Business model canvas
Do you know what your organization's business model is? And how well do you understand it?
It is helpful for any organisation when its owner and key managers have clarity and a good understanding of the business model they follow. That way, these executives can make more competent decisions, solve problems faster, and be consistent leaders that employees can confidently follow.
A tool called the Business Model Canvas was created for just such a purpose. It is suitable for start-ups (including start-ups) as well as long established and well growing (or not) companies.
Let's look at this tool in more detail.
Business model canvas
First of all, what is a "canvas"? The word is derived from the Latin word "cannapaceus" and means "made of hemp". Nowadays, canvas is widely used by artists as a basis for painting oil paintings. In English it is also known by the word 'canvas'.
The Business Model Canvas is a strategic planning and analysis tool first proposed in 2010 by Swiss business model expert Alexander Osterwalder and Belgian information systems specialist Yves Pigner.
In the development of the Business Model Canvas, Osterwalder and Pigner collaborated with the 470 members of the online community "Business Model Innovation Hub". This forum brings together business modeling professionals and experts who contribute with their research, examples and recommendations to shape the final version of the tool.
In a nutshell, the Business Model Canvas is a visual template of nine blocks (elements) that represent what an organization's business model is. It's like a business plan, but on one page. Because of its clarity and simplicity, it has become a global standard used by a huge number of companies and people around the world.
The nine elements of the Business Model Canvas are:
Key Partners;
Key Activities;
Key Resources;
Value Proposition;
Customer Relationship;
Channels;
Customer segments;
Cost Structure;
Revenue streams.
The basic idea of the Business Model Channel is that with its help the performance of the organization can be improved. When all the key aspects are laid out visually and simultaneously, the organization can optimize certain processes or identify a better strategy.
The Business Model Canvas is particularly useful for start-ups, as it helps entrepreneurs to put their thoughts on paper, neutralise chaos, not plan piecemeal and make better decisions.
Let's take a brief look at each of the ten blocks of the Business Model Canvas and see how you can apply this tool to your own organization - current or future.
1. Key Partners
Key partners are the network of partners, suppliers and other stakeholders that your organization relies on to make it work. Partnerships are often useful to achieve savings, reduce risk or access specialised resources and competencies.
Consider the following questions:
Who are the key partners?
Who are the key suppliers?
Which key partnerships allow economies of scale to be obtained?
Which key partnerships allow to minimise risk and uncertainty?
Which key activities are carried out by the partners?
Write down your key partners, current and potential, in the "Key Partners" block of the business model canvas.
2. Key activities
Key activities are the most important business processes that will be put into action to make your organization successful. These are things like product design, product manufacturing, product delivery, problem solving, and solution elaboration. The key activities are determined by the value the organization delivers to the target customers.
Consider the following questions:
What are the key activities required to offer a unique value proposition to customers?
What are the key activities required to build the desired distribution channels?
What are the key activities required to create the desired consumer relationships?
What are the necessary key activities to realize the desired revenue streams?
Write your key activities in the "Key Activities" block of the business model canvas.
3. Key resources
Key resources are the things your organization will need most to realize its business model. Key resources can be owned by your company, leased, or used through an agreement with key partners.
Consider the following questions:
What are the key resources to make a unique value proposition to consumers?
What are the key resources to create the desired distribution channels, consumer relationships, revenue streams?
What are the key human resources? Financial resources? Physical resources? Intangible resources?
Write your key resources in the "Key Resources" block of the business model canvas.
4. Value proposition
The value proposition is your organization's reason for being - what customer needs does it satisfy and to what extent. The value proposition forms the so-called "unique selling proposition" based on the organization's differentiation from the competition on metrics such as quality, design, price, delivery time, service, brand, customer satisfaction, etc.
Consider the following questions:
What value does the organization provide to consumers?
Which needs does the organisation satisfy and which consumer problems does it solve?
What products does the organization offer to different target markets and segments?
How does the organization differentiate itself from the competition?
Write your value proposition in the "Value Proposition" block of the business model canvas.
5. Customer relationships
Customer relationships are very important. The larger the customer base, the more important it is to divide it into different target groups. Each target customer group has specific needs and wants. Anticipating and satisfying these needs and wants creates good and stable customer relationships, i.e. excellent relationships.
There are different types of customer relationships:
Dedicated personal assistance - the needs and wants of each customer in the target group are taken care of by a dedicated representative. For example, many organizations offer service with the help of a so-called. In the case of the "account manager" (account manager), their function is to take care of particularly valuable customers.
Personal assistance - customers communicate with a specialist from a customer service centre during or after the sale. Communication can take place at the point of sale, through a call centre, via email or a chat channel.
Self-service - customers can purchase the organization's products without assistance from the organization.
Automated service - customers are recognized by the organization through password login or other method, and then receive special help and service depending on their parameters and preferences.
Communities - the organization builds communities through social networks and forums to encourage customers to communicate with each other and exchange ideas and information.
Co-creation - in these relationships, the organization builds on traditional supplier-customer relationships and encourages customers to take a more active role in product creation. For example, some companies encourage their customers to do product reviews, which feed into future product development.
Consider the following questions:
1. What type of relationships does each target group expect to be built and maintained?
2. What relationships are currently being built?
3. How are these relationships integrated with the rest of the business model?
4. How much does it cost to maintain them?
5. Write what the customer relationships are in the "Customer Relationships" block of the business model canvas.
6. Channels
Channels are the ways in which value is delivered to relevant customer segments. This includes direct sales, online sales, own stores, partner stores, wholesalers, etc.
Consider the following questions:
How does the organization inform its consumers about its products?
What channels do customers prefer to use?
How does the organization help customers appreciate its value proposition?
How does the organization provide customer support?
Write your channels in the "Channels" block of the business model canvas.
7. Customer segments
Customer segments are the different target groups with customers that the organization segregates. By identifying specific needs and wants for each customer segment, the organization better understands its customers and exactly what products to offer them. This leads to higher consumer satisfaction and increases the value proposition in their eyes.
Consider the following questions:
- Mass or niche market does the organization serve?
- What are the organization's key consumer segments?
- What criteria are used to segment - geographic, demographic, psychographic, behavioral?
Write your consumer segments in the "Consumer Segments" block of the business model canvas.
8. Cost structure
The cost structure is all the operating costs that occur as part of the business model. Provided the key resources, key activities and key partnerships are identified, the cost structure can be determined relatively easily.
Consider the following questions:
- What and how much are the fixed costs?
- What and how much are the variable costs?
- Are there economies of scale?
- Are there economies of scope?
Write the cost structure in the "Cost Structure" block of the business model canvas.
9. Revenue streams
Revenue streams are the cash flows that each individual customer segment generates. There are different ways to generate revenue, for example is the price fixed or will customers be charged each time for each use through subscription or ongoing payments?
Consider the following questions:
- What is the cost of the organization's product?
- How is the price paid by customers?
- Do customers get free products, services, or extras that the competition does not offer?
- Write the revenue streams in the "Revenue Streams" block of the business model canvas.
How is the business model pipeline used?
Now that we've covered the nine basic blocks of the Business Model Funnel, let's see exactly how this tool is used. Exactly which block is good to start with, which to continue through, and which to end with?
A good place to start is by defining the Customer Segments - who are the customers to whom the organization's product will be sold.
Then move on to the Value Proposition - exactly how the organization's product solves the User Segments' problems and meets their needs better than the competition. The value proposition must answer the question "Why should customers buy from us?"
Then it moves on to defining the Channels - how will the Value Proposition reach the Consumer Segments?
Next comes the Customer Relationship - how the organization will win and retain customers.
If the Value Proposition reaches the Consumer Segments through the right Channels and good Customer Relationships are developed simultaneously, all of this will lead to the generation of Revenue Streams. The right strategy should be defined to extract the optimum revenue from the relevant Consumer Segments.
If these five basic blocks of the Business Model Canvas are identified first, we will have a good understanding of our customers. Next, we need to move on to the remaining blocks that provide greater clarity on the organization's business model.
One such block is Key Resources. The most important resources will show what the organization needs to own and secure to perform Delivering Value to Customer Segments.
The next important block contains the Key Activities - strategically the most important things that the organization must do to make the business model work and to be able to Deliver Value to User Segments.
Next comes the turn of Key Partnerships - defining the tasks and activities that will be performed (possibly) with outside help.
Finally, the ninth and final block in the Business Model Canvas is the Cost Structure. After everything described on the Ditch, the Costs will give the final touch to the picture and, compared to the Revenue Streams, will determine whether the business model is prospective and sustainable.
Any organization, both new and existing, could use the Business Model Canvas. For example, using brainstorming, different options for the nine blocks of the ditch could be proposed and discussed among the key executives involved in the meeting.
In summary
The business model canvas is a great tool for compiling and analyzing an organization's business model. Its main advantages are that it is simple, visual and easy to use.
The nine elements of the Business Model Canvas are:
1. Key Partners;
2. Key Activities;
3. Key Resources;
4. Value Proposition;
5. Customer Relationship;
6. Channels;
7. Customer segments;
8. Cost Structure;
9. Revenue streams.
The business model pipeline helps build an objective picture of the organization's business model and leads to a better understanding of it. This is important because only with a good understanding of the business model can managers of the organization make competent decisions, solve problems, and be consistent and confident leaders.