The Business Model Canvas
Designing Your Business Strategy
The Business Model Canvas is a template designed by business theorist Alexander Osterwalder to support companies in the definition (or redefinition) of their business model.
The canvas is visually organized in 9 different sections: with the value proposition exactly at the center of the page, the fields pertaining to customer relationships are placed to the right, while sections regarding operations are listed to the left. Typically product-oriented businesses focus on the left side of the canvas, while services are strongly designed around the content of the right side.
Understanding the role of each section and defining each element with as much precision as possible will generate on the canvas a clear picture of the business model we are designing for the company or product.
Let’s take a look at each of these sections:
Value Proposition: the problem you solve and how you solve it. If your value proposition looks and feels too long, because you have different value propositions according to target segments, you might consider working on more than one canvas for your multiple product lines. This element is at the center of the page, and should be your starting point when working your way through the canvas.
Customer Segments: this is the section dedicated to the audience of the company or product you want to canvas. It is good practice to segment your target as much as possible: this will prove helpful when considering other fields of the canvas, since different audiences may require specific channels or relationships. A useful exercise that can support your targeting effort is the creation of the persona of your ideal customer: location, age group, interests, all these elements will contribute to improving the effectiveness of your targeting.
Channels: this is how you deliver your product or service to your audience. This section should consider distribution, marketing and sales and is often related to the Key Resources and Key Partnerships sections. For example, if your business is operating in the e-commerce space, Amazon would be a Channel if you have multiple distribution networks; a Key Partner if you only sell through their platform.
Customer Relationships: each identified customer segment should have a dedicated customer relationship. This field is the “connecting tissue” between the value proposition and the customer segments: while the channels describe how you deliver your products or services, customer relationships explain why your customer audience would choose you.
Revenue Streams: this is where your business or product expects to make a profit.
Key Resources: strategically placed on the left side of the canvas, this section is where you should list what is essential for you to create and deliver the elements described in the other sections.
Key Activities: these are the operations that have to be performed to build and maintain the business model.
Key Partnerships: this section could potentially be as important as your customer segments, or only be slightly relevant to your business model. All important elements of your business that are outsourced should be listed here.
Cost Structure: the cost structure for your business model will emerge from the elements listed on the left side of the canvas, typically from the key resources and activities.
What makes the visual layout of the business model canvas so powerful is that you are not required to fill in the sections in any specific order: rather, you are encouraged to look at the whole picture and work simultaneously on all of the sections to bring you business model to life.
Effectively designing a business model takes times and practice, so be prepared to go through multiple iterations of your canvassing process before feeling ultimately satisfied of the result and ready for implementation.
Useful tools for this purpose may be found on Canvanizer.com