Business Model Canvas

What is a Business Model Canvas ?

Got a new business idea, but don’t know how to put it to work?
Want to improve your existing business model? Overwhelmed
by writing your business plan? There is a one-page technique
that can provide you the solution you are looking for, and that’s
the business model canvas.
A business model is simply a plan describing how a business
intends to make money. It explains who your customer base is
and how you deliver value to them and the related details of
financing. And the business model canvas lets you define
these different components on a single page.
The business model canvas is a strategic management tool that lets you visualize
and assess your business idea or concept. It’s a one-page document containing
nine boxes that represent different fundamental elements of a business.
The right side of the canvas focuses on the customer or the market (external factors
that are not under your control) while the left side of the canvas focuses on the
business (internal factors that are mostly under your control). In the middle, you get
the value propositions that represent the exchange of value between your business
and your customers.
The business model canvas was originally developed by Alex Osterwalder and Yves
Pigneur and introduced in their book ‘Business Model Generation’ as a visual
framework for planning, developing and testing the business model(s) of an
organization.
https://www.youtube.com/watch?v=QoAOzMTLP5s&t=66s
https://www.youtube.com/watch?v=CakUeC1sCSs
Why You Need a Business Model Canvas?

The BMC provides a quick overview of the business model and is

devoid of the unnecessary details compared to the traditional
business plan.
The visual nature of the business model canvas makes it easier to
refer to and understand by anyone.
It’s easier to edit and it can be easily shared with employees and
stakeholders.
The business model canvas can be used by large corporations as
well as startups with just a few employees.
It clarifies how different aspects of the business are related to each
other.
You can use a BMC template to guide a brainstorming session on
defining your business model effectively.
How to Make a Business Model Canvas ?

There are nine building blocks in the business model canvas

and they are customer value proposition, customer segments,
channels, customer relationships, revenue streams, key
resources, key partners, key activities, and cost structure.
When filling out a business model canvas, you will brainstorm
and conduct research on each of these elements. The data
you collect can be placed in each relevant section of the
canvas. So have a business model canvas ready when you
start the exercise.
What are the 9 Components of the
Business Model Canvas?
1. Customer Segments
2. Customer Relationships
3. Channels
4. Revenue Streams
5. Key Activities
6. Key Resources
7. Key Partners
8. Cost Structure
9. Value Proposition
Customer segments

These are the groups of people or companies that you are trying to
target and sell your product or service to. Segmenting your
customers are based on similarities such as geographical area,
gender, age, behaviors, interests, etc. It gives you the opportunity to
better serve their needs, specifically by customizing the solution you
are providing them.
After a thorough analysis of your customer segments, you can
determine who you should serve and ignore. Then create customer
personas for each of the selected customer segments.
There are different customer segments
a business model can target and they are;
Mass market: A business model that focuses on mass markets doesn’t group its
customers into segments. Instead, it focuses on the general population or a large group of
people with similar needs. For example, a product like a phone.
Niche market: Here the focus is centered on a specific group of people with unique needs
and traits. Here the value propositions, distribution channels, and customer relationships
should be customized to meet their specific requirements. An example would be buyers of
sports shoes.
Segmented: Based on slightly different needs, there could be different groups within the
main customer segment. Accordingly, you can create different value propositions,
distribution channels, etc. to meet the different needs of these segments.
Diversified: A diversified market segment includes customers with very different needs.
Multi-sided markets: this includes interdependent customer segments. For example, a
credit card company caters to both their credit card holders as well as merchants who
accept those cards.
Use STP Model for segmenting your market and developing ideal marketing campaigns
Customer relationships
In this section, you need to establish the type of relationship you will have with each of your customer segments or how
you will interact with them throughout their journey with your company.
There are several types of customer relationships
Personal assistance: you interact with the customer in person or by email, through phone call or other means.
Dedicated personal assistance: you assign a dedicated customer representative to an individual customer.
Self-service: here you maintain no relationship with the customer, but provides what the customer needs to help
themselves.
Automated services: this includes automated processes or machinery that helps customers perform services
themselves.
Communities: these include online communities where customers can help each other solve their own problems with
regard to the product or service.
Co-creation: here the company allows the customer to get involved in the designing or development of the product. For
example, YouTube has given its users the opportunity to create content for its audience.
You can understand the kind of relationship your customer has with your company through a customer journey map. It will
help you identify the different stages your customers go through when interacting with your company. And it will help you
make sense of how to acquire, retain and grow your customers.
Channels

This block is to describe how your company will communicate with

and reach out to your customers. Channels are the touchpoints that
let your customers connect with your company.
Channels play a role in raising awareness of your product or service
among customers and delivering your value propositions to them.
Channels can also be used to allow customers the avenue to buy
products or services and offer post-purchase support.
There are two types of channels
Owned channels: company website, social media sites, in-house
sales, etc.
Partner channels: partner-owned websites, wholesale distribution,
retail, etc.
Revenue streams
Revenues streams are the sources from which a company generates money by selling their product or service to the
customers. And in this block, you should describe how you will earn revenue from your value propositions.
A revenue stream can belong to one of the following revenue models,
Transaction-based revenue: made from customers who make a one-time payment
Recurring revenue: made from ongoing payments for continuing services or post-sale services
There are several ways you can generate revenue from
Asset sales: by selling the rights of ownership for a product to a buyer
Usage fee: by charging the customer for the use of its product or service
Subscription fee: by charging the customer for using its product regularly and consistently
Lending/ leasing/ renting: the customer pays to get exclusive rights to use an asset for a fixed period of time
Licensing: customer pays to get permission to use the company’s intellectual property
Brokerage fees: revenue generated by acting as an intermediary between two or more parties
Advertising: by charging the customer to advertise a product, service or brand using company platforms
Key Activities

What are the activities/ tasks that need to be completed to fulfill your
business purpose? In this section, you should list down all the key
activities you need to do to make your business model work.
These key activities should focus on fulfilling its value proposition,
reaching customer segments and maintaining customer relationships, and
generating revenue.
There are 3 categories of key activities;
Production: designing, manufacturing and delivering a product in
significant quantities and/ or of superior quality.
Problem-solving: finding new solutions to individual problems faced by
customers.
Platform/ network: Creating and maintaining platforms. For example,
Microsoft provides a reliable operating system to support third-party
software products.
Key Resources

This is where you list down which key resources or the main
inputs you need to carry out your key activities in order to
create your value proposition.
There are several types of key resources and they are
Human (employees)
Financial (cash, lines of credit, etc.)
Intellectual (brand, patents, IP, copyright)
Physical (equipment, inventory, buildings)
Key Partners

Key partners are the external companies or suppliers that will

help you carry out your key activities. These partnerships are
forged in order to reduce risks and acquire resources.
Types of partnerships are
Strategic alliance: partnership between non-competitors
Coopetition: strategic partnership between partners
Joint ventures: partners developing a new business
Buyer-supplier relationships: ensure reliable supplies
Cost structure

In this block, you identify all the costs associated with

operating your business model.
You’ll need to focus on evaluating the cost of creating and
delivering your value propositions, creating revenue streams,
and maintaining customer relationships. And this will be easier
to do so once you have defined your key resources, activities,
and partners.
Businesses can either be cost-driven (focuses on minimizing
costs whenever possible) and value-driven (focuses on
providing maximum value to the customer).
Value propositions

This is the building block that is at the heart of the business

model canvas. And it represents your unique solution (product
or service) for a problem faced by a customer segment, or that
creates value for the customer segment.
A value proposition should be unique or should be different
from that of your competitors. If you are offering a new
product, it should be innovative and disruptive. And if you are
offering a product that already exists in the market, it should
stand out with new features and attributes.
Value propositions can be either quantitative (price and speed
of service) or qualitative (customer experience or design).
https://canvanizer.com/new/business-model-canvas#
https://www.businessmodelsinc.com/about-bmi/tools/business-
model-canvas/