When filling out the Business Model Canvas, the Key Resources section indicates the things you need to deliver your value proposition to your customer segment. For instance, if you own a coffee shop, then coffee is obviously going to be a key resource! However, you need to look at your key resources from different angles—what are all of the resources you need need to support your channels or to manage your revenue?
(Is some of this lingo unfamiliar? To catch up on the rest of my Business Model Canvas series, view the following links: Value Proposition, Customer Segment, Channels, Customer Relationships, Revenue Streams, Key Partners.)
Key Resources are the necessary products and/or services allow you to run your business.
Key resources are managed in house. If you are working with a Key Partner who ships your products, then a Key Resource may be the technology and the employees you need to ensure orders flow between your company and the Key Partner. To learn what resources are key, ask yourself: What do I need in our office to make the other pieces of the business work? It could be technology; it could be accounting. Key Resources can be physical, intellectual, human, financial and relational. It all depends on your business model!
Key Resources are the items in your vertical integration.
Vertical integration is when a company owns the supply chain for its product. So, key resources in your vertical integration are products or services that you have complete ownership over. Consider an apple orchard as an example. If you have an applesauce business and own an apple orchard, you can harvest all of the fruit because you own the orchard. You manage the orchard because it’s a Key Resource. You cook and prepare the apples in your factory kitchen, which makes the factory kitchen a key resource. Then, you use your trucks to ship the applesauce to the grocery stores, so your trucks are another key resource. Lastly, you collect the revenue in your office from those grocery stores and process it with the technology you own, which makes that processing software another key resource.
In that example, your entire operation is vertically integrated. You own everything. The areas where you are vertically integrated are typically where your key resources are to be found. Here, you own the materials, you own the factory, you own the trucks, you own the software. And it’s all in house.
Key Resources can also be labor or goods acquired from other companies.
Another way to run a business is to be horizontally integrated. Horizontal integration is when a business acquires another business that’s operating in the same industry. During one trip to New York, I saw a massive front-end excavator doing construction. I mean it was a monster! At the top of this huge machine was a man, comparatively tiny, who controlled the whole operation. That is a perfect picture of horizontal integration. A company can run a large operation with a few key resources. In this case, the key resource would be the tractor and the construction worker. Though the construction company didn’t ‘own’ the employee, they ‘horizontally’ partnered with him and bought his labor. They manage they work from their office, performing Key Activities utilizing their Key Resources. Then, they contract additional activities out to Key Partners. Someone manufactures while another sells.
So, the Key Resources could be everything you need for vertical integration, or they could be the few things you need to be horizontally integrated. And as you scale, your resources will possibly change and evolve. Your Key Resources typically support your Key Activities, and all of that typically works with your Key Partners to supply your Value Proposition.
In summary, Key Resources:
- Might be physical, intellectual, financial, etc.
- Could come in the form of factories, ATM’s, intellectual property, people, trucks, software, and/or systems
- Can be people
- Drive costs, so they must be managed!