Cost Structure

Cost Structure

The final building block focuses on what costs will be incurred as we create and deliver the value propositions to the customer segments. The most common categories of cost are cost-driven and value-driven. Costs can also be described as fixed costs and variable costs. Costs typically should be minimized in every business model but low cost structures are more important to some business models than to others.

What are the most important costs inherent in our business model?
Which Key Resources are most expensive?
Which Key Activities are most expensive?

Is your business more

• Cost Driven (leanest cost structure, low price value proposition, maximum automation, extensive outsourcing)
• Value Driven (focused on value creation, premium value proposition)

Sample characteristics

• Fixed costs (salaries, rents, utilities)
• Variable costs
• Economies of scale
• Economies of scope