and the Value Proposition

Your Key Resources make your business what it is: only you have that particular collection of people, customer knowledge, and key abilities. Taken together, they encircle how you build your value propositions and conduct your key activities. For a successful business model, the link between key resources and the value proposition is crucial. Key resources are the assets and capabilities that help a company create, deliver, and capture value for customers. The value proposition is the unique value a company offers to its customers through its products or services. Understanding this connection is essential for improving the business model and meeting customer needs effectively. Let’s explore how these two components are interconnected:

1. Value Creation: Key resources are essential for turning the value proposition into a reality.
2. Competitive Advantage: Unique key resources strengthen the value proposition’s market positioning.
3. Value Delivery: Key resources ensure efficient delivery of the value proposition to customers.
4. Resource Allocation: Specific resources are strategically allocated to support the core value proposition.
5. Innovation and Adaptation: Key resources enable companies to innovate and adapt the value proposition.
6. Value Capture: The interplay drives revenue and profits by meeting customer needs effectively.
7. Resource Optimization: Understanding the connection helps optimize resource allocation for efficiency.

Key Resources play an important role in expanding business and value, and so are a big element of The UNITE Value Proposition Canvas. Unlock the potential of your business with The UNITE Value Proposition Canvas Model as a powerful tool that empowers businesses to expand and create value. One of the key elements within this canvas is the recognition of the vital role played by Key Resources in driving business growth. By carefully connecting each customer segment to their most crucial key resource, you’ll gain invaluable insights into the essence of your business model. You can download The UNITE Value Proposition Canvas now and discover the keys to unlocking your business’s true potential for success.

Key Resources and Different Types of Business Models

A business model is a framework within which a company offers products or services to customers. It includes the structure, key resources, and processes that enable a firm to create, deliver, and capture value. The study of business models is called management science.

Businesses use business models to compete in the market and achieve sustainable success. A successful business model is one that can be replicated and can be applied to similar markets.

In general, business models separate businesses into three types:

• Product-driven Business.
• Scope Driven Business.
• Infrastructure Driven Business.

1- Product Driven Business Key Resources

Product-driven businesses are focused on developing a product and then finding the market for it. This is the opposite of the market-driven model where companies focus on what customers want, then develop products to meet those needs.

The product-driven model is generally used by smaller companies that have a specific niche or audience in mind. For example, if you have a product that solves a specific problem for a certain group of consumers, then that’s who you’ll market your product to. This can be particularly effective when you have limited funds but still want to make sure your business has some level of growth potential.

The Key resources of these companies are human and intellectual because they usually are able to access intellectual property and know-how in their specific industry and particular niche.

2- Scope Driven Business Key Resources

The key aspect of Scope Driven Businesses is that they will have a clear idea of who their customers are and what they want from them. This means that they will have to spend time trying to understand their customer’s needs and wants before they even consider creating any products or services for them.

The key resources for such a business include:

• An understanding of what your company does best and how you can differentiate yourself from the competition.
• A clearly defined target customer segment.
• An understanding of who it is that you want to serve and how they think, behave, feel and believe.

3- Infrastructure Driven Business Key Resources

Infrastructure driven business refers to companies that make their earnings by utilizing their infrastructure, For Example:

In the Telecommunications industry, it requires an initial large investment in infrastructure. After that, it will reap the benefits over time with just a small investment to keep its systems up to date,

Amazon is also an infrastructure-driven business because its main function is selling products online. The company can leverage its scale by using economies of scale to drive down costs and increase profits.

The key resources for an infrastructure-driven business are:

• Infrastructure (network, platform, etc.)
• Brand name
• User base

Identifying Your Key Resources

Building a strong business model requires attention to all available key resources. We find it useful to brainstorm lists of resources with a variety of team members. Human resources employees will recognize opportunities that a warehouse employee won’t know about, but the warehouse worker will be really smart about logistical matters.

Your IT specialist has insights into your telecommunications infrastructure while your accountant can identify vendor financing opportunities. Each resource mentioned by your team is analyzed and evaluated for its importance in your overall value proposition.

Reflect on the key resources listed in your brainstorming. How do they contribute to your overall business model, and what is missing? Innovation isn’t just a dream; most businesses can identify increasingly important components to their growth efforts as their plans progress.

Capital Resources in Key Resources

Capital resources are an essential component of key resources for any business or organization. Key resources are the strategic assets that a company possesses to create and deliver value to its customers. Capital resources, specifically, refer to the financial assets, funds, and investments that a company uses to operate, grow, and sustain its business operations. These resources are crucial for several reasons:

1. Investment and Growth: Funds for research, expansion, asset acquisition, and growth opportunities.
2. Infrastructure and Technology: Enables efficient operations through acquiring and maintaining physical and technological assets.
3. Human Resources: Attracts and retains talented employees with competitive salaries and benefits.
4. Marketing and Promotion: Invests in marketing to promote products/services and build brand awareness.
5. Risk Management: Acts as a buffer during economic downturns or crises.
6. Innovation and Adaptation: Fuels research and development for staying relevant in a changing market.
7. Competitive Advantage: Secures better deals and invests in advanced technologies for a competitive edge.
8. Debt Reduction and Stability: Pays off debts and maintains a healthy debt-to-equity ratio.
9. Long-Term Sustainability: Crucial for the organization’s growth and stability in the long run.
10. Investor and Stakeholder Confidence: Signals financial health and fosters trust for delivering returns.

Connecting The Dots: The UNITE Business Model Framework

The business model canvas serves as a powerful tool for entrepreneurs, prompting them to explore a wide array of possibilities. One crucial element that sets it apart is the emphasis on identifying key resources. As an entrepreneur, you possess the freedom to make strategic choices regarding these resources: whether to develop them in-house, opt for rental agreements, or acquire them through purchase. The decisions made in this regard have a profound impact on your overall cost structure. The UNITE Business Model Framework includes a number of canvases that focus on value creation and finding the right business model to meet your customer segment and customer needs. The framework is built to inspire drastic changes that help you find a competitive advantage. Our hope is that your company grows through business model innovation, and so we again encourage you to look deeper into our website and the book.

Here is a summary of the key ingredients of the framework: