Key activities are important things your business needs to do to run. It’s even more specific than that. Key activities are the key things that you need to do in order to deliver your value propositions to customers. In this lesson, we look at what key activities are within the context of the business model canvas and how to identify them and use them correctly.
Key Activities Video
Here’s a video where I run through what the key activities are and how they fit into the business model canvas
Identifying the key activities that you need for your valuation is important. It’s equally important to consider which key activities you need to do yourself. Changing these can be a great source of business model innovation, especially when faced with business model depreciation and disruptive market changes.
Finding the Key Activities
To find your key activity the best place to start is your value proposition
- What’s are the most important actions to build your product or service?
- What’s most important to distribute your product and service?
- What kinds of activities are important if we want to maintain customer relationships? (Personal Service, Your Office, Sharing Experience etc..)
- What kinds of activities are fundamental to your revenue streams? (Credit Limit, Fast Payment, Trust etc..)
What Key Activities Do Your Value Proposition(s) Require?
First of all look at your value proposition. What are the key things that you need to do to make it work? If you have a florist you need to
- buy the flowers,
- prepare them and
- deliver them.
You also need to manage your promotional channels so that customers come to the shop.
If you run a plastics factory your key activities are likely to revolve about:
- maintaining production,
- keeping the operations safe, and
- working out how to reduce costs and improve productivity to keep pace with market changes.
Here there are many many more things that you could be doing. Key activities are the critical things that you absolutely must do in order to develop and maintain your competitive advantage.
Small businesses and startups will often list tasks or processes at this stage because they are fairly simple. When you look at the business model of large enterprises that may comprise hundreds of companies and tens of thousands of employees the key activities need to be captured at a far higher level of abstraction.
It is just the same as looking at a map at different scales. One of the keys is using the right scale to look at your business in its stage of development
What Do You Have to do Everyday?
What key activities do you have to do every day? This is a really good approach for helping you to figure out what is a key activity and what is not. If you or your staff are doing the same activities every day then there is a good chance that they are critical for the delivery of the value proposition. For a supermarket (looking at the unit rather than the enterprise) restocking is a key activity. When customers go into the supermarket they expect to find goods on the shelves to buy. Without them, the business model falls apart.
For a company like Google the key activities are improving its code base and then examine all the data that it has gathered to help it improve search results and let advertisers sell better-converting adverts.
For a company like IKEA, the key activities are optimising its logistics chain to ensure that every store has all the furniture that people in that market are buying. It also works on reducing the cost of its products so that it can maintain it’s market-leading position in flat packed self-assembled furniture.
Is Your Business Based Around Producing or Making Something?
Where a company is involved in making something the key activities usually centre on getting the raw materials, transforming them and then shipping or distributing the finished products.
A dairy farmer’s key activities are feeding the cows, checking them for health, milking them and then storing the milk ready for collection. Nestle’s key activities (if we look at the Yoghurt product line) are collecting the milk, processing it into yoghurt, packaging it into containers and then sending it out into its distribution network.
Space X’s key activities are all about designing and manufacturing ever larger rockets, building more effective rocket control and telemetry systems and selling orbital delivery services to its customers.
The key activities tend to vary quite widely based on the type of customer and the manufacturing process used. Where manufacturing is continuous or mass sales tend to be a far smaller portion of the key activities as these are delivered by channels. When products are very large or highly customised then sales tend to be far more complex and take longer.
Some examples of business models based around production include
Is Your Business Based Around Solving Problems for Customers?
Companies which are problem-orientated tend to have a different set of activities. These companies are often consultants, lawyers and other types of knowledge workers.
A lawyer, for example, has client consultations, pleading and case law review as his critical activities. Activities such as billing are generally not key activities because these are common for all businesses and provide little competitive advantage.
The deeper message of key activities is that these are the activities that provide a competitive advantage. Case law review is something that all lawyers do. How can this be a key activity/ Can you do it faster? Do you have a better process for doing it? Is one of your key resources a software system that allows you to assess more cases than would be possible or feasible by hand.
Problem-solving business models are knowledge-intensive. The key is understanding, in the business model, how this knowledge is obtained, processed and packaged to solve the customers’ problem.
Is your Business Based Around Building a Platform or Network for Other People to Use?
When we look at platforms, what we are doing is analogous to providing a meeting hall for people to use. If it is a market place the meeting hall has to have tables for sellers to display their wares. It has to have all the facilities that buyers need to make purchases.
When we look at the key activities we can see that there is often a build once-optimise continually process. Facebook, for example, was built once. Mark Zuckerberg only ever built a single Facebook. Over time almost all the original code has been upgraded, expanded, replaced and optimised as the value proposition has changed over time.
It’s tempting to just say build and optimise the platform. That is doing too little work. What is far better is to delve down into the details and say – what is it about the way that we build and optimize the platform that gives us the amazing results?
The other aspect to bear in mind with platforms is that you are often serving two or more customer segments simultaneously using the platform. There will be platform-centric key activities. There will be key activities that are focused on each of the customer segments (or groups of them under certain conditions)
If you want to see some examples of platform key activities have a look at these business models
Deciding the Key Activities in Your Business Model
For most startups, there aren’t normally more than 2-3 key activities. That is mainly because if an activity is key it should be consuming most of a person’s time. Startups have few people and limited time and resources. They can’t as a result have too many key resources. They are unable to deliver on them if they do.
Having lots of key activities is also an indication of sloppy thinking and an inability to prioritise what is really important. Focusing on just a few activities allows you to get really good at them and find a source of competitive advantage. Being very good at some activities is also a great way of defending against threats to your business model.
One way of prioritising is to imagine that no-one has come into the office. You are the only person in there.
What are the first three things that you do?
Those will normally be your key activities
So for example when I worked at a food delivery company as the VP of operations I cared about three things
- Are the chefs cooking?
- Are my delivery riders here?
- Has the website and app sent me lots of customer orders to fulfil
That translated to
- Platform build & Optimisation
in our business model canvas.
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