RUN · Business Foundations / Module 1 of 5Free
M01
What Is the Business Really Selling?
Customers pay for an outcome. Many businesses describe a product and miss what is actually being bought.
Ask a founder what the business does and the answer usually comes back as a product or an activity. That answer is accurate, and it is also incomplete, because it describes the business from the inside. Customers see it from the outside, and what they see is a problem that has been solved, or not. This first module asks the owner to stand where the customer stands and to describe the business from there.
You will
- Describe your business in terms of the customer's job to be done, not your product
- Identify the few activities and resources that make the model work
- See how value created becomes revenue, and where it leaks
- Separate the customers you serve well from the ones you merely serve
By the end you will have
- Evidence from at least 15 customers on what they are trying to achieve and why they choose you
- An activity test showing your value leaks and the activities you can cut
- A one-page business model written from the customer's side, tested with customers
- A one-sentence description of your business in the customer's language
Time to apply: two to three weeks elapsed (mostly customer conversations), and half a day of analysis
The case · Hardware distributor, 40 people
The distributor who wanted more stock
Bidii Building Supplies distributes cement, steel, roofing and plumbing materials from a yard on the edge of Mombasa. It has 40 staff, two delivery trucks and about 600 active customers: building contractors, hardware shops and a growing number of individuals building their own homes. Revenue last year was KES 380 million. Net profit was about KES 7 million, under 2% of sales.
The founder, Hassan, believes the problem is competition. Two new distributors have opened nearby and both advertise lower prices. His plan is to borrow KES 25 million to add tiles, sanitary ware and paint, so that customers can 'buy everything in one place', and to match competitors' prices on cement and steel.
Before he signs the loan, his daughter, who joined the business after university, phones twelve of their largest contractor customers and asks one question: why do you buy from us? Not one of them mentions price or range. Nine of them mention the same thing: Bidii gets materials to site the same day, usually within four hours, and a site that stops for lack of cement costs a contractor KES 60,000 to 90,000 a day in idle labour. Three of them add that deliveries have become less reliable this year.
- Revenue
- KES 380 million
- Gross margin
- 11%
- Net profit
- Under 2% of sales
- Contractor share of revenue
- About 60%
- Deliveries on time last quarter
- 71% (nobody measured it before)
- Delivery charge to customers
- None: it is 'free'
Should Hassan borrow to widen the range and cut prices, or rebuild the business around reliable delivery and charge for it?
Before you read on: form your own view
- 1.What do you think Bidii's contractor customers are actually paying for?
- 2.What would happen to Bidii's margin if it matched competitors' prices and added three new product ranges?
- 3.What information would you want before deciding where to put KES 25 million?
Write your answer down. We return to this case after the worked example.
Step 01 / 13
The business problem
Founders tend to describe their business by what they make or do: we sell cement, we run a clinic, we build software. Customers describe the same business by what it solves for them. The contractor says his site did not stop. The parent says her child was seen today. The finance manager says her team no longer re-types orders. These are different descriptions of the same transaction, and the difference matters more than it first appears.
When the owner's description and the customer's description diverge, the business begins to aim at the wrong target. Pricing is set against the product rather than the outcome. Marketing talks about features the customer takes for granted. Operations invest in capabilities nobody is paying for, while the thing customers actually value is left to chance because no one has named it.
Bidii's situation is common. The owner describes the business by its stock: cement, steel, roofing. The contractor describes it by its outcome: my site did not stop. Because the business has never written down what customers are buying, the thing they value most, same-day delivery, is treated as a cost to be minimised rather than a product to be managed and priced. It is not measured, not improved and not charged for, and it is quietly getting worse.
Meanwhile, the owner's strategy is aimed at what customers did not mention: range and price. If he follows it, he will spend money competing on the one dimension where new entrants are strongest, while neglecting the one where Bidii is hard to copy.
Why it matters
Almost every later decision in this curriculum rests on the answer to this module's question. What to charge, whom to hire, which system to buy and where to grow all depend on knowing what the customer is paying for and why they choose this business over the alternatives. The alternatives include competitors, but they also include doing the work themselves, or doing nothing at all.
A business that cannot answer the question clearly tends to compete on price by default. Price is the one argument available to a business that has not identified any other. Once that happens, margins narrow, the owner works harder for less, and the real source of customer loyalty remains unmanaged.
What it costs when it is left alone
- Margin is given away to match prices that customers were not choosing on in the first place.
- Investment goes into capabilities nobody is paying for, while the real source of loyalty is left unmanaged.
- The service customers value most deteriorates because it has no owner, no measure and no budget.
- Marketing and sales talk about features customers take for granted, so the business sounds like every competitor.
- When a competitor eventually matches the hidden advantage, the business has no idea what it has lost or why customers are leaving.
Step 02 / 13
The decision
What is the business really selling, and should it be organised and priced around that, or around what it has always sold?
The decision is hard because the owner's description of the business is not wrong. Bidii does sell cement. The question is whether cement is what the customer pays for or merely what carries the real product. Answering it means admitting that some activities the business has invested in matter less than assumed, and that something treated as an overhead is in fact the reason customers come back. It also requires evidence from customers, which most owners have never systematically collected.
Keep the current model
Compete on range and price as before. Suitable only if customers genuinely choose on price and you have a cost advantage.
Reorganise around the outcome
Make the thing customers value an explicit product: owned, measured, improved and priced.
Split the offer
Serve customers who value the outcome with a premium offer, and price-driven customers with a leaner, cheaper one.
Investigate further
If customer evidence is thin or contradictory, gather more before committing money in either direction.
Step 03 / 13
The concept
Every customer comes to a business with a job to be done: a problem they need solved or an outcome they need to achieve. The contractor's job is to keep the site working and finish on time. The cement is the means. When you describe your business in terms of the customer's job, three things become clear: who you really compete with, what you should measure, and what you can charge for.
The customer always has alternatives, and they are wider than competitors. The contractor could keep a larger stock on site, use a different supplier, collect materials himself, or accept delays. Each alternative has a cost to the customer. Your value is the difference between what you deliver and what the next-best alternative would cost them, in money, time, risk and effort.
A business model is the short chain that connects all of this: who the customer is, the job they need done, what you deliver, why they choose you over the alternatives, the few activities and resources that make it possible, and how the value you create turns into revenue you actually collect. Writing it on one page exposes the gaps: value created but not charged for, activities performed that nobody values, and dependencies nobody has acknowledged.
- Job to be done
- The outcome the customer is trying to achieve, described in their words, before they think about your product.
- Next-best alternative
- What the customer would do if you did not exist, including doing it themselves or doing nothing.
- Value proposition
- The specific reason a defined customer chooses you over the next-best alternative.
- Critical activity
- An activity that, if you stopped it, would make customers leave.
- Value leak
- Value the customer receives that the business neither measures nor charges for, or value promised that is not reliably delivered.
- Served well vs merely served
- Customers whose job your model is designed for, versus customers you sell to but whose needs your model does not fit.
Step 04 / 13
The framework
Work from the outside in: start with the customer and their job, and only then describe what the business does. Each box answers one question.
The KSL one-page business model
01
Customer
Who exactly, by segment
02
Job to be done
The outcome they need
03
Alternatives
Including doing nothing
04
Why us
The value proposition
05
Critical activities and resources
What makes it possible
06
Revenue and leaks
How value becomes cash
| Box | The question it answers | Test of a good answer |
|---|---|---|
| 1. Customer | Who do we serve best? | Specific enough that a salesperson would know whom to call |
| 2. Job to be done | What problem do they have before they come to us? | Written in the customer's words; contains no mention of our product |
| 3. Alternatives | What would they do without us? | Includes doing it themselves and doing nothing, with the cost of each |
| 4. Why us | Why do they choose us over those alternatives? | Confirmed by at least five customers; a competitor could not claim it equally |
| 5. Critical activities | What must we do well for that to stay true? | If we stopped it, customers would leave |
| 6. Critical resources and dependencies | What people, assets, suppliers or relationships make it possible? | Names single points of failure honestly |
| 7. Revenue model | How does the value become revenue? | Shows what we charge for, and on what basis |
| 8. Value leaks | Where is value created but not captured, or promised but not delivered? | Each leak has an estimated cost |
Two tests make the model useful rather than decorative. The first is the customer-language test: if you read box 2 and box 4 to a customer, would they recognise themselves? The second is the stop test: for every major activity the business performs, ask whether customers would leave if it stopped. Activities that fail the stop test are candidates for simplification. Activities that pass it but are not charged for are value leaks.
Question it
Charged for but not valued. Expect price pressure; simplify or bundle.
Core product
Valued and paid for. Protect quality and measure it.
Cut or simplify
Neither valued nor paid for. Pure cost. Reduce it.
Value leak
Valued but given away. Measure it, improve it, and find a way to be paid for it.
← Customers would not leave if we stopped
Customers would leave if we stopped →
The rule of thumb
If your answer to 'why do customers choose us?' is price, check whether you really have the lowest costs. If you do not, price is not your advantage; it is the absence of one you have identified.
Step 05 / 13
Diagnostic questions
Answer these honestly, before you speak to customers. Then compare your answers with what customers tell you.
The questions this module must answer for your business
- 01What problem does the customer have before they come to us?
- 02Why do they choose us over the next-best alternative, including doing nothing?
- 03Which activities, if we stopped them, would make customers leave?
- 04Where does the model depend on one person, supplier or customer?
How you describe the business today
- How do you describe the business to a stranger in one sentence? Does it mention a product or an outcome?
- How would your three largest customers describe what you do for them? Have you asked them?
- What do your sales materials, website and quotations emphasise?
What customers value
- What was happening in the customer's business or life just before they contacted you?
- What would your best customers do if you closed tomorrow? What would that cost them?
- Which complaints do you hear most often, and what do they tell you about what customers expect?
- When you have lost a good customer, what reason did they give, and what was the real reason?
How the model works and where it leaks
- Which activities do you perform that customers value but do not pay for?
- Which activities cost you significant time or money but would not be missed?
- Where does the model depend on one person, one supplier, one customer or one asset?
- Which customers do you sell to but serve badly because the business is not designed for them?
Step 06 / 13
Worked example
Hassan's daughter extended her twelve calls to 25 interviews across three customer groups, and the management team spent an afternoon on the activity test. All amounts are in KES.
Bidii Building Supplies: rewriting the model from the customer's side
1.Separate the customer groups
Segment Share of revenue Gross margin Typical order Interviews Building contractors 60% 12% Delivered to site, urgent, weekly 12 Hardware shops (resellers) 28% 8% Collected, bulk, price-driven 8 Self-builders 12% 15% Delivered, occasional, need advice 5 2.Record what each group is trying to achieve and why it chooses Bidii
Segment Job to be done (their words) Next-best alternative Why they choose Bidii Contractors 'Keep my site working; never stop for materials.' Hold more stock on site (cash, theft) or accept delays (KES 60–90k per idle day) Same-day delivery, usually within four hours; driver unloads where needed Hardware shops 'Restock at the lowest landed cost.' Any distributor; collect themselves Price, and a long relationship with Hassan Self-builders 'Build my house without being cheated or making expensive mistakes.' Local hardware shop; a fundi buying on their behalf Advice on quantities, honest weights, delivery to remote plots Range was mentioned by two of 25 customers. Price was mentioned by all eight hardware shops and none of the contractors.
3.Run the activity test
Activity Annual cost Would customers leave if we stopped? Do we charge for it? Quadrant Same-day delivery to site 14.0m (trucks, drivers, fuel) Yes: contractors and self-builders No Value leak Holding 2,400 product lines Stock of 46m; 900 lines sold under 10 times a year No (2 of 25 mentioned range) Through margin Question it Quantity advice for self-builders Part of two sales staff's time Yes: self-builders No Value leak Credit to contractors (30 days) About 2.1m in financing Some would No Value leak Price matching for resellers Margin of 8%, falling Resellers would It is the price Core for resellers only 4.Write the one-page model for the main segment
Box Bidii, contractor segment Customer Small and mid-sized building contractors within 40 km, running two to ten sites Job to be done Keep every site working; never lose a day to missing materials Alternatives Hold buffer stock on site (ties up cash, theft risk) or accept delays costing KES 60–90k per idle day Why us Materials on site within four hours of the call, reliably, with the right quantities Critical activities Order taking by phone and WhatsApp, stock accuracy on core lines, dispatch planning, on-time delivery Critical resources Two trucks (a single point of failure), two experienced drivers, the dispatch clerk's knowledge of sites Revenue model Margin on materials only; delivery and urgency given away Value leaks Delivery cost of KES 14m unrecovered; on-time rate fallen to 71%; nobody owns delivery performance 5.Test the two strategies against the model
Plan A: widen range, match prices Plan B: organise around reliable delivery Investment KES 25m borrowed for stock Third truck on lease (about KES 3.6m a year); dispatch board; drop 900 slow lines, releasing about KES 8m of stock Effect on margin Price matching on cement and steel cuts gross margin by an estimated 1.5 points on contractor sales (about KES 3.4m) A 2% 'site guarantee' price on contractor sales (about KES 4.6m), with a credit if delivery is late What it builds A range competitors can copy with a loan A measured, owned delivery promise that is hard to copy without trucks, dispatch skill and site knowledge Risk More debt, more slow stock, same unreliable delivery Contractors may resist the price; mitigated by guarantee and measured performance
The lesson
Bidii was not selling cement. It was selling uninterrupted building sites, and giving that away while it deteriorated. Once the business was described from the customer's side, the plan changed from borrowing to compete on what customers did not value to investing modestly in what they did, and being paid for it.
Back to the case: The distributor who wanted more stock
Hassan did not take the KES 25 million loan. He leased a third truck, appointed the dispatch clerk as delivery owner with an on-time target of 95%, and started publishing each contractor's on-time record on their monthly statement.
Three months later, with on-time delivery at 93%, Bidii introduced a 'site guarantee' for contractors: a 2% higher price on delivered orders, and a 5% credit on any order delivered more than an hour late. Two contractors left for cheaper suppliers; most stayed, and three new ones came from referrals. Resellers continued to be served on collection, at reseller prices, without the guarantee.
If you formed an initial view that the problem was competition and the answer was range or price, notice what changed it: evidence from customers about the job they need done, and a test of which activities they would miss.
Compare this with the view you wrote down at the start. What changed, and why?
Step 07 / 13
Apply it to your business
Now do the same for your business. Allow two to three weeks elapsed (mostly customer conversations), and half a day of analysis.
Gather this first
- Revenue and gross margin by customer group for the last 12 months (even approximate)
- A list of 15 to 25 customers to speak to, across your main customer groups, including some you have lost
- A list of your main activities with a rough annual cost for each
- Your current sales materials, website text and a recent quotation
- 1
Group your customers
Divide customers into two to four groups whose needs differ. Note each group's share of revenue and approximate margin.
- 2
Speak to customers
Ask open questions: what was happening before you called us? What would you do if we did not exist? Why us rather than the alternative? What would make you leave? Record their words, not your summary.
- 3
Fill in the evidence table
Enter each interview in part A of the worksheet. Look for the job, the alternative and the reason that appear most often in each group.
- 4
Run the activity test
List your main activities in part B. For each, decide whether customers would leave if you stopped it and whether you charge for it.
- 5
Write the one-page model
Complete part C for your main customer group. Use the customers' words in boxes 2 and 4.
- 6
Identify the gaps
Compare the model with how you currently price, measure and invest. Name the largest value leak and the activity that costs most for the least value.
- 7
Decide
Choose whether to keep the current model, reorganise around the outcome, split the offer, or investigate further.
Step 08 / 13
Worksheet
Three parts: the customer evidence, the activity test, and the model itself. Your entries are saved in this browser.
One-page business model
ACustomer evidence
One row per customer conversation. Use the customer's own words.
| Customer | Group | What they were trying to achieve | Their next-best alternative | Why they chose us | What would make them leave | Price sensitivity | Remove |
|---|---|---|---|---|---|---|---|
BActivity test
List the activities that consume significant money or time. The quadrant tells you what to do with each.
| Activity | Annual cost (estimate) | Would customers leave if we stopped? | Do we charge for it? | Quadrant | What this means for us | Remove |
|---|---|---|---|---|---|---|
| Total | – |
- Total cost of listed activities
- –
- Activities listed
- 0
CYour one-page business model
Complete this for your most important customer group. If two groups need very different models, complete it twice.
Step 09 / 13
Interpret your results
A completed worksheet is evidence, not a conclusion. Read it before you decide.
- 1.Did customers describe your business in the same way you do? Where did their words differ most from yours?
- 2.Which reason for choosing you appeared most often in each group? Is it something you measure today?
- 3.Is your largest value leak large enough to change your profit materially if you captured part of it?
- 4.Which of your current investments or plans is aimed at something customers did not mention?
- 5.Which customers do you merely serve? What would happen if you served them differently or stopped?
- 6.What surprised you most, and what evidence would you need to be confident it is true?
- 7.If a competitor copied your most important advantage tomorrow, would you know? How?
| If you find… | It usually means… |
|---|---|
| Customers cite reliability, speed or advice; you compete on price | Your real product is a service you give away. Measure it before you price it. |
| Customers in different groups give completely different reasons | You are running two businesses in one. Consider separate offers, prices and service levels. |
| Most customers cite price and you do not have the lowest costs | You have not yet found a defensible advantage. Investigate what the best customers value, or work on cost. |
| A critical activity depends on one person or one asset | Your advantage is fragile. Document it and build cover before you promote it. |
| Many activities fall in 'cut or simplify' | Complexity has grown without purpose. Simplifying releases cash and capacity for what matters. |
| You could not find five customers who agree on why they choose you | Your model is not yet clear. Do not invest heavily until it is. |
Step 10 / 13
Make the decision
Decide how the business will treat what customers are really buying. Record the decision and the evidence behind it.
Keep the current model
Choose this whenCustomers confirm they choose on what you already sell and charge for, and your costs support it.
What followsProtect what works; fix only the value leaks you found.
Reorganise around the outcome
Choose this whenCustomers value an outcome you deliver but do not own, measure or price.
What followsName an owner, set a measure, improve reliability, then introduce pricing for it.
Split the offer
Choose this whenCustomer groups value fundamentally different things.
What followsDesign a premium offer for outcome-driven customers and a lean offer for price-driven ones.
Simplify
Choose this whenSignificant cost sits in activities customers would not miss.
What followsCut or reduce those activities and redeploy the cash and people.
Investigate further
Choose this whenEvidence is thin, contradictory or from too few customers.
What followsComplete at least 15 more conversations before committing money.
Your decision record
Step 11 / 13
Action plan
Most businesses take a quarter to move from insight to a changed offer. Edit the suggested actions to fit your decision.
Implementation cycle: 30 / 60 / 90 days
| Action | Owner | Deadline | Expected result | Resources needed | Measure of success | Review date | Remove |
|---|---|---|---|---|---|---|---|
| Days 1–30: Evidence | |||||||
| Days 31–60: Own and measure | |||||||
| Days 61–90: Capture the value | |||||||
Step 12 / 13
Management routine
What customers buy changes slowly but certainly. These habits keep the model honest.
Weekly
Review the measure of the outcome customers value
- Did we deliver the promise this week?
- Where did we fail, and why?
Monthly
Speak to three customers, including one who has gone quiet
- Has what they need changed?
- What alternative are they considering?
Quarterly
Review value leaks and the activity test
- Have we captured any leak?
- Has a new activity crept in that nobody values?
Annually
Rewrite the one-page model before the budget
- Is the model still true?
- Does next year's investment match what customers value?
Step 13 / 13
Final output
By the end of this module you should have
- Evidence from at least 15 customers on what they are trying to achieve and why they choose you
- An activity test showing your value leaks and the activities you can cut
- A one-page business model written from the customer's side, tested with customers
- A one-sentence description of your business in the customer's language
- A recorded decision on how the business will be organised and priced around what customers buy
- A 90-day plan with an owner and a measure for the outcome customers value most
When the problem is bigger than this module
Rewriting a business model is straightforward to describe and hard to carry through: it changes pricing, roles, measures and sometimes the customers you pursue. If the analysis shows you are running two businesses in one, or that your advantage depends on a person or asset you cannot easily replace, that is where a Growth Partnership helps, working the change through pricing (M50), segmentation (M45) and competitive strategy (M51).