Color coding separates different parts of a business model so you can see them clearly. Google's example shows how to distinguish between users and advertisers, their value propositions, channels, and revenue streams. You can also use colors to compare current versus future models or break out SWOT elements.
Chapters
Let's look at a best practice of business modeling, and that is color coding. So I'll illustrate this at the example of Google. So what does Google offer us? Let's search online to basically you and me. So I'll call this users. What's the channel they use to reach us? It's google.com. Do we pay for that? No, it's free. So Google makes money not from us users, but they make money from the advertisers, which is a different customer segment. And that's why we will use a different color. We'll turn it into blue. And that will allow us to distinguish everything that's related to the advertisers, for which we'll make blue sticky notes. So what's the value proposition to advertisers? It's search ads. And what's the channel Google uses to reach advertisers? It's AdSense. And what's the revenue stream? They earn money from auctioning off the search terms. So by using color coding, we can immediately see everything related to the advertisers and and everything related to the users. So color coding basically allows you to get a clearer picture of your business model. There are other ways how you can use it. One would be coding your existing business model in one color and coding your future business model or your desired business model in another color. You could also imagine sketching out your business model and then doing a SWOT analysis where you will do your strengths and weaknesses in different colors than your business model. So basically, color coding allows you to get a clearer picture of what's going on.
