The Left Side Decides What It Costs
The four left-side blocks describe the machine that delivers your promise and what running it costs. Two companies can make the same promise and survive or fail on this half alone.
The blocks form a chain. The activities you commit to decide the resources you need, the resources you will not own become partnerships, and all three land in the cost structure that the right side has to pay for.
Blockbuster and Netflix both promised a film at home tonight. At its 2004 peak Blockbuster ran about 9,000 stores, and their rent and staff had to be paid however many people walked in. Netflix rented DVDs by mail on a subscription, using the postal service as its partner, and in 2007 added streaming, where one more viewer of a film it already offers costs little extra. Blockbuster filed for bankruptcy in 2010.
When you fill in your left side, ask of each cost whether it grows with every customer or stays put as you add them.
Two tutoring businesses charge the same price for the same subjects. One rents a learning centre; the other teaches online from home. Which block is most likely to decide which one survives a slow year?
Cost Structure, because the centre's rent is due however many students enrol
Value Propositions, because in-person teaching is a better promise
Customer Segments, because online students are a different group
Channels, because the centre gets more passing trade
The promise, price and students are the same, so the right sides match. The rented centre is a fixed cost that is due whether enrolment is high or low, while the online tutor's costs fall with demand. The difference lives in the cost structure.