•If it is a hobby, how can you turn it into a

Abstract
business?
In my previous Article “How Innovation is
Easy” and especially in last section “WHY Introduction
INNOVATION IN SMALL FIRMS IS
SUBSTANTIALLY DIFFERENT THAN IN A business model describes how a company
LARGE COMPANIES?” I mentioned the six creates, delivers and captures value.
Proponents of open innovation and one of Everyone has his or her unique way of
them was Business Model Canvas. So here viewing the business model. During
we will discover and approach more and discussions about this, there has been an
more about Business Model Canvas (BMC). increasing need for a uniform template to
What that mean BMC and What is using for? define and discuss the business model. This
template should be applicable to new and old
For small businesses, it is important to businesses alike, across industries.
analyses all situations carefully before taking
any decision. That way, there will be A business model is a description of how
fewer your business intends to operate and make
chances of making mistakes and designing money. Sounds simple, RIGHT?
strategies that will not work. To help these
businesses, several
available like SWOTanalytical
Analysistools are
Canvas, The Business Model Canvas is a strategic
LEAN Canvas, FEEDBACK management and lean start-up template can
Canvas, Open Innovation Canvas, HR be used as aid for developing a new, or
Innovation CANVAS, PITCH PLANNER analyzing and mapping an existing business
CANVAS, PROJECT CANVAS, and other model of a company. It is a visual chart with
analysis tools that we will make you discover elements describing a firm or product's value
them in next articles. Moreover here we will proposition, infrastructure, customers, and
show you and explain you in details the finances. It assists firms in aligning their
WHY, HOW and WHAT of Business Model activities by illustrating potential trade-offs.
Canvas. However, before you start using a It gives a graphic representation of a number
Business Model Analysis template and of variables that show the values of the
check out pervious analysis examples, it is organization.
important to understand what this analytical
method is all about. BMC helps you answer The Business Model Canvas was initially
two important questions: proposed and developed by Alexander
Osterwalder based on his earlier work on
• Is this a business or a hobby? Business Model Ontology. Since the release
of Osterwalder's work in 2008, new canvases
for specific niches have appeared.
Business model canvas has 9 building blocks Segmentation (CS), Cost Structure (C$)
that are Key Partners (KP) , Key Activities and Revenue Streams (R$).
(KA) , Key Resources (KR), Value
Proposition (VP), Customer Relationships
(CR), Channels (CH), Customer

objectives. It helps to take into consideration

The information provided by the canvas of all the company inputs and creating
regarding the products, services, resources valued
and the partners of the company helps in the output the customers. It is affected by the
analysis of the processes and functions for external world and other processes other than
the achievement of organizational goals the business itself.
and
What is a business model? How does it relate destination. The planning is how you are
to a business plan? Alternatively, better yet, going to get there.
business planning? They live together. They
synchronize. Your business planning makes How to Build Business
your business model happen. And your
business plan is a regular step in your Model Canvas?
The illustration below shows how the nine
Business planning. It is not business plan vs.
elements of the Canvas are integrated with
business model, the way some people seem
each other. As mentioned before, we will
to think. The business model is like a
begin to explore the right dimension of the

Canvas first.
 of the “Channels” or “Distribution
Channels” block, which includes items such
as the delivery, blog, newsletter, customer
service and webinar. These channels
distribute and deliver the value propositions
to the customers. How are these propositions
promoted, sold and delivered? Why? Is it
working?

Next, we should understand the “Customer

Relationships” block. In other words, we
should figure out how to strengthen customer
involvement with the business. To give a
few examples: business development
partnership, customer retention, customer
We start by putting the block support, online chat and feedback. How do
“Customer Segments” in place, which you interact with the customer through their
maps who we are targeting to provide ‘journey’?
value and who are the potential The last right block is the “Revenue
customers to our desired objectives. Stream,” which translates to the path to
For instance: Who are the customers? generate revenue based on the recommended
What do they think? See? Feel? Do? value proposition. Examples include a
monthly subscription, direct sale, paid ads
In the second block “Value Proposition,” and license. How does the business earn
ideas are generated to fulfill the needs of the revenue from the value propositions?
potential customers, while always keeping in
mind the business objectives that are driving
this product or service. Examples of value
propositions include cost reduction, agility,
convenience, customization and decision
support. What is compelling about the
proposition? Why do customers buy, use?
The Customer Segments and Value
Propositions blocks are the main elements
that will lead the remaining components of
the Canvas.

Once we determine the potential customers

and value propositions, it is necessary to
think about how we can link these two
fundamental components. This is the purpose
In the left dimension of the Canvas, we can Some partners (outsourcing companies, for
find more direct and objective definitions example) can provide machines to drive
that sustain the components mapped in the towards any key resource. Other types of
right dimension. partnerships can supply contractors or
execute some of the key activities, such as
monitoring the social networks. What can
the company not do so it can focus on its
Key Activities?

Representing the required costs to maintain

and build the proposed solution is performed
by the “Costs Structure” block, which
indicates, for example, the amount of money
necessary to pay the machines’
maintenance, contractors, OPEX,
infrastructure and resources. What are the
business’ major cost drivers? How are they
linked to revenue?
What is the relation
between Business Model
Canvas and StartUPs Fail?
The “Key Resources” refer to the resources
directly associated with the business model
operation, such as teams, machines,
investments and technology platforms. What
unique strategic assets must the business
have to compete?

The “Key Activities” are all activities

needed to meet the value proposition, build
channels and keep relationships. We might
consider managing the social networks (a
powerful mechanism to strengthen the
customer relationship) or building a web
store. What uniquely strategic things does
the business do to deliver its proposition?

“Key Partners” are people who contribute Depending on whom you ask, somewhere
to both key activities and key resources. between 50% and 80% of businesses fail
within their first five years. There are plenty
of reasons why that happens, but they all
come down to one thing: lack of profitability.
Whether or not you make a profit depends Infrastructure
on
how well you design and execute all the ·Key Activities: The most important
activities and resources that make up your activities in executing a company's value
business—your business model. proposition. An example for BIC, the pen
In his, book Business Model Generation: A manufacturer, would be creating an efficient
Handbook for Visionaries, Game Changers, supply chain to drive down costs.
and Challengers, business theorist
Alexander Osterwalder writes, “An ·Key Resources: The resources those are
organization must make a conscious
necessary to create value for the
decision about which segments to serve and
customer. They are considered an asset to a
which segments to ignore.” It is vital to
company, which are needed in order to
prioritize your efforts because there are so
sustain and support the business. These
many ways to serve or ignore your
resources could be human, financial,
company’s different segments, and every
physical and intellectual.
dollar spent on one-project takes away from
another project. One of the best ways to
· Key Partner: - Partner Network- In
weigh competing priorities is to use the
order to optimize operations and reduce risks
Business Model Canvas, a strategic
of a business model, organization usually
management and lean startup tool based on
cultivates buyer-supplier relationships so
years of research by Osterwalder. It
they can focus on their core activity.
condenses strategic planning onto a single
Complementary business alliances also can
page and covers nine areas divide into 4
be considered through joint ventures,
majors: ·Infrastructure, Offering, Customers,
strategic alliances between competitors or
Finances:
non-competitors.

Offering
·Value Propositions: The collection of
products and services a business offers to
meet the needs of its customers. According
to Osterwalder, (2004), a company's value
proposition is what distinguishes itself from
its competitors. The value proposition
provides value through various elements
such as newness, performance,
customization, "getting the job done",
design, brand/status,
price, cost reduction, risk mutually dependent customer
reduction, accessibility, and segment. A credit card company will
convenience/usability. provide services to credit card
The value propositions may be: holders
while simultaneously assisting
1. Quantitative – price and efficiency merchants who accept those credit
2. Qualitative – customer cards.
overall experience and ·Channels: A company can deliver
outcome its value proposition to its targeted customers
3. Customers through different channels. Effective
· Customer Segments: To build an channels will distribute a company’s value
effective business model, a company must proposition in ways that are fast, efficient
identify which customers it tries to serve. and cost effective. An organization can
Various sets of customers can be segmented reach its clients either through its own
based on the different needs and attributes to channels (store front), partner channels
ensure appropriate implementation of (major distributors), or a combination of
corporate strategy meets the characteristics both.
of selected group of clients. The different
types of customer segments include: ·Customer Relationships: To ensure
the survival and success of any businesses,
1. Mass Market: There is no specific companies must identify the type of
segmentation for a company that relationship they want to create with their
follows the Mass Market element as customer segments. Various forms of
the organization displays a wide view customer relationships include:
of potential clients. e.g. Car
2. Niche Market: 1. Personal
form Assistance:
of Assistance in a
employee-customer
Customer
segmentation based on specialized interaction. Such assistance is
needs and characteristics of its performed either during sales, after
clients. e.g. Rolex sales, and/or both.
3. Segmented: A applies 2. Dedicated Personal Assistance: The
company additional within most intimate and hands on personal
segmentation In assistance where a sales
existing customer
segmented segment.
situation, the
the business representative is assigned to handle
may further distinguish its clients all the needs and questions of a
based on gender, age, and/or income. special set of clients.
4. Diversify: A business serves multiple 3. Self Service: The type of relationship
customer segments with that translates from the indirect
different interaction between the company and
needs and characteristics. the clients. Here, an organization
5. Multi-Sided Platform / Market: For a provides the tools needed for the
smooth day-to-day business
operation, some companies will serve
 customers to serve themselves easily 1. Fixed Costs – Costs are unchanged
and effectively. across different applications. e.g.
4. Automated Services: salary, rent
A system similar to 2. Variable Costs – These costs vary
self-service as it has but
personalized the ability to depending on the amount of
more
identify individual customers and production of goods or services. e.g.
his/her preferences. An example of music festivals
this would be Amazon.com making 3. Economies of Scale – Costs go down
book suggestion based on the as the amount of good are ordered or
characteristics of the previous book produced.
purchased. 4. Economies of Scope – Costs go down
5. Communities: Creating a community due to incorporating other businesses
allows for a direct interaction among which have a direct relation to the
different clients and the company. The original product.
community platform produces a
scenario where knowledge can be · Revenue Streams: The way a
shared and problems are solved company makes income from each customer
between different clients. segment. Several ways to generate a
6. Co-creation: A personal relationship revenue stream:
is created through the customer's direct
input in the final outcome of the 1. Asset Sale – (the most common type)
company's products/services. Selling ownership rights to a
physical good. e.g. retail
Finances corporations
2. Usage Fee – Money generated from
·Cost Structure: This describes the most the use of a particular service e.g.
important monetary consequences while UPS
operating under different business 3. Subscription Fees – Revenue
generated by selling a continuous
models. A company's DOC.
service. e.g. Netflix
 Classes of Business Structures: 4. Lending/Leasing/Renting – Giving
exclusive right to an asset for a
1. Cost-Driven – This business model particular period of time. e.g. Leasing
focuses on minimizing all costs and a Car
having no frills. e.g. Low cost airlines 5. Licensing – Revenue generated from
2. Value-Driven – Less concerned with charging for the use of a protected
cost, this business model focuses on intellectual property.
creating value for their products and 6. Brokerage Fees – Revenue generated
services. e.g. Louis Vuitton, Rolex from an intermediate service
between 2 parties. e.g. Broker selling
 Characteristics of Cost Structures: a house for commission
 7. Advertising – Revenue generated
N.B : The 4 most common mistakes
from fees for
charging product
1. You fill it once and you're done
advertising.
8. Resources the main inputs that your
2. You fill it all at once
company uses to create its value
3. You don't take everything you wrote
proposition service its customer
as an hypothesis
segment and deliver the product to
4. You are generic in what you write
the customer.
down

The Business Model Canvas gives you a

True at all stages
bird’s eye view of your business while
encouraging understanding, discussion,
Going off of the common mistakes we
creativity and analysis among your team
discussed before there's obviously a few
members. It’s used by successful innovators
things you must do no matter what stage
around the world like Intel, Panasonic, 3M,
you're at:
and MasterCard, and many users
recommend filling out the canvas in just 20
1. Being specific
minutes.
2. Taking everything as an hypothesis
Conclusion to test: remember you're just laying
the assumptions to built that
The Business Model Canvas is useful for hypothesis.
driving the conception of new products and 3. Creating multiple canvases to
services through its nine basic elements from choose amongst: don't fixate on just
both rational and emotional perspectives. It one option, go wide then deep.
also allows the teams to brainstorm insights, 4. Be quick on your feet: fill those
ideas and opinions around the product, blanks quickly (lees than 1 hour<1hr)
enabling a common understanding among and don't bike shed. Remember you
the stakeholders as well as generating strong are putting hypothesis together that
performance indicators towards a strategic you will test, don't try to think them
innovation. It’s another helpful tool for the through in your head.
product owner to conceive a new product, 5. If you ran a test hopefully you've
service, website, e-commerce or game. learned something so go back and
update your canvas based on it.
Have you used the BMC before? Do you 6. regularly consult
plan on using it in the future? Let me know your BMC (especially if you are a
in the comments section below, or if you techy): the temptation of going off
have Updates about this Topic (BMC). to build stuff is always so strong that
going back to the BMC weekly can
provide a great grounding
checkpoint.
 Examples of Business Models Canvas:

■ Skype Business Model Canvas

■ Spotify Business Model Canvas
■ Google Adwords Business Model Canvas
Sources:

1. Business Model Generation - by Alexander Osterwalder

2. THE 20 MINUTE BUSINESS PLAN: BUSINESS MODEL CANVAS MADE EASY -

by Alexander Cowan

3. Business Model Canvas: Step by Step - by Paulo Rebelo

4. How to use the business model canvas correctly - by Spike Morelli

5. How to Make a Business Model Canvas - by mgustin12

6. Business Model Canvas: A Complete Guide - by Martin

7. What is a business model?- by Alan Gleeson

8. Osterwalder's business model canvas - by Edwin Muilwijk

9. Business Model Canvas - by From Wikipedia, the free encyclopedia

10. Business Model Canvas And Generation Marketing Essay - by UKessays.com

11. Business Model vs. Business Plan vs. Business Planning - by Tim Berry

12. The Business Model Canvas - by Bill Martin

13. Business Model Canvas 101: A Step-by-Step Guide to Strengthening Your Strategy - by

jshumway

14. Business Model Canvas with Explanations - by 6W2X