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Of all of the start-up tools out there, the Business Model Canvas is one of the most well-known and relied-upon to help entrepreneurs transform an idea into an organized strategy and an actionable business plan.

The Business Model Canvas gives entrepreneurs a wide snapshot of every aspect of their business – everything from the value proposition and customer segments to operations and the financials. The tool itself, however, is no more complex than a series of nine boxes representing business segments drawn across one sheet of paper. A large part of its effectiveness is in its simplicity. The exercise forces owners to stay focused and concise as they map out their business according to each of the boxes to hone in on their business strategy and plan.

A Business Model Canvas lets you put your entire business down on paper and assess your strategy, planning gaps and exposure to risk.

According to Bruce Gitlin, SCORE mentor and business development expert, the Business Model Canvas can help entrepreneurs address specific risks and acquire more information about competitors, costs, customer segments or a market niche.

"Many start-up entrepreneurs and small businesses are so busy trying to get started and survive that they spend little time planning. When they do try to plan, they are often confused and don't know where to start,” explains Gitlin. “This tool sets an overarching framework for developing a business strategy, a detailed business plan, and/or a prioritized action plan.”

You can easily create your own Business Model Canvas and go through the exercise yourself.

When planning your start-up, go through your own Business Model Canvas exercise and integrate your completed canvas into your business plan. If your business is already operating, going through the exercise is just as valuable. You’ll have the opportunity to assess your business plan using actual data and refine your strategy to get closer to your goals.

Here is a breakdown of the nine Business Model Canvas building blocks and how to think through each one as you create your own canvas.

  • Key Partners

Who are the buyers and suppliers you need to form relationships with? What other alliances will help you accomplish core business activities and fulfill your value proposition to customers?

  • Key Activities

What are the most important activities you must engage in to fulfill your value proposition, to secure distribution channels, to create and strengthen customer relationships, to optimize revenue streams, and more?

  • Key Resources

What resources do you need to create value for your customers and sustain your business?

  • Value Proposition

What core problem does your business solve? What benefits does your business deliver? And, what products or services will you offer to meet the needs of your customers?

  • Customer Segments

Who will your business serve? Will you serve a single customer type or multiple customer segments? Which customers are the most critical for your business’ success?

  • Customer Relationships

What types of relationships will you forge with your customers? What are the relationship expectations from each customer segment?

  • Sales Channels

Through what means will you reach your targeted customers and deliver your products and services to them? Which will be the most cost-effective? How are your sales channels integrated?

  • Cost Structure

What are all of the costs that you’ll incur while operating your business? There are two primary types of cost structures: value-driven and cost-driven. A part of this block is determining which structure makes the most sense for your business and factoring that into your cost strategy.

  • Revenue Stream

How will you charge for our product or service? What are customers willing to spend? And, how much will each revenue stream contribute to your overall annual revenue?

Identifying planning gaps between these nine building blocks is the real value of the Business Model Canvas.

According to Gitlin, gaps in planning stand out when using the tool, making it effective for entrepreneurs who are new to starting and running a business.

"The Business Model Canvas helps visualize what is important and forces users to address key areas,” he says. “It can also be used by a team (employees and/or advisors) to understand relationships and reach agreements." 

Completing your own Business Model Canvas is one of the most valuable planning steps in your overall business plan. Whether you’re a new business owner crafting a business plan for the first time or an owner looking to address planning gaps in a current business, going through the Business Model Canvas exercise is even more valuable with a SCORE mentor by your side.

Copyright © 2023 SCORE Association, SCORE.org

Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.

Business Model Canvas: Explained with Examples

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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.

In this guide, you’ll have the Business Model Canvas explained, along with steps on how to create one. All business model canvas examples in the post can be edited online.

What is a 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 business model canvas beats the traditional business plan that spans across several pages, by offering a much easier way to understand the different core 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.

Business Model Canvas Explained

What Are the Benefits of Using a Business Model Canvas

Why do you need a business model canvas? The answer is simple. The business model canvas offers several benefits for businesses and entrepreneurs. It is a valuable tool and provides a visual and structured approach to designing, analyzing, optimizing, and communicating your business model.

  • The business model canvas provides a comprehensive overview of a business model’s essential aspects. The BMC provides a quick outline of the business model and is devoid of unnecessary details compared to the traditional business plan.
  • The comprehensive overview also ensures that the team considers all required components of their business model and can identify gaps or areas for improvement.
  • The BMC allows the team to have a holistic and shared understanding of the business model while enabling them to align and collaborate effectively.
  • The visual nature of the business model canvas makes it easier to refer to and understand by anyone. The business model canvas combines all vital business model elements in a single, easy-to-understand canvas.
  • The BMC can be considered a strategic analysis tool as it enables you to examine a business model’s strengths, weaknesses, opportunities, and challenges.
  • It’s easier to edit and can be easily shared with employees and stakeholders.
  • The BMC is a flexible and adaptable tool that can be updated and revised as the business evolves. Keep your business agile and responsive to market changes and customer needs.
  • The business model canvas can be used by large corporations and startups with just a few employees.
  • The business model canvas effectively facilitates discussions among team members, investors, partners, customers, and other stakeholders. It clarifies how different aspects of the business are related and ensures a shared understanding of the business model.
  • You can use a BMC template to facilitate discussions and guide brainstorming brainstorming sessions to generate insights and ideas to refine the business model and make strategic decisions.
  • The BMC is action-oriented, encouraging businesses to identify activities and initiatives to improve their business model to drive business growth.
  • A business model canvas provides a structured approach for businesses to explore possibilities and experiment with new ideas. This encourages creativity and innovation, which in turn encourages team members to think outside the box.

How to Make a Business Model Canvas

Here’s a step-by-step guide on how to create a business canvas model.

Step 1: Gather your team and the required material Bring a team or a group of people from your company together to collaborate. It is better to bring in a diverse group to cover all aspects.

While you can create a business model canvas with whiteboards, sticky notes, and markers, using an online platform like Creately will ensure that your work can be accessed from anywhere, anytime. Create a workspace in Creately and provide editing/reviewing permission to start.

Step 2: Set the context Clearly define the purpose and the scope of what you want to map out and visualize in the business model canvas. Narrow down the business or idea you want to analyze with the team and its context.

Step 3: Draw the canvas Divide the workspace into nine equal sections to represent the nine building blocks of the business model canvas.

Step 4: Identify the key building blocks Label each section as customer segment, value proposition, channels, customer relationships, revenue streams, key resources, key activities, and cost structure.

Step 5: Fill in the canvas Work with your team to fill in each section of the canvas with relevant information. You can use data, keywords, diagrams, and more to represent ideas and concepts.

Step 6: Analyze and iterate Once your team has filled in the business model canvas, analyze the relationships to identify strengths, weaknesses, opportunities, and challenges. Discuss improvements and make adjustments as necessary.

Step 7: Finalize Finalize and use the model as a visual reference to communicate and align your business model with stakeholders. You can also use the model to make informed and strategic decisions and guide your business.

What are the Key Building Blocks of the Business Model Canvas?

There are nine building blocks in the business model canvas and they are:

Customer Segments

Customer relationships, revenue streams, key activities, key resources, key partners, cost structure.

  • Value Proposition

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.  

Business Model Canvas Template

Let’s look into what the 9 components of the BMC are in more detail.

These are the groups of people or companies that you are trying to target and sell your product or service to.

Segmenting your customers based on similarities such as geographical area, gender, age, behaviors, interests, etc. 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.

Customer Persona Template for Business Model Canvas Explained

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 templates for segmenting your market and developing ideal marketing campaigns

Visualize, assess, and update your business model. Collaborate on brainstorming with your team on your next business model innovation.

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.

Customer Journey Map

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.

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

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.

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 are the external companies or suppliers that will help you carry out your key activities. These partnerships are forged in oder 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

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).

Value Proposition Canvas

What to Avoid When Creating a Business Model Canvas

One thing to remember when creating a business model canvas is that it is a concise and focused document. It is designed to capture key elements of a business model and, as such, should not include detailed information. Some of the items to avoid include,

  • Detailed financial projections such as revenue forecasts, cost breakdowns, and financial ratios. Revenue streams and cost structure should be represented at a high level, providing an overview rather than detailed projections.
  • Detailed operational processes such as standard operating procedures of a business. The BMC focuses on the strategic and conceptual aspects.
  • Comprehensive marketing or sales strategies. The business model canvas does not provide space for comprehensive marketing or sales strategies. These should be included in marketing or sales plans, which allow you to expand into more details.
  • Legal or regulatory details such as intellectual property, licensing agreements, or compliance requirements. As these require more detailed and specialized attention, they are better suited to be addressed in separate legal or regulatory documents.
  • Long-term strategic goals or vision statements. While the canvas helps to align the business model with the overall strategy, it should focus on the immediate and tangible aspects.
  • Irrelevant or unnecessary information that does not directly relate to the business model. Including extra or unnecessary information can clutter the BMC and make it less effective in communicating the core elements.

What Are Your Thoughts on the Business Model Canvas?

Once you have completed your business model canvas, you can share it with your organization and stakeholders and get their feedback as well. The business model canvas is a living document, therefore after completing it you need to revisit and ensure that it is relevant, updated and accurate.

What best practices do you follow when creating a business model canvas? Do share your tips with us in the comments section below.

Join over thousands of organizations that use Creately to brainstorm, plan, analyze, and execute their projects successfully.

FAQs About the Business Model Canvas

  • Use clear and concise language
  • Use visual-aids
  • Customize for your audience
  • Highlight key insights
  • Be open to feedback and discussion

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Amanda Athuraliya is the communication specialist/content writer at Creately, online diagramming and collaboration tool. She is an avid reader, a budding writer and a passionate researcher who loves to write about all kinds of topics.

The 9-Step Business Model Canvas Explained (2023 Update)

importance of a business model canvas

Written by Raquel Alberdi

Business | entrepreneurship, 16 comments(s).

Business Model Canvas

Blog » The 9-Step Business Model Canvas Explained (2023 Update)

importance of a business model canvas

“A major mistake made by many start-ups around the world is focusing on the technology, the software, the product, and the design, but neglecting to ever figure out the business . And by “business” we simply mean how the company makes money by acquiring and serving its customers”.

-Reid Hoffman

After meeting with hundreds of entrepreneurs and business owners over the years I believe the LinkedIn co-founder and Blitzscaling author Reid Hoffman’s got it spot on.

People tend to focus on specific parts of their business, such as which software packages are being used, which is the cheapest supplier, how to optimize internal processes…?

They get so bogged down in the details of the day-to-day running that they lose the overall vision of their business.

Without this vision they are unable to scale, they make marginal profits, miss opportunities, struggle to innovate, and end up running “just another” business.

Another handy metaphor in understanding this common mistake is the soldier in the trenches .

Every meter of ground gained comes at a heavy cost, mistakes are made, and progress is hard-fought and slow…a day-to-day experience for 99% of entrepreneurs and businessmen.

But when you do have that 360 vision you see the entire battlefield. Decisions are much clearer, fewer mistakes are made, and progress is fast and methodical.

Fortunately, a business model framework exists that gives you both vision and clarity .

The Business Model Canvas provides entrepreneurs, business owners, and strategists with a tool to analyze, structure, and evolve a business while always keeping the bigger picture front of mind.

So let’s take a closer look at how it works.

Table of Content

What is the Business Model Canvas?

Created by Swiss entrepreneur and Strategyzer co-founder, Alexander Osterwalder, the Business Model Canvas is a visual representation of the 9 key building blocks that form the foundations of every successful business. It’s a blueprint to help entrepreneurs invent, design, and build models with a more systematic approach.

Why is it so popular within the business community?

Its simplicity. The business model canvas allows us to carry out a high-level analysis without drilling down and getting lost in the details. You just draw out the 9 building blocks on a blank canvas, fill them in as each concept relates to your business, and hang it somewhere everybody can see.

It’s a visual overview of your entire business on a single canvas.

While the Business Model Canvas is an extremely fluid concept and hyper-specific to individual companies, each canvas is still broken down into these 9 key building blocks:

Customer Segments

Value propositions, customer relationships, revenue streams, key resources, key activities, key partners.

When laid out on the canvas the model will look something like this:

 Scheme of business model in which 9 important fields are developed for its execution.

While you’ve probably come across each of the 9 building blocks before, the attractiveness of the Business Model Canvas is that it confines them to a single page , not a traditional 42-page document.

This makes it a lot easier to digest, as well as assess existing business models or map out new ideas.

How do I fill out the Business Model Canvas?

To start your Business Model Canvas you will need to breakdown and analyze each of the 9 building blocks.

A good way to approach this is to gather the heads from marketing, sales, operations, finance, and manufacturing (if product-based) and pencil-in a morning where you can all meet together.

Then, after drawing a mock canvas onto a whiteboard, proceed to dissect and discuss each of the 9 building blocks as they relate to your business. You can use sticky notes to better organize your thoughts around the canvas.

If you are an entrepreneur or new business owner working alone and don’t have a team to bounce your ideas off, not to worry. You can still carry out your analysis before sharing it with a like-minded entrepreneurial community or forum, like those found on ThePowerMBA , to get useful, insightful feedback.

Whichever way you decide to approach it, I recommend you complete each block in the following order:

  • Cost structure

For continuity, I’m going to use the fashion retail giant Zara when analyzing each of the 9 key building blocks.

If you’d like to skip to another case study similar to your own business, navigate to the table of contents at the top of the page and select one of the other business model canvas examples.

Customer segment business model canvas for Zara company

The first block of the Business Canvas Model is about understanding who is the most important customer(s) you’re delivering value to. Or, in other words, who are they? What do they do? And why would they buy your product or service?

Not a single company exists without its clients, making customer segments the best block to start with while drawing out your business model canvas.

A great exercise to define your customer segments is to brainstorm and create your company’s buyer persona (s) .

Buyer personas are fictional depictions of an ideal or hypothetical client. Typically when brainstorming a buyer persona you’d want to define certain characteristics (age, demographic, gender, income, industry, pain points, goals, etc.)

However, remember at this stage we want a snapshot of our customer segment. There’s no need to jump into great detail just yet.

In the case of Zara, there are three distinct customer segments to whom they offer different products.

The products created for each of these customer segments (clothing, shoes, and accessories) are not trans-consumable. That is to say, a woman’s dress is highly unlikely to be worn by a 7-year-old child.

Once we know exactly who it is we are targeting, it’s time to look at what we as a company have to offer.

Zara Customer Segments business model canvas template showing the development of the 9 fields

The second phase is about figuring out your company’s value propositions , and importantly, your UVP (unique value proposition). The “what” that makes customers turn to you, over your competitors? Which of their problems are you best at solving?

Each value proposition consists of a bundle of products or services that fulfill the needs of a buyer persona from your customer segment. It’s the intersection between what your company offers, and the reason or impulse customers have for purchasing.

Some popular questions to ask while determining your UVP are:

  • Which specific customer pain point are you trying to solve?
  • What job are you helping customers get done?
  • How does your UVP eliminate customer pain points?
  • What products or services do you provide that answer this specific pain point?

So let’s try and apply this to Zara. Why do people choose to purchase from them, over their competitors?

Zara’s principal value propositions are fairly clear. They offer various ranges of stylish men’s, women’s, and children’s clothing and accessories at an affordable price.

But there’s more to it than that.

If we dive a little deeper we see Zara’s value propositions are more complex, which are behind the success of the brand:

Fast fashion

Zara adds new clothes and designs to its collections every 2-3 weeks, both in its stores and online. It keeps the brand updated, fresh, and modern while maintaining its all-important medium price point

Great eCommerce experience

Once you enter Zara’s online store you’re presented with a clean, easy-to-navigate, and high-end feel. The customer segments are visible on the left navigation bar with a search tab to further aid customers with their online experience.

Zara's Canvas business model where you can see the innovative presentation of its image

Localized stores

You can find a store in nearly all major retail locations (shopping malls, retail outlets, airports, etc.) meaning accessibility is not an issue for the majority of consumers.

Flagship stores

Zara demonstrates its aesthetic evolution to customers through its flagship stores. The recent opening of their Hudson Yards , New York City flagship is a great example of this. Customers shop around its vivid, minimalist layout offering them an experience aligned with the brand’s deeper, eco-friendly values.

Zara's Canvas business model where you can see the innovative presentation of the image of its stores

Zara Hudson Yards, New York

Business Model Canvas Template Zara - Value Propositions

The next step is to ask yourself how you are reaching your customers, and through which channels ?

This includes both the channels that customers want to communicate with you as well as how they’ll receive your products or services.

Is it going to be a physical channel? (store, field sales representatives, etc.) Or is it a digital channel? (mobile, web, cloud, etc.).

Zara has 3 primary channels in which they communicate and deliver products to its customers:

  • Direct sales through their stores
  • Online (both app and website)
  • Social media

Customers can go to a traditional “bricks and mortar” store to browse, model, and purchase different items of clothing at one of their retail stores.

Alternatively, they can shop online or through their mobile application and have the product delivered straight to their door or nearest store. The choice is completely up to them!

So that covers Zara’s commercial channels, but what about how they communicate with customers?

While they do communicate through their mobile app, their predominant channel is social media.

What’s more, they’re really, really good at it.

For example, did you know that Zara invests less than 0.3% of its sales revenue into advertising?

This is only possible due to an A-rated social media presence . Customer queries are not only dealt with quickly, but recommended re-works are sent back to HQ, forwarded onto in-house designers who then apply the feedback to future collections.

This customer-first approach through fluid communication channels has saved them thousands of dollars in marketing, strengthened their brand, and created a loyal customer base.

You should only step away from this building block once you’ve decided how each of your customer segments want to be reached.

Zara Channels business model canvas template where its components are developed

Once you have acquired customers, you will need to think about how you can build , nurture, and grow those relationships.

Now, this can be automated and transactional like large eCommerce brands Amazon or Alibaba. Or, it could be at the complete opposite end of the scale and require a more personal relationship you’d typically have with a bank or your local bike shop.

Zara’s relationship with its customers is threefold, and lies somewhere in the middle of transactional and personal:

  • Salesperson at store
  • Brand through social media
  • Sentimental attachment to a product

Yes, you have the initial transactional touchpoint at the store or online, something relatively impersonal and for many the only interaction they’ll have with the brand.

However, customers (especially in the fashion industry) are encouraged to continue to interact with a brand through social media platforms.

As we mentioned before when discussing channels, Zara has a very effective communication system in place. Not only can people instantly get in touch with the brand, but also engage with new posts, images, and collections uploaded to social media.

This personal approach to customer relationship building can, in some cases, lead to the natural growth of brand ambassadors and communities .

An attachment can also develop between customers and particular garments or accessories from one of their collections. The sentimental attachment to these products also creates another potential form of brand loyalty.

The relations with Zara's clients to give a Business Model Canvas where the 9 points to be developed are seen

Now that you’ve described how you are going to create real value for your customers, it’s time to look at how you plan to capture that value.

What are your revenue streams? Is it going to be a transactional, direct sales strategy ? Are you going to consider a freemium mode l, where you give a portion of your product or service away for free with the idea of converting later on down the line?

If you’re a SaaS company such as SalesForce or Strava , then it’s likely that a licensing or subscription revenue model will be more appropriate.

At Zara, it’s extremely simple. They make their money by selling clothes and accessories either at a store or online.

Zara business model canvas template for the development of Revenue streams within the 9 points to work

As you can see, we’ve filled in the entire right-hand side of our business model canvas. We touched upon:

Customer segments

  • Value propositions
  • Revenue streams
  • Distribution channels

Now it’s time to move over to the left side of the business canvas model and look at what we need, internally , to deliver our value propositions.

Key resources of the Zara Business Model Canvas

To start with, let’s take a look at key resources.

The key resources are all things you need to have, or the assets required to create that value for customers.

This could be anything from intellectual property (patents, trademarks, copyrights, etc.) to physical holdings (factories, offices, delivery vans, etc.) right down to finances (the initial cash flow perhaps needed to start your brand).

Another key resource every company needs to consider is its human capital . Are you going to need highly specialized software engineers? Or field-based sales teams?

They are relatively capital-heavy resources that need to be factored into your business model.

In the case of Zara, they are going to need a number of key resources if they hope to deliver their propositions:

  • Stock management
  • A large, interconnected network of physical stores
  • A strong brand
  • Logistics and supply chain infrastructure

Stock is vital for both online and offline customers.

If they are unable to supply their range of products and meet customer demands, satisfaction levels fall and they have a serious problem on their hands.

A large distribution network of brick and mortar stores combined with a strong brand name help mitigate these factors, as well as reinforce any ongoing marketing activities and communication efforts.

Finally, an efficient logistics process within Zara is critical, especially when you consider the complexities involved with such a large-scale operation.

They will require the necessary technology to analyze data on inventory, storage, materials, production, and packaging, with the staff to execute each of these stages and manage the delivery of the final products.

Zara business model canvas template where the Key Resources are developed

The next step is to define the key activities – the areas you need to be good at to create value for your customers.

To mix it up a little let’s take a look at a slightly different business in Uber .

Their key activities can be broken down into:

  • Web and mobile app development
  • Driver recruitment
  • Marketing: customer acquisition
  • Customer service activities : drivers’ ratings, incidents, etc.

They need a fast, clean UX for their customers using the app, drivers to carry out their service, and the ability to both market the product and deal with any customer queries.

Zara’s key activities will differ to those of Uber. Some of the things they need to consider would be:

  • Manufacturing
  • Retail process (point of sale and 3rd party management)
  • Distribution channel / logistics

Design is a key activity as Zara’s value proposition is to provide stylish garments at an affordable price. Their collections need to be constantly updated to follow the latest fashion trends at the time.

To produce their collections Zara will also require manufacturing capabilities. Now Zara doesn’t own their own factories (we will get to that in the Key Partners section) but they still need to be involved in the garment manufacturing process.

Everything from fabric selection to pattern making, to detailing and dyeing affects the outcome of the final product which of course they have to then go on and sell.

The effective management of the retail and distribution channels (online, offline, shipping, and communication with providers) is also key. A breakdown in either of these activities, such as a poor relationship with an important provider will have serious consequences for the business.

Zara business model canvas template showing the key activities for its development

Most modern business models now require brands to build out and work with various key partners to fully leverage their business model.

This includes partnerships such as joint ventures and non-equity strategic alliances as well as typical relationships with buyers, suppliers, and producers.

A great example of a strategic partnership would be between ThePowerMBA and Forbes . In exchange for exposure of our brand to the magazine’s global audience, we provide expertise and content on high-level business education programs.

As we touched upon when discussing key activities , Zara requires strategic partnerships with many different providers if they are to design and produce their collections.

Another key partner is their major holding company, Inditex .

Inditex has several subsidiaries including Massimo Dutti , Pull & Bear , and Oysho . Being a subsidiary of Inditex means they share a consolidated balance sheet, stakeholders, management and control, and various legal responsibilities.

While as a subsidiary Zara is afforded certain freedoms when it comes to design, delivery, and the general running of the company, the overall strategy will need to be aligned with Inditex and its other subsidiaries.

Zara Key Partners business model canvas template where the eighth point is developed

The final step of the Business Model Canvas is to ask yourself, how much is it going to cost to run this model?

This includes some of the more obvious needs such as manufacturing costs, physical space, rent, payroll, but also areas such as marketing activities.

If you are unsure of exactly what to include in your cost structure take a look at a Profit and Loss statement ( P&L ) from a competitor or company in a similar industry to yours. You’ll find many items overlap such as research and development ( R&D ), cost of goods sold, admin expenses, operating costs, etc.

Once that’s done you should prioritize your key activities and resources and find out if they are fixed or variable costs .

As Zara is such a large, corporate business they are going to have both fixed costs (rent, payroll, point of sales personnel) and variables, such as costs associated with the fluctuating sale of goods, purchase of materials and, manufacturing costs.

Once you’ve completed these 9 steps, your Business Canvas Model should look something like this:

Business Model Canvas Examples

Hopefully, you were able to get a good feel for the effectiveness of the business model canvas with our run-through of Zara.

However, if you found it difficult to follow due to the stark difference between your industries, I’m going to quickly go through 3 more companies to demonstrate the tool’s flexibility:

  • Netflix (Media service/production)
  • Vintae (Vineyard)

Even if these business model canvas examples don’t align exactly with your industry, I honestly believe that studying different models gives you a competitive advantage in your professional career regardless.

If you’re currently employed by a company, you’ll better understand how your specific role helps the company achieve some of its “long-term” goals.

Alternatively, if you are a business owner yourself (or perhaps thinking of starting your own business) you’ll have a better understanding of your business and where potential opportunities lay.

I’m sure you’re familiar with our next business model canvas example candidate, Netflix .

The global media company offers an online streaming service of various movies, documentaries, and TV programs produced in-house or licensed 3rd-party content. Their success sparked a revolution in the online media world with the likes of Amazon, Apple, Disney, HBO, and Hulu all rushing to launch their own online video streaming platforms.

Netflix started life as an online DVD rental company, basically a web version of the more popular (at least at that time) “bricks and mortar” Blockbuster.

Co-founder Reed Hastings predicted as far back as 1999 that the future of media was in online streaming, saying “postage rates were going to keep going up and the internet was going to get twice as fast at half the price every 18 months.”

It wouldn’t be until 2007 that Hasting’s prediction would become true when Netflix, as we now know it, was born.

So let’s take a current look at their business model canvas:

Netflix business model in which the 9 topics are taken into consideration

As you probably know, there are very few people out there who haven’t subscribed, watched, or at least heard of Netflix. There is content for everybody: wildlife documentaries, sci-fi movies, rom coms, action-thrillers, you name it – it’s there.

That’s why their customer segment can be classified as a “ mass market ” as the base is just so diverse.

All people require is a computer, TV, internet, and/or smartphone and they’re good to go. For most developed markets, that covers just about everybody.

Value Proposition

Whether on the train to work, sitting in the car (if you’re not driving!), or relaxing at home in front of the TV, you can consume their online, on-demand video streaming service.

They also have a huge library of content for consumers to choose from, ensuring that people keep coming back, as well as increasing their mass-market appeal.

They also produce high-quality, original content to differentiate themselves from their competitors.

Most people access Netflix either through their website or mobile/TV App . Another popular channel that you may have picked up on is their affiliate partners .

You’ve perhaps signed up for a mobile, TV, and internet package where the provider offers Netflix as an extra to sweeten the deal, so to speak.

That would be an example of an affiliate partnership between Netflix and mobile service providers.

I doubt many consumers have had direct contact with Netflix unless it’s to resolve a subscription issue or general query. It’s very much a self-automated service – you download the app, select the program you wish to watch, and hit play.

Very simple, very effective.

Again, this doesn’t need much embellishment. Netflix generates money from the different tiers and packages put together in their subscription services.

This varies depending on the region to account for local markets, but on the whole, it’s sold at a low price point.

Originally, Netflix’s Key Resources would have been their unrivaled DVD collection combined with a cost-effective mail-order system.

Nowadays it’s undoubtedly the rights to stream online video content. Netflix has brokered deals with some of the biggest production studios worldwide.

Combined with their huge library of in-house productions , it’s more than enough to encourage customers to renew their subscriptions.

To help sustain interest in their product, Netflix understands they need to serve-up relevant content for each sub-sector of their mass audience. Therefore their machine learning algorithm selects content for consumers based on streaming habits (what they watched, at what time, etc,.) to personalize the customer experience.

This explains why over 80% of all content streamed on Netflix was cherry-picked by this algorithm, making it a Key Resource for their business model.

Also, Netflix accounts for a whopping 12.6% of global bandwidth usage . The literal capacity to stream their services must be met meaning bandwidth must also be included here.

Content procurement is arguably their biggest Key Activity. They need to find people to produce and deliver their original content, including actors, studios, writers, etc. as well as secure the licensing and streaming rights from 3rd party producers such as Sony, Warner Bros, and Disney.

Finally, they need a fast, easy-to-use application to host their online streaming service. This needs to be available for both TV and mobile devices if they are to deliver their “on-demand” value proposition.

K ey Partners

Seeing as Netflix’s entire business model is largely based around streaming 3rd party content, key partnerships need to be built with production studios . No content, no Netflix!

Also, as we touched upon earlier Netflix is one of the largest consumers of bandwidth worldwide. If the speed and delivery of their streaming service are to be continued then deals will also need to be made with internet service providers (ISPs).

Netflix’s biggest expenditures come from both their in-house content procurement and 3rd party licensing agreements . The high-quality standard of video streamed on Netflix is only possible due to the speed and performance of its online platform and application , which has additional costs of staff, software, etc.

To show you just how flexible the business model canvas can be, I wanted to throw in a slightly leftfield example. Vintae is a Spanish wine producer who, after a detailed analysis of the business model canvas, was able to innovate and disrupt one of the world’s most competitive industries.

As some of you may know, the wine industry is extremely competitive. It’s also steeped in history and tradition , making it very challenging for newcomers to grab market share, let alone think about year-on-year growth and revenue.

However, CEO “Richi” Arambarri looked at the traditional “ bodega ” business model and saw a chink in its armor.

A “small” innovation in the business canvas model helped them to become one of the region’s most important winery groups, with over 10 installations and a presence across all regional denominations (Rioja, Priorat, Rias Baixas, etc.) with year on year growth of 30% – practically unheard of in such a competitive industry.

So how did Vintae analyze the business model canvas to find a niche in their market?

To answer that question, we must first look at the traditional winery business model .

Traditional Winery Business Model with its 9 developed points

As you can see, the wine industry has historically been patrimonial. Vineyards and estates are passed down through generations with the winery responsible for all phases of production, clarification, and distribution.

The traditional winery business canvas model suggests you must be the owner of the winery/vineyard where the wine is “manufactured”, meaning physical assets are a key resource of the business model.

So, if you wanted to start producing a Rioja, for example, you’d have to set up your vineyard in the region.

This is monumentally expensive as you need to:

  • Purchase the land
  • Plant a vineyard
  • Absorb set-up and installation costs
  • Deal with maintenance costs

It’s here where Vintae saw their opportunity.

What if we move vineyard ownership across the business model canvas from key resources to key partners ?

By leasing the equipment and space of large wineries (of which there was plenty), they could still produce their wine but reduce the cost and exposure associated with land purchase, crushing equipment, huge storage tanks, vineyard maintenance, and their bottling line.

This enabled them to focus on their sales, marketing, and distribution channels to create a better brand experience for their customers.

Also, it afforded them more flexibility when creating new wines as they were no longer confined to the limitations of grapes grown on their vineyard.

The lightness of this new business model eliminates maintenance overheads, channels energy into personalizing the customer experience, and allows for unprecedented levels of growth in one of the world’s most competitive industries.

Vinate business model

Business Model Canvas Software

Although I did mention starting with a large whiteboard, sticky notes, and a pack of colorful sharpies there are several options in which you can digitize the business canvas model production process.

While I still believe the aforementioned process is extremely valuable (it gets your entire team’s input in a single hour-long session) you may decide it more viable for each member of management to pool their ideas digitally before sharing with the rest of the group.

If that’s the case, then take a look at some of the following software tools for creating your business model canvas.

Strategyzer

Created by the founders of the business model canvas Alex Osterwalder and Yves Pigneur , Strategyzer offers a range of business model canvas templates for you to get started with.

If you opt for the paid model (there is a 30-day free trial period) they offer a series of various classes that teach you how to build and test different value propositions and business models.

A real-time built-in cost estimator analyzes the financial viability of some of your business ideas, identifying alternative areas you may wish to explore with your model.

All-in-all, it’s a great resource to play around with and test some of your business ideas, with the option to dive into further detail if you see fit.

Canvanizer is a free, easy-to-use web tool that allows you to share links between team members who are brainstorming ideas for a business model canvas, but working remotely.

Like Strategyzer, there are several business model canvas templates provided to help you get started with your analysis. The strength of this platform is its accessibility. Much like a Google Doc., several people can brainstorm on the same canvas simultaneously with changes being synchronized automatically.

Business Model Canvas Tool

A ThePowerMBA alumni, impressed by the simplicity and effectiveness of the tool, went ahead and created the free application Business Model Canvas Tool .

It’s an incredibly intuitive, and easy-to-use tool that allows you to create templates simply by clicking the + button in each building block.

Each business model canvas created can be downloaded and shared as a pdf. with the rest of the team.

Would You Like to Learn More about Business Models?

If, after going through our 9-step guide on how to use the Business Model Canvas you’d like to learn more about different business model analysis tools , take a look at our alternative MBA business program .

As you’ll see, the course gives students a 360-degree view of business and management practices – such as engines of growth, segmentation and targeting, and value propositions.

I highly recommend you go check it out.

Regardless, I’d love to hear what you thought about this guide. Was it helpful? Would you like to see additional business cases analyzed from your industry?

Let us know in the comments below.

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16 Comments

Ayeah Goodlove

Perfect thought

kourosh abdollahzadeh

I am a DBA student. I have used your site a lot. Thank you for the information

KJ Hwang

Well defined steps, Thanks for good contents.

Reza Ebadi

Dear Sir many thanks for you guideline. it was very effective for me. Thanks a Million

Debashis Rout

Well explained with practical business case

Allen

Wow, this article was incredibly helpful! I’ve heard about the Business Model Canvas before, but I wasn’t sure exactly how it worked or how to use it for my own business.

NIMAKO JAMES

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Opoku Samuel

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Claudia Roca

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My team and I literally used your guide to write a BMC for a project we were working on, and in just about an hour we were done.

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Franco

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Jude

Insightful! Gave me the clarity I needed for my upcoming business. Thank you so much.

Praveen

Thank you very much for the business model example of ZARA. It was very very informative

Efi

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Thank you very much for reading and sharing your comments

Tatyasaheb Phadtare

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Understanding Your Business Model Canvas: A Step-By-Step Guide

This step-by-step guide will help you understand the Business Model Canvas and how to create one for your business. Learn how to identify key resources, assess the viability of your business plan, and create a roadmap for success. Get the information you need to start working on your business model today!

The canvas is a tool used to visualize business ideas and help entrepreneurs and owners develop a comprehensive strategy for their business. By comprehending the business model canvas guide you can gain an in-depth understanding of the key components that make up a successful business model.

The business model canvas also provides a comprehensive overview of the various elements of the business, including the customer segment, value proposition, revenue model, cost structure, and distribution channels.

Furthermore, having a high quality business model canvas helps entrepreneurs and business owners to identify potential sources of revenue and identify risks and opportunities.

What is a business model canvas?

The Business Model Canvas is a visual representation of the core components of your business. It's a great tool to help you to think about which elements of your business are most important, and how they interact with each other. Think about your overall vision for your business. You can use it to identify new opportunities and to help you to prioritize your ideas. The canvas can help you to flesh out your ideas and to start to think about how your various business elements fit together.

What are the nine key components of a business model canvas?

The business model canva provides the framework to define the nine core components of a business model, which are:

  • Value proposition
  • Customer segmentation
  • Key activities
  • Partnerships
  • Cost structure
  • Revenue streams
  • Potential success
  • Potential failure

What is a good example of a business model canvas?

The business model canvas is meant to help you identify your most valuable customer and find ways to make their lives easier. A landing page is one way to do this. Landing pages are meant to collect customer data and convert prospects into leads. They can be used as a business model canvas component to collect customer data and ensure your marketing message is on target.

How can I use the business model canvas to develop a better understanding of my business?

That understanding developes by giving you a visual overview of what your business is currently doing. Every business has a model, even if it hasn't been fleshed out or thought about -and the canvas helps you define that model-. The canvas also helps you track your business development and growth so you can see your model take shape over time.

How can I use the business model canvas to define the value proposition of my business?

When you're building a startup, you're trying to solve a problem for a customer. You need to understand what problem you're solving for them, and why your solution is better than the competition.

The business model canvas helps you understand your customers and where your business fits into the market. It also helps you define your value proposition. To answer the question of how to use the business model canvas, you need to understand the value that your business is providing to customers. The canvas helps you understand how your product or service fits into the marketplace and what makes it unique.

What is customer segmentation and how is it used to improve the business model canvas?

Every business needs to find their niche. The reason for this is that if you try to appeal to everybody, you will end up appealing to nobody. Finding the right target audience is the first step to success. Once you have them, you can find ways to get them to buy your products.

Finding customers who are willing to pay more for your product or service is often the way to go. These are the customers who are most likely to buy from you again. If you can find a way to target these customers, you will have a great business model. Then, this information is used to improve the business model canvas.

How can I use the business model canvas to better understand my customer base?

The canvas offers a straightforward way to analyze the market by putting all the facts in one place. An entrepreneur can assess the market situation and customer needs by answering a few questions:

  • Who is the target audience?
  • What do they need?
  • How do they currently solve their problem?
  • How can I improve their situation?
  • How can I reach my clients?
  • What is the pricing model?
  • What is my brand image?
  • How can I build a relationship with my clients?

By answering these questions and placing them on the canvas, you can better understand your customer base.

What are the key activities necessary to run my business?

Every business is unique, so there's no one-size-fits-all answer to this question. However, there are a few common activities that most businesses will include. These include:

  • Marketing and sales
  • Finance and accounting
  • Customer service
  • Human resources
  • Legal and compliance

There are many others, but these are some of the most important. Depending on the business, some of these areas may be more important than others. For example, customer service is essential for a retail business but may not be as important for a software company.

How can I use the business model canvas to define the key areas of my business?

Essentially, you can use the business model canvas to visualize every step of your business, from where it originates to where it ends. This will help you focus on your business model, but more importantly, you can show others where your business starts and ends.

What are the partnerships necessary for my business to succeed?

There are several important factors to consider when answering this question

First , the entrepreneur should identify areas where they need help and find a partner who can provide that assistance.

Second , the entrepreneur should make sure the partnership is a good fit for both parties involved.

Third , the entrepreneur should make sure the partnership is legally binding.

Finally, the entrepreneur should be aware of potential risks associated with partnering with another party.

How can I use the business model canvas to define the cost structure of my business?

Your business model canvas will give you an idea of what you need to do to get your business off the ground. But, before you can get there, you have to consider whether you have the resources to do so. For example, are you ready to make the financial investment required to get your business off the ground? Spending time reflecting on your personal finances as an individual and as a business owner can help you answer this question and make a more informed decision about whether you have the capital required to get started.

What are the revenue streams associated with my business?

Depending on the nature of your business, you may have multiple revenue streams. We would suggest that you start by listing them all, then take a look at the ones that are most promising and start thinking about how you can optimize them. Try to come up with a plan for each revenue stream so that you know what you're working towards and what you need to do to make it happen.

Can I use the business model canvas to evaluate the potential success of my business?

The most important thing to remember when evaluating the potential success of your business is that no one can predict the future. No matter how much experience you have or how many experts you consult, there are simply too many variables that can affect the outcome. So rather than trying to predict the future, focus on what you can control.

Identify your key objectives and goals, and develop a plan for achieving them. Continuously track your progress, and adjust your plan as needed. By focusing on what you can control, you can put yourself in the best position to succeed without getting bogged down by uncertainty.

What strategies can I use to make sure my business is successful?

It's easy to get swept up in the excitement and drama of your business and lose sight of the big picture. To ensure your success, you need to be hyper-aware of your goals and targets and constantly check in with yourself to make sure you're on the right path. A lot can happen in a day, or even an hour, so you'll need to be diligent about staying on track.

We recommend setting aside 10 minutes every day to reflect on your business and make sure it's on track to meet your goals. This doesn't mean you can slack off on the tasks at hand, but it will keep you from getting distracted by details and keep you on the right path.

How can I use the business model canvas to help me make decisions?

You can spend hours, days, or weeks researching every single aspect of your business, but if you don't take action and start moving forward, you will never accomplish anything. That's why we think the business model canvas is so helpful. It forces you to focus on the most important aspects of your business and figure out how you're going to get them done.

It's easy to get overwhelmed with all the details, but the business model canvas forces you to narrow it down to the most important parts of your business. Once you've chosen the most important parts of your business, you can start working on them and taking action.

What are the highlights associated with my business model?

The answer to this question should focus on the vision you have for your company. Your company is unique and you should be able to point out the benefits that make it so. You should be able to articulate the vision behind your company and the mission it has.

How can I use the business model canvas to adjust and improve my business model over time?

Ask yourself these questions:

  • What is working well?
  • What is not working well?
  • What are the opportunities?
  • What are the threats?

By answering these questions, you can adjust your business model to become more successful and improve over time.

The Canvas allows entrepreneurs to quickly evaluate the customer base and make decisions based on the data they have collected. Additionally, the canvas can be used to adjust and improve the business model over time. To ensure the potential success of a business, entrepreneurs should consider the key questions when creating their business model canvas, as well as any potential risks associated with the model. With the right tools and strategies, entrepreneurs can use the business model canvas to establish and grow a successful business.

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The Business Model Canvas

What is the business model canvas.

The business model canvas is a tool designers use to map out a business or product’s key actors, activities and resources, the value proposition for target customers, customer relationships, channels involved and financial matters. It gives an overview to help identify requirements to deliver the service and more.

“A business model describes the rationale of how an organization creates, delivers, and captures value.” — Alexander Osterwalder, Co-creator of the Business Model Canvas  

Learn about the business model canvas and how it helps in design.

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The Business Model Canvas – Flexible Chart, Early-Warning System and More 

In service design , two tools are essential to use early in your design process: the business model canvas and the value proposition canvas . You can use the business model canvas to build an overview of changes to be made to an existing business (e.g., a merger) or of a totally new business opportunity or market gap . At the start of your design process, it’s vital to map out the business model of your service to see how it will fit into the marketplace. You’ll also need to ensure what you propose can bring maximum value to both your customers and business, and keep doing so in terms of customer retention, profitability and more.

To gain the most accurate vision of a proposed product or service, it’s essential to understand all the components and dynamics of not only the customer experience but also the service as a whole ecosystem . This ecosystem contains all the channels and touchpoints that must work together to deliver and sustain maximum value to the customer.

This canvas gives you several important advantages, namely these:

It’s collaborative – so you can bring the various partners together on the same page to generate and analyze ideas, and have an early testing ground for concepts before you advance to service staging a prototype.

It’s human-centered – so you can keep close track on how to create and maximize value for customers as well as stakeholders and other partners.

It makes it easier to collect rich data – if you have a clear purpose and strategy in mind. 

A business model canvas typically contains 10 boxes:

Key Partners – The people who will help you fulfill the key activities, using the key resources. 

Key Activities – Those vital actions that go into the everyday business to get things done; these are all the activities needed to realize and maintain the value proposition, and to power everything else involved.

Key Resources – The tools needed to get those things done, stretching across all areas the canvas covers to include, for example, customer retention.

Value Proposition – The item you think will create value for your customer: e.g., a new idea, a price drop. This is a summary of what your business will deliver to customers, and feeds into the value proposition canvas, the tool you’ll use to expand this.

Customer Relationships – Where you envision the relationship each customer segment expects: e.g., customer acquisition, retention and upselling (i.e., How do you get customers? How do you keep customers? How do you continue to create value for them?).

(Note: boxes 5 and 4 are closely linked as everything you do revolves around retaining the customer and considering the customer lifecycle.)

Customer Segments – Your most important customers (e.g., seniors); consider the value of personas here.

Channels – How you deliver the value proposition. Will it be online, through physical means or a combination? Here, you identify which channels are the best (both desirable for customers as well as cost-efficient and cost-effective for the brand).

Cost Structure – Here you find the most essential cost drivers. This allows you to consider the return on investment (ROI).

Revenue Streams – Where you find potential revenue sources (e.g., advertising). 

Sustainability – How sustainable your offering is overall, to the environment, to the social good, etc.

importance of a business model canvas

© Strategyzer AG, modified, CC-BY-SA-3.0

How to Build a Business Model Canvas

For the best results, follow these guidelines and aim to fill in all the gaps, looking out for cause-and-effect relationships that run between boxes/throughout:

Complete the top seven boxes (Key Partners to Customer Segments) – using all the information you can gather from your research.

Complete the next boxes:  

Cost Structure – Determine the cost drivers from the Key Partners, Activities and Resources boxes; and

Revenue Streams – Determine these from the Customer Relationships, Customer Segments and Channels boxes.

Once you have established these, you can work to estimate them in monetary terms.

Complete the Sustainability box – according to the insights you’ve found.  

Here’s an example of a business model canvas as a work in progress:

importance of a business model canvas

© Interaction Design Foundation, CC BY-NC-SA 3.0

Overall, remember your canvas is a flexible tool. It’s also a living document that you can revisit and use to find the most effective alternatives. With a clear sense of goals, a keen eye for detail and ear for input, and a readiness to refine this canvas, you can use it to fine-tune the best service prototype every time.

Learn More about The Business Model Canvas

Take our Service Design course , featuring a template for service blueprints.

Read this example-rich piece by experienced strategy designer Justin Lokitz for tips on using the business model canvas .

Find some additional tips on how to make the most of your business model canvas here .

Literature on the Business Model Canvas

Here’s the entire UX literature on the Business Model Canvas by the Interaction Design Foundation, collated in one place:

Learn more about the Business Model Canvas

Take a deep dive into Business Model Canvas with our course Service Design: How to Design Integrated Service Experiences .

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In a service design process, you use an in-depth understanding of the business and its customers to ensure that all the touchpoints of your service are perfect and, just as importantly, that your organization can deliver a great service experience every time . It’s not just about designing the customer interactions; you also need to design the entire ecosystem surrounding those interactions.

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Business Analysis Blog

What is a Business Model Canvas and how does it help with start up ideas?

importance of a business model canvas

What is a Business Model Canvas and why use it?

The business model canvas is a strategic management tool that helps businesses to analyse and plan their business models. It is used by startups and established businesses alike, and is a useful tool for any business looking to define or refine its business model.

The Business Model Canvas essentially shows your start up idea, business or product ‘on a page’ which makes it an extremely effective way to communicate your start up idea, existing business model or even a new product/service to potential business investors, strategic business managers or product teams. It is also a very powerful tool to demonstrate which areas in your business needs change.

The business model canvas is important because it helps you to understand all the different elements of your business and how they work together. This can be extremely helpful when you are starting a business or launching a new product or service.

The business model canvas can also help you to communicate your planned start up or existing business model to others.

Video example: How to validate your start up idea with the Business Model Canvas?

This short video uses a practical example company, Felonycases.com to illustrate some of the real world considerations they would have considered as part of the Business Model Canvas elements.

The canvas is divided into nine sections or building blocks, each of which represents a key element of the business model. These elements are:

  • – Value proposition
  • – Customer segments
  • – Channels
  • – Customer relationships
  • – Revenue streams
  • – Key resources
  • – Key activities
  • – Key partnerships
  • – Cost structure.

Each of these sections is further divided into smaller sub-sections, which helps to ensure that all aspects of the business model are covered and considered during analysis. We will however first discuss each of the 9 elements in more detail and explain exactly how it can be applied to your small or larger business:

#1 Value Proposition

The first element, and arguably the most important, is the value proposition. This is what your business offers to its customers that provides them with value. It is the unique selling point (USP) of your business, and should be something that sets you apart from your competitors. Consider what it is that makes your business unique and more attractive than your competitors when you consider this element.

An example of a value proposition can be:

“We are the only business in our industry that offers a money-back satisfaction guarantee”

“We offer the lowest prices in our market”.

#2 Customer Segments

The second element to consider is your customer segments. This is who your business sells its products or services to. It is useful here to describe each of your customer segments (if there are more than one) as a persona. The better you can understand your customer the more likely it is that you will be able to serve them well.

importance of a business model canvas

“Small businesses in the Retail industry who are looking to expand their customer base”.

#3 Channels

The third element is your channels. This is how you reach and communicate with your customer segments. It is important here to consider both online and offline channels, as well as how you will reach each of your customers. Here is good to know which channels will be most effective for which customer segment or type of communication.

An example of a channel could be:

“Social media platforms such as Facebook and Twitter”.

#4 Customer Relationships

The fourth element is your customer relationships. This is how you build and maintain relationships with your customers. It is important to consider what type of relationship you want to have with each customer segment, as this will determine how you communicate and interact with each. Keep in mind that customer relationships can be one-to-one, one-to-many or many-to-many.

An example of a customer relationship could be:

“We want to build long-term relationships with our customers based on trust and loyalty”.

#5 Revenue Streams

The fifth element is your revenue streams. This element is important because it covers how your business makes money. It is important to consider all of the ways that your business can generate revenue, as this will help you to determine which are the most profitable and sustainable in the long-term.

An example of a revenue stream could be:

“We generate revenue through advertising on our website” or another example could be:

“We generate revenue through the sale of our products and services”.

#6 Key Resources

The sixth element is your key resources. This is what your business needs in order to function and deliver its value proposition to customers. It is important to consider both physical and human resources when you think about this element.

An example of resources could be: “We have a fleet of trucks that delivers groceries to customers.”

#7 Key Activities

The seventh element is your key activities. This is what your business does on a day-to-day basis in order to function. It is important to consider all of the activities that are essential to your business, as well as those that are not.

An example of key activities could be:

“We source and buy groceries from suppliers” or “We package and deliver pet products to customers.”

#8 Key Partnerships

importance of a business model canvas

An example of a key partnership could be:

“We partner with a local pet store to sell our products” or “We partner with a fence builder to complete our landscaping projects.”

#9 Cost structure

The ninth and final element is your cost structure. It is key that you define and understand the costs associated with running your business. This will help you to make informed decisions about where to allocate your resources and how to price your products and services.

An example of a cost could be:

“The cost of goods sold (COGS)” or “The cost of marketing our business”.

Now that we have gone through each of the nine elements of the business model canvas, it is time to understand when you should create a business model canvas and how to do so.

When to use the Business Model Canvas?

The business model canvas is a versatile tool that can be used in a variety of situations. Some of the most common times to use the business model canvas are when you are:

– starting a business: The business model canvas can help you to flesh out your business idea and determine whether or not you should pursue the idea or perhaps change your approach.

– trying to improve an existing business : If you are not happy with the performance of your business, the business model canvas can help you to identify areas that need improvement.

– launching a new product or service: The business model canvas can help you to understand how your new product or service will fit into your existing business and what changes you need to make to ensure it is successful within the business.

Benefits of using a Business Model Canvas includes

  • All business model elements in one place.
  • Easy to use and understand.
  • Helps you to think about all aspects of your business.
  • Helps you to communicate your business model to others.

There are also some potential drawbacks of using a Business Model Canvas, including

  • It can be too simplistic and may not capture all the details of each element effectively.
  • If you do not have a solid business plan or strategy in place, the business model canvas can be ineffective.
  • It can be difficult to make changes to your business model once it is set in stone on the canvas.

However, at the end of the day, the business model canvas is a tool that can be extremely helpful.

How to start creating a Business Model Canvas?

Now that you understand when to use a business model canvas, it is time to learn how to create one. The process of creating a business model canvas is relatively simple and can be done in just a few steps.

  • Start by downloading a business model canvas template .
  • Once you have the template, begin filling in and brainstorm the content with your colleagues or business partners.
  • As you fill in the business model canvas, be sure to refer back to your business plan or strategy to ensure that the information you are including is aligned with your overall business goals.
  • Once you have completed the business model canvas, take some time to review it and make sure that all of the information is accurate and aligned.

Now that you know what the elements of a business model canvas are and you know when it is appropriate to use one, you can apply it to assess your start up idea, existing business or even that new product or service that is being considered at your company.

We hope you have learned something new that can make a real tangible difference to your success whether it is an solopreneur, entrepreneur or business analyst working in a large organisation.

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Why a business model canvas is important to organizational innovation.

Mark Hemmer

How can an organization innovate?

That's the question every business leader should be asking themselves in 2016. Failing to innovate successfully could mean closing your doors in today's business and technology climate.

To achieve organizational innovation , every facet of a business needs to move together in the same direction. That can be difficult without a clear visual of what your business model is and how your activites should be aligned. You need to identify what your company wants - and is prepared - to do before innovation can turn from a buzzword into an action.

Need help with your company's innovation strategy? Request a consultation. We'd love to talk.

Are you familiar with a Business Model Canvas? You should become familiar - the Business Model Canvas is a methodology on the rise. It helps companies visualize and position their business models for growth and innovation.

What is a Business Model Canvas?

Strategyzer defines it : "The Business Model Canvas, is a strategic management and entrepreneurial tool. It allows you to describe, design, challenge, invent, and pivot your business model."

The Business Model Canvas breaks your business model down into easily-understood segments: Key Partners, Key Activities, Key Resources, Value Propositions, Customer Relationships, Channels, Customer Segments, Cost Structure, and Revenue Streams.

By digging into these elements of your company, you can recognize and act on areas that can be improved. It also reveals clear paths on which to build your organizational innovation strategy.

Gaining a better understanding of your business never hurts. It helps you communicate your goals to your team. It helps communicate to clients why they should do business with you. It helps pull into focus what your business does and how it will continue to do it - successfully - into the future. The Business Model Canvas is an invaluable tool for startups and Fortune 500 staples alike.

Watch this for more information on why your company should use the Business Model Canvas:

How can it help organizational innovation?

Innovation is disruptive. But, not every business is prepared for disruption. Without a plan, pivoting is next to impossible. For an organization to innovate, it has to have a fine-tuned strategy that guides it towards a viable future business model. Using a tool like the Business Model Canvas can serve to unite your company under a clear visualization of where your organization sits today and where it can be tomorrow (and how it will get there).

The Business Model Canvas moves innovation out of the 'in-theory' stage and into the planning stage. See clearly, for example, what your strongest revenue streams are and how they can complement each other. Or, more closely examine your value propositions and discover better ways to position your product or service to customers. Use customer segments to find out exactly who you're talking to and how to approach them more effectively.

Your company's future is hidden in the details. Find it and you'll be ready to innovate successfully.

Learn More About Organizational Innovation:

Grow Up Podcast

Topics: Innovation

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Strategic Management Insight

Business Model Canvas (BMC)

Business Model Canvas

What is the Business Model Canvas

Business Model Canvas (BMC) is a framework that helps determine how a business creates, delivers, and captures values. It is a visual representation of the important aspects or parts to consider when designing a Business Model.

BMC aids in constructing a shared understanding of a business by condensing it into a simple, relevant, and intuitively understandable one-page visual while not oversimplifying the complexities of how enterprises function.

This concept has been applied and tested around the world and is used in organizations such as GE, P&G, Nestlé, IBM, Ericsson, and Deloitte, including Government Services of Canada and many more [1],[2] .

The Nine Building Blocks

BMC describes a business through nine basic building blocks that show the logic of how a business intends to make money. These nine blocks cover the four main areas of a business: Customers, Offer, Infrastructure, and Financial Viability.

BMC acts as a shared language for describing, visualizing, assessing, and changing business models. It is like a blueprint for a strategy to be implemented through organizational structures, processes, and systems.

Nine building blocks of a business

Each of these blocks is explained in more detail as follows:

1. Customer Segments (CS)

These are the groups of people or organizations that a business aims to reach and serve. Customers are the heart of a business model, and without (profitable) customers, a business cannot survive.

Customers are grouped into distinct segments with common needs, common behaviors, or other attributes. Customer groups represent separate segments if:

  • Their needs require and justify a distinct offer.
  • They are reached through different Distribution Channels.
  • They require different types of relationships.
  • They have substantially different profitability.
  • They are willing to pay for different aspects of the offer.

An organization must make a conscious decision about which segment(s) to serve and which segments to ignore. Once this decision is made, a business model can be carefully designed around a strong understanding of specific customer needs.

The following two questions, if answered with clarity, help a business identify its CS.

  • For whom are we creating value?
  • Who are our most important customers?
  • What are the customer archetypes?

Examples of some of the Customer Segments are shown in the figure:

Examples of Customer Segments

2. Value proposition (VP)

Value Proposition describes the bundle of products and services that create value for a specific Customer Segment chosen by a business.

A VP is the reason why customers turn to one company over another. VP must solve a customer’s problem or satisfy a need. A business can have more than one VP, but each must consist of a selected bundle of products and/or services that caters to the requirements of a specific Customer Segment.

While some VPs may be innovative and represent a new or disruptive offer, others may be similar to existing market offers but with added features and attributes.

An organization’s VP must answer the following questions with clarity:

  • What value do we deliver to the customer?
  • Which one of our customer’s problems are we helping to solve?
  • Which customer needs are we satisfying?
  • What bundles of products and services are we offering to each CS?

Elements from some of the following can contribute to customer value creation:

Examples of Customer Value Propositions.

3. Channels (CH)

Channels describe how a company communicates with and reaches its Customer Segments to deliver a Value Proposition.

Channels are customer touch points that play an important role in the customer experience and serve several functions, including:

  • Raising awareness about a company’s products and services
  • Helping customers evaluate a company’s Value Proposition
  • Allowing customers to purchase specific products and services
  • Delivering a Value Proposition to customers
  • Providing post-purchase customer support

To establish an effective channel, a company must first answer the following:

  • Through which Channels do our Customer Segments want to be reached?
  • How are we reaching them now?
  • How are our Channels integrated?
  • Which ones work best?
  • Which ones are most cost-efficient?
  • How are we integrating them with customer routines?

There are five distinct phases (figure below) through which a channel passes, and it could cover more than one of these phases at a time.

Different phases of channels

Channels can be either direct, indirect or hybrid, as shown:

Different types of channels

Finding the right mix of Channels to satisfy how customers want to be reached is crucial in bringing a Value Proposition to market and can create a great customer experience.

4. Customer Relationships (CR)

Customer Relationships describe the types of relationships a company establishes with specific Customer Segments. Relationships can range from personal to automated. An organization’s CR strategy may be driven by one of the following motivators:

  • Customer acquisition
  • Customer retention
  • Boosting sales (upselling)

A business can arrive at the optimum CR by asking the following questions:

  • What type of relationship does each of our Customer Segments expect us to establish and maintain with them?
  • Which ones have we established?
  • How costly are they?
  • How are they integrated with the rest of our business model?

Several categories of Customer Relationships may co-exist in a company’s relationship with a particular Customer Segment. Some of which are:

Types of Customer Relationships

5. Revenue Streams (RS)

Revenue Streams represent the company’s cash (earnings) from each Customer Segment and are like the arteries of any business.

Revenue streams

There are two distinct categories of Revenue Streams:

  • Transaction Revenues which are one-time customer payments
  • Recurring Revenues that are ongoing payments to either deliver a Value Proposition to customers or provide post-purchase customer support

A business can arrive at its ideal revenue stream by asking the following questions:

  • For what value are our customers willing to pay?
  • For what do they currently pay?
  • How are they currently paying?
  • How would they prefer to pay?
  • How much does each Revenue Stream contribute to overall revenues?

There are several ways a business can generate revenue, such as:

Types of Revenue streams

A business may have one or more Revenue Streams, each with different pricing mechanisms. The choice of pricing mechanism greatly influences the revenues generated.

There are two main types of pricing mechanisms, Fixed and Dynamic, as follows:

Types of Pricing Mechanisms

6. Key Resources (KR)

The Key Resources describe the most important assets required to make a business model work.

These resources allow an enterprise to create and offer a Value Proposition, reach markets, maintain relationships with Customer Segments, and earn revenues. Different Key Resources are needed depending on the type of business model.

For example, a chip fabrication business like TSMC [9] requires capital-intensive facilities worth billions of dollars, while a chip designer like NVIDIA [10] would need skilled manpower as its Key Resource.

Key Resources can be owned or leased by a business or acquired from its key partners. They can be identified by answering the following questions:

  • What Key Resources do our Value Propositions require?
  • What resources are required to sustain our Distribution Channels, Customer Relationships and Revenue Streams?

Key Resources can be categorized as follows:

Key Resources

7. Key Activities (KA)

Key Activities describe the most important things a company must do to make its business model work. They are required to create and offer a Value Proposition, reach markets, maintain Customer Relationships, and earn revenues.

Key Activities differ depending on the business model type. For example, Microsoft’s Key Activity is software development, while for Dell, it is Supply Chain Management. For a consultancy firm like McKinsey, Key Activity is problem-solving.

A business can identify its Key Activities by answering the following questions:

  • What Key Activities do our Value Propositions require?
  • What activities directly contribute to maintaining our Distribution Channels, Customer Relationships and Revenue Streams?

Key Activities can be categorized as follows:

Key Activities

8. Key Partnerships (KP)

The Key Partnerships describe the network of suppliers and partners that make the business model. There are four types of partnerships:

Four types of partnerships

A business must ask the following questions before forming partnerships:

  • Who are our key partners?
  • Who are our key suppliers?
  • Which Key Resources are we acquiring from partners?
  • Which Key Activities do partners perform?

Primarily, there are three motivations for a business when creating partnerships, as shown:

Three motivators to creating partnerships

9. Cost Structure (CS)

Cost Structure describes all costs incurred to operate a business model. A business incurs costs in creating and delivering value, maintaining customer relationships, and generating revenue. Costs are business-specific, where some are more cost-driven than others.

A business must answer the following questions to arrive at an optimum cost structure:

  • What are the most important costs inherent in our business model?
  • Which Key Resources are most expensive?
  • Which Key Activities are most expensive?

While costs should be minimized in every business model, it is useful to distinguish between two broad classes of business model Cost Structures:

  • Cost Driven : This model focuses on minimizing costs wherever possible. This approach aims at creating and maintaining the leanest possible Cost Structure, using low-price Value Propositions, maximum automation, and extensive outsourcing. Examples: No frills airlines like Southwest & easyJet, Fast food joints such as McDonald’s & KFC.
  • Value Driven: Premium Value Propositions and a high degree of personalized service usually characterize value-driven business models. Examples: Luxury hotels, Expensive Cars like Rolls-Royce

Cost Structures can have the following characteristics:

characteristics of cost structures

Putting-it-all together

The nine business model Building Blocks form the basis for a handy tool, which is called the Business Model Canvas (figure below). This tool resembles a painter’s canvas preformatted with nine blocks that allow painting pictures of new or existing business models. It is a hands-on tool that fosters understanding, discussion, creativity, and analysis.

Template for The Business Model Canvas

BMC works best when printed out on a large surface such that groups of people can jointly note, sketch, and discuss business model elements.

Example of Business Model Canvas

Nespresso [17] , a fully owned daughter company of Nestlé, changed the dynamics of the coffee industry by turning a transactional business (selling coffee through retail) into one with recurring revenues (selling proprietary pods through direct channels).

The two-part strategy involved selling their patented coffee machine to retail customers first to lock them into the brand. This generated a recurring demand for coffee refills (pods) that led to constant revenues. These pods were sold directly through mail/website/own stores, thereby eliminating middlemen/dealers, which further increased profits [1] .

Nespresso’s strategy plotted on a Business Model Canvas looks as follows:

Example of business model canvas

Business Model Canvas helped Nespresso establish a solid and enduring foundation by engaging consumers directly and bringing a barista-like experience within the reach of a home or an office.

Advantages & Limitations

  • Encourages Collaboration – collaborative framework, which helps put different business stakeholders in sync. This improves the likelihood of generating new ideas and their quality.
  • Facilitates testing of ideas before launch – allows business owners, strategists, and managers to think through business ideas as well as test concepts that would otherwise get tested with potential customers where the stakes are higher.
  • Customer-centered approach – Key customer segments, relationships, activities, and value propositions are all elements that focus on creating, delivering, and capturing value for customers.
  • Clarity – Analyzing the business through the lens of nine blocks brings better clarity and structure to the business model.

Limitations

  • Lacks a section for defining the start-up’s mission statement, which is crucial to understanding the goals and objectives of any business.
  • Overlooks the importance of a profit mechanism beyond costs and revenues, including decisions on how to use potential profits.
  • The order of the canvas is not intuitive, making it difficult to read and understand the strategic decisions in a logical sequence.
  • Does not depict interconnections between different elements, which can have a significant impact on the overall business model.
  • Fails to acknowledge the company’s role within its ecosystem, including its impact on the environment and local communities.
  • External factors such as competition, history, and other industry-specific factors are absent from the canvas, which can greatly influence the success of a business model.

1. “A Better Way to Think About Your Business Model”. Harvard Business Review, https://hbr.org/2013/05/a-better-way-to-think-about-yo . Accessed 01 Aug 2023

2. “Business Model Generation”. Alexander Osterwalder, https://www.strategyzer.com/books/business-model-generation . Accessed 28 Jul 2023

3. “The Apple M1 is a revolution that is changing the computing world”. Citymagazine, https://citymagazine.si/en/apple-m1-is-a-revolution-that-changes-the-computer-world/ . Accessed 29 Jul 2023

4. “Mass Customization”. Corporate Finance Institute, https://corporatefinanceinstitute.com/resources/management/mass-customization/ . Accessed 29 Jul 2023

5. “Moka Pot”. Wikipedia, https://en.wikipedia.org/wiki/Moka_pot . Accessed 29 Jul 2023

6. “NetJets Homepage”. NetJets, https://www.netjets.com/en-us/ . Accessed 01 Aug 2023

7. “Distribution Channels – Definition, Types, & Functions”. Feedough, https://www.feedough.com/distribution-channels-definition-types-functions/ . Accessed 30 Jul 2023

8. “Lease from Hertz”. Hertz, https://www.hertz.com/rentacar/rental-car/car-lease . Accessed 30 Jul 2023

9. “TSMC”. Wikipedia, https://en.wikipedia.org/wiki/TSMC . Accessed 30 Jul 2023

10. “NVIDIA”. Wikipedia, https://en.wikipedia.org/wiki/Nvidia . Accessed 30 Jul 2023

11. “BMW, Daimler, Ford and Volkswagen team up on high-power charging network”. Techcrunch, https://techcrunch.com/2017/11/03/bmw-daimler-ford-and-volkswagen-team-up-on-high-power-charging-network/ . Accessed 31 Jul 2023

12. “Honda And Sony Combine Talents To Build Electric Vehicles”. Forbes, https://www.forbes.com/sites/peterlyon/2022/06/26/honda-and-sony-announce-joint-venture-to-build-electric-vehicles/ . Accessed 31 Jul 2023

13. “Uber and Spotify launch car music playlist partnership”. BBC, https://www.bbc.com/news/technology-30080974 . Accessed 31 Jul 2023

14. “Walmart Has the Scale and Infrastructure to Generate Positive Gains”. Yahoo Finance, https://finance.yahoo.com/news/walmart-scale-infrastructure-generate-positive-201822628.html . Accessed 31 Jul 2023

15. “Demand-Side Economies of Scope in Big Tech Business Modelling and Strategy”. MDPI, https://www.mdpi.com/2079-8954/10/6/246 . Accessed 31 Jul 2023

16. “The Business Model Canvas”. Strategyzer, https://www.strategyzer.com/canvas/business-model-canvas . Accessed 31 Jul 2023

17. “HomePage”. Nespresso, https://www.nespresso.com/us/en/ . Accessed 01 Aug 2023

18. “Business Model Canvas of Nespresso”. Alex Osterwalder, https://www.youtube.com/watch?v=dhQh-tryXOg . Accessed 01 Aug 2023

19. “Nespresso Capsule”. Electromall, https://electromall.net/product/nespresso-capsule/ . Accessed 01 Aug 2023

20. “The Best Nespresso Machine (But It’s Not for Everyone)”. Newyork Times, https://www.nytimes.com/wirecutter/reviews/best-nespresso-machine/ . Accessed 01 Aug 2023

21. “Business Model Canvas”. Think Design, https://think.design/user-design-research/business-model-canvas/ . Accessed 01 Aug 2023

22. “6 Problems with the Business Model Canvas”. The Pourquoi Pas, https://www.thepourquoipas.com/post/problems-with-the-business-model-canvas . Accessed 01 Aug 2023

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Business Model Canvas

What is the business model canvas.

A business model canvas provides a high-level, comprehensive view of the various strategic details required to successfully bring a product to market. The typical use case for this tool is to outline the fundamental building blocks of a business, but it can be used effectively for individual products as well. The exact ingredients may vary, but these are some of the typical components included:

  • Customer segments —Who is going to use this product?
  • Product value propositions —What is this going to do for the customer to make their life/job better?
  • Revenue streams —How will the company make money from this product?
  • Channels —How will the product be sold or distributed?
  • Customer relationships —What is the success and support strategy for new customers?
  • Key partners —What other companies or individuals are part of the development and go-to-market strategy?
  • Key activities —What must happen internally to release this product?
  • Key resources —What people, materials and budget are required to pull this off?
  • Cost structure —How much will it cost to develop, manufacture, distribute, and support the product?

Asking and answering these questions should be de rigueur for any new product, but this particular framework is useful for distilling the supporting business case down into something easily digestible. By forcing everything to be on a single page, each question must be answered succinctly, which often cuts through any grandstanding to illustrate whether each area is truly addressed and viable.

How do product managers use the business model canvas?

The business model canvas serves two primary purposes for product managers : focusing their thinking during its creation along with expediting and framing the conversation when communicating with others.

Because the business model canvas is a comprehensive summary of what the product will do, who will use it, why they’ll use it, how it will happen, and how the money works, it requires a lot of thinking and homework to put it together. This exercise is very helpful for product managers to fully understand the market opportunity and refine their story while uncovering potential problem areas and fully vetting their impact. Plus the process of boiling everything down to a single page ensures that what is included is as truthful and well supported as possible.

The business model canvas can serve as a continually referenceable touchstone for the product development process and beyond, essentially serving as a mission statement for the product. As conditions on the ground change and more is learned about the product’s market reception and usage, the canvas can be updated to accurately reflect the latest information; reviewing the canvas periodically is a worthy activity in and of itself.

As a communication tool, the business model canvas is an ideal document for our short attention span world and is as useful with the executive team as it is with a junior developer. Since it only contains the most salient and relevant information, the audience won’t be drowning in details or distracted by supporting evidence or non-sequiturs. The canvas can also create a universal vocabulary for the product and get everyone using the same language and concepts going forward.

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Tips for using the business model canvas

Here is how to make the most of the business model canvas and the process of creating and maintaining it:

  • Note assumptions and challenge them —Since a business model canvas is developed while a product is still “theoretical” there is often a lack of actual facts to rely on. Instead, educated guesses, informed opinions and assumptions are utilized to build it out. While there’s often no escaping these, anything in the canvas that is an assumption versus a proven fact should be called out, with every effort made to both challenge the assumption and anticipate the impact if the assumption turns out to be incorrect.
  • Bounce it off a virgin audience —Fellow employees and even board members will approach a business model canvas with a trunkload of inherent biases. To truly test the veracity and completeness of a canvas, allow some outside parties to validate it independently. It should be a self-explanatory document, so allowing them to review it and provide feedback without any dialogue or explanations is a great test of its worthiness and thoroughness.
  • It’s easy to update, so keep it current —Unlike longer, weightier documents, the single-page nature of the business model canvas means there’s no excuse for it to languish and fall behind the business’s current line of thinking or newly gathered information. Reviewing it on a regular basis and maintaining its accuracy enhances its usefulness and is a helpful process to note when assumptions or plans have changed.
  • An ever-present reminder —Thoughts, plans, goals, and assumptions were laid out succinctly in the canvas with great care and deliberation. Going forward the canvas can be continually referred to for guidance, inspiration, and level setting as folks become swept up in the momentum of product development, sales, and marketing.
  • Present it in pieces —Sure, the entire business model canvas fits on one piece of paper, but there is a lot of things on that 8 ½ x 11 inch page. When presenting it, discuss each piece individually, gradually revealing the entire contents. This will prevent information overload and allow the team to convey things narratively instead of an information dump.
  • Reference all the evidence —Any hard data should be clearly referenced (if not included) in the canvas to give the arguments and statements as much legitimacy as possible. Reviewers will be trying to poke holes (as they should), so firm things up whenever there’s a chance.
  • Be specific —No one needs a business model canvas to understand fundamental business case elements; it is intended to tell the story and rationale for this particular product. Cut out anything generic and make it as relevant to this exact opportunity as possible. In particular, link individual customer segments with their respective value propositions, since a product won’t be all things to all people.
  • Create multiple canvases —During the early phases, generating more than one business model canvas based on divergent assumptions, target markets, or value propositions can be a useful tool for exploring different directions the product could head. After the plans are firmed up, multiple canvases can still be employed, this time to see how different scenarios pan out when key factors change… it can be used as a wargaming tool to prepare for different potential outcomes.
  • Who, what, and why first. How and how much second —Although a business model canvas includes everything from a value proposition and personas to implementation costs and resources, everything should be driven from the market opportunity and rationale for bringing a product to market. If those aren’t solid, spending cycles on technology and costs is a waste of time.

Creating a business model canvas puts new product ideas under the microscope and pulls together disparate sources of intelligence, opinions, hunches and research into a single piece of paper. It forces critical thinking and analysis of assumptions and guesses and provides an excellent reference point for the entire organization.

Once the canvas is approved and productization begins, the canvas can also serve as a straw man for the product roadmap, lining up future features and functionality based on the priorities laid out in the document to achieve market success.

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What is the business model canvas and why do i need it.

Business Model Canvas- Floship

Starting a small business is a monumental task. It seems like there are a million things you have to take care of before you can make your first dollar. You need to register your business, set up your website, work out your budget, figure out your marketing plan, test your products, and establish good relationships with your manufacturers and suppliers.

You also need to create your business plan and your business model. So much to do.

You know what a business plan is. It’s your step-by-step guide on how your business will achieve its objectives. What you might not fully understand is you business model.

A business model is simply a design for the successful operation of a business. It’s how you create value for yourself (e.g. make money) while delivering products or services to your customers.

There are numerous types of business models, and they can all be mapped onto physical chart called the “business model canvas”.

The business model canvas and was developed by Alex Osterwalder, and if you don’t have a business model canvas it’s a great tool to use to improve the focus and clarity of what your business is trying to achieve.

It eliminates all of the fluff from the traditional business plan and lets you zero in on what’s important.

The Business Model Canvas Explained

Business Model Canvas

The business model canvas is broken into nine building blocks for your customers.  We’ll break down each of those segments so you can get a better understanding of what each of them means for your company.

#1 – Value Propositions

The first section is about your value proposition. Your value proposition is what your company is making and who they’re making it for. It’s not about your specific idea or product, it’s about solving a problem or filling a need. It’s also about who you are solving that problem for.

Once you know what problem your solving and who you’re solving it for, you can get into what exactly your product or service is. This is where you list all the benefits and features of your product and what they do to solve the problem.

#2 – Customer Segments

Perhaps the most important part of your canvas is the customer segments. If you don’t know who your business is catering to you’ll never be able to sell to them. You need to figure out who your customers are and why they would buy from you. You want to get very specific and figure out where your customer lives, what their social habits are, how old they are, if they’re male or female, etc. You want to be so detailed that you could draw a picture of your customer, put it on a wall, and have it detail their exact persona.  On day one this is nothing but a hypothesis, but as you start testing and selling your products, you will be able to change this accordingly.

#3 – Channels

Your channels are what you use to deliver your product from your company to your customer. In the old days you really only had one channel and that was the physical channel. You had a storefront and your goal was to get people to visit your store.

With the rise of technology, a storefront is no longer necessary. Now many people use the internet and mobile devices as their channels. Even if you have a physical channel setup, you’re most likely still going to have a web presence. You need to decide which outlet or outlets are best for you to get your product to the customer.

#4 – Customer Relationships

Customer Relationships

Your customer relationships are the fourth piece in your business model canvas. This section is about how you get your customers, how you keep your customers, and how you grow your customer. The channel you choose to distribute your product will also help determine your customer relationships.

A physical store will acquire its customers differently than an online store. If you’re using a website as your main channel, you need to figure out how to get them to your website, how to get them to buy once they are there, and how to get them to hang around and buy more of your products. Just like previous steps this is only a hypothesis on day one and will be figured out as your business grows.

#5 – Revenue Streams

Your revenue streams are how you will actually make your money from your value proposition. What value is your customer paying for and how are you going to capture that value?

Depending on your company it could be a direct sales model, a freemium model, a subscription model, or a licensing model. Again, the model you choose depends on your business, and your business could use multiple revenue models. Your revenue streams aren’t about the actual pricing of your product, it’s just your way of capturing revenue.

#6 – Resources

The next section of your business model canvas deals with is your resources. This is what you need to sell your product, the assets that are required for you to be successful.

The most important resource for many new companies is financing. Do you have enough cash on hand to fund your business? WIll you need funding or a line of credit?  There are also physical needs like a store, manufacturing plant, or delivery trucks. You might need intellectual properties as patents and customer lists. You might also need a good, strong workforce of salesmen, programmers and manufacturers.

#7 – Key Partners

Your key partners are the people and companies who are going to help you grow your business. There are some things you aren’t going to be able to do and some you just won’t want to do on your own, so you’ll want to partner with people that can do them for you. Two of the most common partnerships are suppliers and buyers.

The two main questions you need to ask yourself before forming a partnership is what you’re going to get from them and what activities they are going to perform. If you have a one man startup, your partnerships will likely be different than the partnerships a larger company has.

In your first year you might choose to do everything yourself just to save money. As your business grows, you will be able to invest in partnerships that can save you time and help grow profits.

#8 – Key Activities

business model

Your key activities are the most important things your business must do to make your business model work. If you’re in the production business you’ll be making products.  Maybe you’re a consultant and you’re in the business of solving problems. You could also be in sales and be responsible for getting people to buy various products.

Whatever it is that your business does, your key activities are what you need to become an expert in for your business to be successful.

#9 – Cost Structure

Your cost structure is what it’s going to cost you to keep the business running. You have to think beyond the obvious costs like your payroll, rent, and materials and be sure you are including everything.

You need to know what the most important costs are, what your most expensive resources are, and how much your activities and partnerships cost. Then you will need to ask the typical accounting questions like what your fixed and variable costs are, and any economies of scale. Anything that is going to cost you money to keep your business operational needs to be included here.

The Lean Business Model Canvas

Something that has become increasingly popular over the last few years is the “lean business” or “lean startup.” The lean business is essentially a business method that gets you from idea to business as fast as possible.

In a lean business you put out wh at is called your “minimum viable product”. This is your product in its most basic form with none of the extra bells and whistles. You put that product out to a select group of people to see if they like it. If they like it you can move on with that product, if they don’t you either pivot or scrap the idea all together.

The lean model allows you to get to market as fast and as cheaply as possible. The lean business model canvas was made in the spirit of the lean business. It’s more actionable and entrepreneur based and focuses on the way time can affect the revenue stream of a business. When the lean business model canvas was created, four more elements were added.

#1 – Problem

A problem box was created because many businesses spend a lot of time and money on a product that isn’t needed or doesn’t solve a problem. It’s important to know what problem you are solving before you do anything else.

#2 – Solution

Once you know what problem you are solving, it’s time to work on your solution. This is where you would describe your MVP (minimum viable product).

#3 – Key Metrics

Your key metrics are the range of products or services you want to provide.  It is key to choose the right metrics because choosing wrong could lead to disaster for your business.

#4 – Unfair Advantage

Your unfair advantage is just that – any unfair advantage you might have over your competitors. It is very important to know if you have any unfair advantages over your competitors, or if they have any over you.

To truly make it the “lean” canvas, they had to remove the elements they didn’t think were necessary. They removed:

  • Key activities
  • Key resources
  • Key partnerships
  • Customer relationships.

They were removed because they were either a waste of time to a lean startup, covered in another element, or they were more outside focused and not focused directly on the business.

business plan

Whether you’re an established business or just getting started, a business model canvas is an amazing tool to help you reach your goals. It provides you with a one page document that cuts out the fluff lays everything out right in front of you. It’s easily editable so as your business changes you can change your canvas to match. And if you’re creating a lean startup, there is a business model canvas made just for you.

For other Canvas Models check out  Toptal’s Technology Product Canvas

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Assessing your Business Model - Business Model Canvas

Learn how to evaluate and refine your business model with the Business Model Canvas.

importance of a business model canvas

Understanding the Business Model Canvas

Before we delve into the nitty-gritty details of assessing your business model, let's take a moment to understand what the Business Model Canvas is all about. Developed by Alexander Osterwalder and Yves Pigneur, the BMC is a visual framework that provides a holistic view of your business. It serves as a roadmap, capturing the various elements that work together to create value and generate revenue.

The Business Model Canvas is a powerful tool that enables entrepreneurs and business owners to analyze and design their business models . It offers a structured approach to understanding how different components of a business fit together and interact with each other. By visually representing these components, the BMC allows for a comprehensive assessment of the business model's strengths, weaknesses, and potential areas for improvement.

With the Business Model Canvas, you can identify key aspects of your business and evaluate their effectiveness. It helps you identify your target customers, define your unique value proposition, determine the most effective channels for delivering your products or services, and establish the type of relationships you want to build with your customers. Additionally, it helps you identify potential revenue streams, highlight critical activities and resources, identify strategic partnerships, and analyze the cost structure of your business.

Key Components of the Business Model Canvas

The Business Model Canvas consists of nine key building blocks that form a complete picture of your business. These building blocks include:

  • Customer Segments: Identifying and understanding your target customers.
  • Value Proposition: Defining the unique value your business offers to customers.
  • Channels: Determining how you will deliver your value proposition to customers.
  • Customer Relationships: Outlining the type of relationships you want to establish with your customers.
  • Revenue Streams: Identifying the sources of revenue for your business.
  • Key Activities: Highlighting the most important activities your business needs to perform.
  • Key Resources: Identifying the critical resources required to deliver your value proposition.
  • Key Partnerships: Identifying strategic alliances and partnerships that can enhance your business.
  • Cost Structure: Analyzing the costs associated with your business operations.

Each of these building blocks plays a crucial role in shaping your business model. By examining and understanding each component, you can gain valuable insights into how your business operates and identify areas for improvement.

Importance of the Business Model Canvas

Now that we have a basic understanding of the BMC, let's explore why it is crucial for your business assessment process. The BMC allows you to visualize and analyze every aspect of your business model in a clear and concise manner. It helps you uncover potential gaps, exploit opportunities, and make informed decisions to drive your business towards growth and profitability.

By using the Business Model Canvas, you can gain a comprehensive understanding of your business and its potential for success. It enables you to identify areas where your business is excelling and areas where improvements can be made. With this knowledge, you can develop strategies to optimize your business model, attract more customers, increase revenue streams, and reduce costs.

Furthermore, the Business Model Canvas encourages collaboration and communication within your organization. It provides a common language and visual representation that allows team members to align their efforts and work towards a shared vision. By involving key stakeholders in the process of analyzing and designing the business model, you can foster a sense of ownership and commitment, leading to increased motivation and productivity.

In conclusion, the Business Model Canvas is a valuable tool for any entrepreneur or business owner. It offers a structured approach to understanding and optimizing your business model, enabling you to make informed decisions and drive your business towards success.

Steps to Assess your Business Model

Now that we understand the importance of the Business Model Canvas (BMC), let's dive into the steps you can follow to assess your business model effectively.

Identifying your Value Proposition

Your value proposition is the heart of your business model. It defines the unique benefits and solutions you offer to your customers. Start by clearly articulating your value proposition and ensure it aligns with your target customers' needs and desires.

Analyze how your value proposition sets you apart from competitors and how it addresses customers' pain points. Refine and adapt your value proposition as necessary to stay relevant in a dynamic market.

For example, if you are a technology startup offering a project management software, your value proposition could be "Streamline project collaboration and increase productivity with our intuitive and user-friendly project management software."

By understanding your value proposition, you can effectively communicate the value you bring to your customers and differentiate yourself from competitors.

Analyzing Customer Segments

Understanding your customers is vital to crafting an effective business model. It's essential to identify your target customers and segment them based on their characteristics, behaviors, and needs. Connect with your customers through market research, surveys, and feedback to gain insights into their preferences.

By analyzing your customer segments, you can tailor your value proposition, marketing strategies, and distribution channels to effectively reach and engage your target audience.

For instance, if you are a fitness apparel brand targeting active individuals, you might identify two customer segments: gym enthusiasts and outdoor adventurers. Each segment may have different preferences and needs, allowing you to customize your products and marketing messages accordingly.

Understanding your customer segments enables you to create targeted marketing campaigns, develop personalized offerings, and build strong relationships with your customers.

Evaluating Revenue Streams

Revenue is the lifeblood of any business. Assessing your revenue streams involves understanding how you generate income and the pricing strategies you employ. Evaluate which revenue streams are most profitable and explore opportunities to diversify or create new revenue sources.

Adopt a data-driven approach to analyze customer purchasing behavior, identify potential upsells or cross-sells, and optimize your pricing models to maximize revenue generation.

For example, if you are a subscription-based software company, you may have multiple revenue streams such as monthly subscriptions, annual subscriptions, and additional fees for premium features. By analyzing the profitability of each revenue stream, you can identify areas for improvement and potential opportunities for expansion.

Furthermore, understanding your customers' willingness to pay and their perception of value can help you refine your pricing strategies and optimize your revenue streams.

By evaluating your revenue streams, you can ensure a sustainable and profitable business model that aligns with your customers' needs and drives financial success.

Utilizing the Business Model Canvas for Strategic Planning

Now that we have covered the steps to assess your business model, let's explore how you can leverage the Business Model Canvas for strategic planning and decision-making.

The Business Model Canvas (BMC) is a powerful tool that provides a visual representation of your business model. It consists of nine building blocks that help you analyze and understand the key elements of your business. These building blocks include key partners, key activities, key resources, value proposition, customer segments, channels, customer relationships, revenue streams, and cost structure.

Aligning Business Goals with the Canvas

The BMC helps you align your business goals with each building block , ensuring that every aspect of your business model supports your overall objectives. By using the BMC as a framework, you can easily identify areas where strategic adjustments are necessary to achieve your goals.

For example, if one of your business goals is to increase customer satisfaction, you can analyze the customer relationships and value proposition building blocks on the canvas. Are there any changes you need to make in how you interact with your customers or in the value you offer them to enhance their satisfaction?

Regularly review and update your BMC to ensure it reflects your evolving business strategy and serves as a compass for decision-making. As your business grows and changes, you may need to make adjustments to your business model to stay competitive and meet the needs of your target market.

Adapting the Canvas to your Business Needs

The beauty of the BMC lies in its flexibility. It can be adapted and tailored to fit the unique requirements of your business. Don't be afraid to customize the canvas by adding or modifying building blocks to better represent your business model.

For instance, if your business operates in a highly regulated industry, you may want to add a compliance building block to the canvas. This will help you ensure that your business model takes into account the necessary legal and regulatory requirements.

Remember, the BMC is not a static document; it should evolve alongside your business. Embrace experimentation and iterate your canvas as you gather new insights and respond to market changes. By continuously refining and adapting your business model, you can stay ahead of the competition and seize new opportunities.

Pitfalls to Avoid when Assessing your Business Model

While assessing your business model using the Business Model Canvas (BMC), it's vital to be aware of common pitfalls that can hinder an accurate evaluation. Let's explore some of these pitfalls and how to avoid them.

Common Mistakes in Business Model Assessment

Avoid falling into the trap of confirmation bias by relying solely on your preexisting beliefs about your business model's effectiveness. It's easy to become attached to your ideas and overlook potential flaws. Be open-minded and seek feedback from external sources such as customers, industry experts, and mentors. Their perspectives can provide valuable insights and help you identify blind spots.

Another common mistake is overlooking the interconnectedness of the BMC building blocks. While assessing your model, consider how changes in one area may impact other areas of your business. Take a holistic approach to ensure a comprehensive assessment. For example, if you plan to introduce a new product or service, consider how it will affect your revenue streams, customer segments, and key activities. By examining the interdependencies, you can make more informed decisions and avoid unintended consequences.

Ensuring Accurate and Objective Assessment

Subjectivity can cloud your evaluation process, leading to biased conclusions. To maintain objectivity, involve multiple stakeholders in the assessment to gain diverse perspectives. This can include team members, partners, investors, and even customers. Each stakeholder brings a unique viewpoint that can challenge assumptions and provide valuable insights. Consider organizing workshops or focus groups to facilitate discussions and gather different opinions.

Additionally, use data-driven analysis wherever possible. Leverage market research, customer data, and financial metrics to support your assessment and validate your assumptions. For example, conduct surveys or interviews to gather feedback from your target audience. Analyze sales data to understand customer preferences and purchasing patterns. By grounding your assessment in data, you can make more informed decisions and mitigate the risks of relying solely on subjective opinions.

Furthermore, consider seeking external consultants or industry experts to provide unbiased insights and recommendations. These professionals can bring a fresh perspective and draw from their experience working with various businesses. Their expertise can help you identify blind spots, uncover hidden opportunities, and refine your business model for optimal performance.

In conclusion, when assessing your business model using the BMC, it's crucial to avoid common pitfalls that can hinder an accurate evaluation. By staying open-minded, considering the interconnectedness of the building blocks, involving multiple stakeholders, and using data-driven analysis, you can ensure a more comprehensive and objective assessment. This will ultimately help you make informed decisions and drive the success of your business.

The Role of the Business Model Canvas in Business Growth

The Business Model Canvas not only helps assess your current business model but also plays a significant role in driving business growth. Let's explore how the BMC facilitates expansion and innovation.

How the Canvas Facilitates Business Expansion

The BMC enables you to visualize potential areas for growth and expansion. By identifying areas of improvement within your building blocks, you can leverage new technologies, enter new markets, or extend your product lines.

Consider how your existing customer segments and value proposition can be adapted to target new customer segments or cater to emerging trends. The BMC acts as a roadmap for strategic decisions that propel your business towards growth.

The Canvas as a Tool for Innovation

The dynamic nature of the BMC encourages innovation within your business model. As you assess and refine your model, explore new opportunities to deliver value to customers. Embrace new technologies, business processes, or partnerships that can enhance your value proposition and create a competitive advantage.

Use the canvas to experiment with different ideas, test hypotheses, and iterate on your business model. Foster a culture of innovation where employees are empowered to challenge the status quo and contribute to the continual improvement of your business.

The Business Model Canvas is a powerful tool that can revolutionize the way you assess and enhance your business model. By understanding its key components and following a systematic approach to evaluation, you can uncover areas for improvement, adapt to market changes, and drive your business towards growth and success.

Embrace the flexibility and adaptability that the Business Model Canvas offers, and always be willing to evolve your model in response to changing customer needs and market dynamics. Remember, continuous assessment and optimization are essential for staying competitive in today's rapidly evolving business landscape.

So, grab your virtual marker, let your creativity flow, and start unlocking the full potential of your business with the Business Model Canvas!

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Business Model Canvas Benefits — How Does it Help Entrepreneurs?

Unlock the advantages of Business Model Canvas for entrepreneurs. Learn how it fosters strategic planning and business success with PitchBob.

importance of a business model canvas

Entrepreneurs and organizations need to be agile and adaptive to keep ahead of the competition in the quickly changing business environment. The Business Model Canvas (BMC) has become a useful tool for business owners to efficiently plan, strategize, and communicate their business concepts. The BMC offers a visual depiction of the business model of a firm, allowing stakeholders to comprehend, evaluate, and enhance many facets of their endeavour. We will discuss the advantages of using the Business Model Canvas in this article and how it can be used in real-world situations.

What is a Business Model Canvas?

A strategic management framework called the Business Model Canvas was created by Alexander Osterwalder and Yves Pigneur. It is made up of nine fundamental pieces that represent the main components of a business model. Customer groups, value propositions, channels, customer relationships, income streams, crucial resources, crucial activities, crucial alliances, and cost structure make up these building blocks.

Visual Representation and Clarity:

The Business Model Canvas’ visual aspect is one of its main benefits. The business concept is quickly and clearly summarised in the canvas, making it simple to comprehend and share. Entrepreneurs can arrange their thoughts and ideas in a simple and aesthetically pleasing way by using a pre-made template. Stakeholders can quickly understand the complete business model thanks to the visual representation, which speeds up deliberations and decision-making.

Identifying and Evaluating Key Components:

Entrepreneurs can define and evaluate the essential elements of their business model with the help of the business model canvas. Each component of the structure acts as a springboard for important queries that encourage strategic planning. For instance, the client segment block advises business owners to identify and comprehend their target customers, their demands, and the best ways to reach them. Entrepreneurs discover their business model’s strengths, shortcomings, and possibilities for improvement by analysing each component.

Facilitating Collaboration and Communication:

Teams and stakeholders can align their understanding of the business model using the collaborative tool known as the business model canvas. Participants can share their knowledge, viewpoints, and expertise by using a shared canvas. The canvas encourages collaboration, knowledge sharing, and conversation. It makes it possible for cross-functional teams to work together successfully, ensuring that everyone is on the same page and pursuing the same objectives.

Strategic Decision-Making:

The Business Model Canvas is a strategic tool that supports decision-making. It aids business owners in assessing different business plans, determining the viability of fresh concepts, and seeing potential pitfalls and opportunities. Entrepreneurs can predict the effects of their decisions and make wise decisions by visualising the interdependencies between various components. The canvas also promotes creativity and innovation by inspiring businesspeople to think creatively and explore new avenues.

Adaptability and Iteration:

Business models must change and adapt to the shifting demands of the market. By enabling business owners to test, improve, and iterate on their business models, the Business Model Canvas streamlines this procedure. It is simple to update and modify particular building components thanks to the canvas’s visual nature without completely redesigning the model. This flexibility enables business owners to react to customer feedback, change course as necessary, and maintain relevance in cyclical markets.

What Should You Use Business Model Canvas?

The business model canvas is a strategic management tool that assists in the study and planning of business models. Both startups and established companies use it as a useful tool for any firm looking to expand or enhance its business strategy.

To prospective business shareholders, tactical business managers, or product teams, the Business Model Canvas efficiently communicates your start-up concept, present business model, or even a new product or service since it essentially puts it "on a page." It is also a powerful tool for demonstrating which elements of your business need to be adjusted.

You may better comprehend all the various components of your company and how they interact by using the business model canvas examples . When introducing a new product or service or beginning a business, this could be quite helpful. You can use the business model canvas to explain to others the concept behind your current company or upcoming start-up.

How Can You Use Business Model Canvas?

a) Startup Planning: The Business Model Canvas is a tool that entrepreneurs may use to organise their thoughts, test presumptions, and provide a strong basis for their beginning businesses. They are able to create their distinctive value proposition, comprehend the market, and find possible revenue streams using its assistance.

b) Existing Business Analysis: The Business Model Canvas can be used by established businesses to evaluate the success of their present business model, pinpoint areas for development, and look into potential new markets. They can use it to assess their alliances, revenue sources, and consumer segments critically.

c) Strategic Partnerships: Organisations can use the Business Model Canvas to evaluate the suitability of their various business models when contemplating collaborations or partnerships. It aids in the evaluation of resource sharing, the identification of potential synergies, and the estimation of partnership value.

d) Product Development: The process of developing a product can make use of the business model canvas. It aids business owners in determining their target market, comprehending client requirements, and creating a value proposition that fits client tastes. Entrepreneurs may make sure that their product offering is viable and sustainable by taking into account the various building pieces.

e) Business Model Innovation: The Business Model Canvas invites business owners to use their imaginations and research cutting-edge business strategies. Entrepreneurs might discover new ways to produce and capture value by questioning preconceived notions and experimenting with various arrangements of the building blocks. It offers a methodical framework for formulating and improving fresh company ideas.

CONCLUSION:

The Business Model Canvas Template is an effective way that helps businesses and entrepreneurs comprehend, assess, and enhance their business models. It works well for communicating with stakeholders and bringing them into alignment due to its visual aspect, clarity, and systematic approach. The firm Model Canvas offers a thorough framework for analysing and improving numerous areas of a firm, whether it is used for startup planning, strategic decision-making, or business model innovation. Entrepreneurs can successfully traverse the complexity of the contemporary business environment by utilising this instrument.

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Everything You Need To Know About Business Model Canvas

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If you are here, I’m quite sure that you are looking to gain a better understanding of the business model canvas. Well, if I’m right, you’ve come to the right place. This blog post will cover everything you need to know about the business model canvas, which is such a popular tool used by entrepreneurs and business leaders. By the end of this post, you’ll have a solid understanding of the business model canvas and how to apply it to your own business.

1. What is the Business Model Canvas?

What is the Business Model Canvas

At the beginning of the day, it’s important to understand what the Business Model Canvas is. In short, it is a lifesaver for business owners. I used it when starting my own business, and it was a game-changer. Why is that? Well, it provides a roadmap-like visual representation of all the key components of your business, helping you understand how they interact and fit together. In this way, it helps you quickly identify areas that need improvement and make informed decisions about your next steps.

But the canvas is more than just a tool for structure. It encourages you to think outside the box and come up with innovative ways to increase customer value and generate revenue streams . You can uncover new opportunities and transform your business into a game changer by exploring different customer segments , value propositions, and key resources. I can assure you that it is not easy without this tool.

The best part? This way of doing things encourages collaboration and fosters a sense of collective ownership among all stakeholders. As well, it helps make decision-making and problem-solving processes quicker and more efficient .

In short, the Business Model Canvas is a must-have if you are looking to create a profitable and scalable business model. Whether you’re starting from scratch or pivoting an existing business, the canvas will save you time and effort and give you a competitive edge . That, I believe, is what we’re all looking for.

2. How to Use the Business Model Canvas

How to Use the Business Model Canvas

To fully leverage the benefits of the canvas, it’s important to have a clear understanding of its structure and how it can be applied to your specific business needs. Here’s “how to,” step-by-step:

Step 1: Familiarize Yourself with the Canvas

Familiarize Yourself with the Canvas

The first step is to become familiar with its components. The canvas is made up of nine blocks that show the most important parts of a successful business model. These are customer segments, value propositions, key activities, key resources, customer relationships, channels, revenue streams, cost structures, and key partners. The goal here is to look at how these parts work together so you can learn more about how your business works and find places where it could be better.

Step 2: Identify Your Customer Segments

Identify Your Customer Segments

One of the most important elements of the business model canvas is the customer segmentation block. In order to create a successful business model, it is critical to understand who your customers are and what their needs are. If I bolded this point, it’s because I didn’t use sufficient powerful words to highlight the importance of this step. You’re like a shooter with his eyes closed if you don’t know what your customer needs .

Step 3: Develop Your Value Proposition

Develop Your Value Proposition

As part of your strategic planning , the value proposition block is where you define what sets your business apart from your competitors. In other words, why choose your business instead of others? Ask yourself: What unique benefits do you offer to your customers that they can’t find anywhere else? Most of the time, this point is forgotten, and our business becomes just another “one.”

Step 4: Identify Key Activities and Resources

Identify Key Activities and Resources

The key activities and key resource blocks are where you determine what it takes to deliver your value proposition. Is your business engine. Without them, your business will be tight from the start. could be the processes, skills, and resources you need to bring your value proposition to life. By identifying these key components, you can assess the feasibility of your business model and have a good chance of making the right decision about how to put your resources in the right budget pocket. By figuring out these key parts, you can figure out if your business model is likely to work and have a good chance of making the right decision about where to put your money.

Step 5: Evaluate Your Revenue Streams

Evaluate Your Revenue Streams

The revenue streams block is where you identify how your business will generate income. Consider this point the lifeblood of your business. Think about the different ways you can make money from your value proposition and decide which ones are most likely to work. Without a constant revenue stream, you don’t have a business.

Step 6: Determine Your Cost Structure

Determine Your Cost Structure

The cost structure block is like a rainbow, built from different colors. Generally speaking, these are the costs you need to pay to deliver your value proposition and make money. This extends the context to build a clear perspective about pricing and profitability.

Step 7: Leverage Key Partnerships

Leverage Key Partnerships

The key partnership block is where you consider the relationships you need to build in order to bring your business model to life. They are critical dots. If you miss them, your business will burn a lot of fuel without having a good chance to take off. Consider it an external vane system connected to yours. Here, the key is your ability to create quality connections. In other words, to be the master of networking.

Step 8: Fine-Tune Your Business Model

Fine-Tune Your Business Model

Every new day is an opportunity to do things better. Let’s talk about this step as being Kaizen, or continuous improvement . The Business Model Canvas is not a one-time exercise; it’s a work in progress. So, use the canvas to review and improve your business model as you learn more about your customers and market and gather more information. You need to continue tweaking your business model so you can stay ahead of the curve and remain a force to be reckoned with.

So, there you go. These are all steps involved in the process. Now, let’s move on.

3. What business model canvas to use?

What business model canvas

The original Business Model Canvas, created by Alexander Osterwalder and Yves Pigneur , detailed above, is the most commonly used and well-known canvas for mapping out a business model.

But there are also different versions and changes to the original Business Model Canvas, each with its own set of building blocks and ways of thinking.

For example, the Lean Canvas is a simplified version of the Business Model Canvas that focuses on solving problems and testing assumptions, while the Business Model You Canvas helps you create a personal business model, which could be an interesting exercise to do.

Ultimately, the choice of which business model to use will depend on the specific needs and goals of your business. If you are just starting out and are looking for a simple, visual tool to help you get a handle on your business idea , the Lean Canvas might be the best choice.

If your business is already up and running and you want to better understand and explain your current business model, the original Business Model Canvas may be a better fit.

4. Benefits of Using the Business Model Canvas

Benefits of Using the Business Model Canvas

Sometimes, our attention can be caught by different business tools without a clear understanding of their benefits. Now, let’s be the lawyers of the devil and break the Business Model Canvas benefits into small parts.

To solve this problem, let’s look at the different parts of the canvas and how they can help you make a business model that is strong and scalable.

A Complete Look at Your Business: The Business Model Canvas encourages you to look at your business as a whole, find the key parts of your business model, and look into different customer segments, value propositions, key resources, and partnerships. We could conclude that this holistic approach helps you see the big picture and make informed decisions without getting lost in the weeds.

Brainstorming and Working Together: Using this model, you can set up a good environment for brainstorming and working together, which will help everyone involved feel like they own the project as a whole. With everyone on board, decision-making and problem-solving become quicker and quite effective.

Identifying Areas for Improvement ( Kaizen ): This helps you make data-driven decisions and stay ahead of the curve by quickly identifying areas that need improvement or re-evaluation. One Kaizen step every day will increase your chance to remain in the game.

Creating new revenue streams: This point encourages businesses to think beyond their own products or services and consider how they can use partnerships, technology, or new customer segments to create new value propositions and revenue streams. This creative approach can lead to game-changing innovations that can help you stand out in a crowded market .

A Better Understanding of Your Business Model: This doesn’t mean that we don’t know our business numbers. However, by providing a framework for understanding the structure of a business model, the Business Model Canvas gives you an understanding of how your business model works.

In conclusion, the Business Model Canvas is a great tool for making a business model that is strong and scalable, and it could be a real bright spot in the business world. So, if you’re caught between a rock and a hard place trying to navigate the complexities of business, the Business Model Canvas might just be the breath of fresh air you need.

5. Why is the business model canvas important?

Why is the business model canvas important

Let’s face it: if we are looking only at the dry words and numbers without visual representation, it’s difficult to have a clear perspective on our business structure.

This model lets you look at your business as a whole and find the most important parts, such as customer relationships, value propositions, key activities, key resources, customer segments, key partnerships, revenue streams, cost structure , and so on. And so, in just one or two pages, we can map entire business pockets.

6. Examples of Companies That Use the Business Model Canvas

Business Model Canvas Example_1

Let’s take a look at a couple of them who embrace this model.

Airbnb, the popular home-sharing platform, used the Business Model Canvas to reimagine the traditional hotel industry and disrupt the market with its innovative business model.

Spotify: The music streaming service leveraged the Business Model Canvas to better understand its customer segments, value propositions, and revenue streams and to create a successful business model that can sustain its growth and profitability.

Dropbox: The file hosting service used the Business Model Canvas to identify key components of its business model.

Tesla used the business model canvas to design and launch its new business model, which included innovative product offerings, customer segments, and revenue streams.

Amazon: The e-commerce giant used this model to analyze its existing business operations and identify opportunities for growth and innovation.

These are just a few examples of companies that use the Business Model Canvas and demonstrate its versatility and usefulness in a variety of business contexts. In the actual competitive market, your business needs to be a well-oiled machine with everything and everyone working together seamlessly. Moreover, we need to be nimble and adaptable in an ever-changing market. Of course, one of the answers that can sustain these efforts is this tool: the business model canvas.

7. Conclusion

Conclusion Business Model Canvas

Now, let’s wrap up: we could definitely say that the business model canvas is a must. It gives a structured way to design and develop a business model, but you also need to know a lot about your business and market.

However, by using the canvas to its full potential, you can be a breath of fresh air in an otherwise crowded market and ultimately transform your business into a high-runner. Let it be your roadmap to success, and you’ll be a master of the business model generation game in no time.

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About the Author

Liviu Prodan

Liviu is an experienced trainer and LifeHacker. He’s been living the ‘Corpo life’ for more than 15 years now and has been a business developer for more than 12 years. His experience brings a lot of relevancy to his space, which he shares on this blog. Now he pursue a career in the Continuous Improvement & Business Development field, as a Lean Six Sigma Master Black Belt, a path that is coherent with his beliefs and gives him a lot of satisfaction.

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Benefits of Business Model Canvas

Last update: 20 december 2023.

In this article, we’ll unravel the benefits of using a business model canvas and show you why it’s the secret weapon every entrepreneur needs. So, grab your compass and let’s dive in!

What is Business Model Canvas?

Business Model Canvas is a powerful tool that provides a structured framework for developing and analyzing business models.

The Business Model Canvas offers a visual chart, encompassing crucial elements of a business such as value propositions, customer relationships, channels, revenue streams, and more.

This tool assists in aligning business activities and understanding potential trade-offs, thereby serving as a comprehensive guide for strategic planning and decision-making.

It was introduced by Alexander Osterwalder and Yves Pigneur in their book “Business Model Generation.”

business model canvas example

Benefits of Business Model Canvas for Your Business

Benefit #1: quick.

It helps you to plan your business concept “Quick”. The advantage of having a business model canvas is that you can get quick glances at what you want and need to set up your business on one sheet of paper. Without it, you might take longer to plan on your business concept, it can take you up to 40 pages or rather hundreds of page reports.

Benefit #2: Overview

It gives you an “overview” of your business plan. You can understand the whole business just by looking at one business model canvas and that’s only possible because you have 9 different segments which are the main point that you need to focus on when wanting to start a business.

Benefit #3: Clarity

The third benefit gives you clarity. As why it gives you clarity is simple, you’re able to look through the whole plan on a zoom out perspective, and often times whenever we do brand strategy for our clients they find clarity at the end of the whole business model canvas part of the reason it gives them a lot more focus on their business and they are very clear on what they want to do next.

Benefit #4: Improved Decision-Making

With its visual nature and comprehensive framework, the canvas enables data-driven decision-making. It provides a structured approach to evaluate different options, compare trade-offs, and select the most viable strategies. This helps you make informed decisions that are grounded in analysis and insights.

Benefit #5: Collaboration and Alignment

The Business Model Canvas serves as a collaborative tool, facilitating discussions and fostering alignment among team members, stakeholders, and partners. It enables everyone involved to contribute their perspectives, share insights, and collectively shape the business model, fostering a sense of ownership and buy-in.

Benefit #6: Customer-Centric Focus

The canvas emphasizes understanding your customers and delivering value to them. By clearly defining customer segments and value propositions, you can tailor your offerings to meet their specific needs and preferences. This customer-centric approach increases the likelihood of success and fosters long-term relationships.

9 Key Elements of the Business Model Canvas

Business Model Canvas Template

We’ll explore how each of the nine components can shape your unique business model.

1. Customer Segments:

Understanding your customer base is paramount. This involves segmenting your audience based on characteristics like demographics, needs, and behaviours.

Identifying the right customer segments helps in tailoring value propositions and business strategies effectively.

Questions for you to answer:

  • Who are your primary customers?
  • What are their key demographics (age, location, income level)?
  • What specific needs and behaviors define your customer segments?
  • How do these characteristics influence your product or service design?
  • In what ways can you tailor your offerings to meet the unique demands of these segments?

buyer persona

2. Value Proposition

The core of your business, value propositions are the unique solutions or benefits your business offers. They define why customers choose your product or service over others. This could range from product quality, price, convenience, or customer experience.

Questions to answer:

  • What unique benefits does your product or service offer?
  • How does it solve customers’ problems or improve their situation?
  • What makes your offering distinct from competitors?
  • How do you communicate these benefits to your target audience?

Value Propositions Template

For a more detailed exploration of crafting compelling value propositions, consider using the Value Propositions Canvas template .

3. Channels

Determine how you will reach and communicate with your customers.

Channels are the pathways through which your business reaches its customers. This includes direct and indirect routes like online platforms, retail stores, or third-party distributors. Effective channels are crucial for delivering value propositions and maintaining customer relationships.

Questions to answer :

  • Which channels are most effective for reaching your target customer segments?
  • How do these channels align with your customers’ preferences and behaviours?
  • What balance will you strike between online and offline channels?

Example Channels:

  • E-commerce websites
  • Social media platforms
  • Brick-and-mortar retail stores
  • Email marketing
  • Partner distribution networks

4. Customer Relationships

This element defines the nature of the interactions and relationships you establish with your customer segments. From personalized service to automated tools, it’s about how you acquire, retain, and grow your customer base.

  • What types of relationships do you intend to build with different customer segments?
  • How will you balance personalization with scalability in these relationships?

Example Customer Relationships:

  • Personal assistance and after-sales service
  • Loyalty programs
  • Community engagement through social media
  • Automated email marketing campaigns

For deeper insights into nurturing customer relationships, learn about Understanding the Customer Journey .

5. Revenue Streams

Identifying how your business earns money is critical. Revenue streams can include direct sales, subscriptions, licensing fees, or advertising. Understanding these streams helps in structuring your business model for profitability.

  • What are your primary sources of revenue?
  • How does each revenue stream contribute to your overall financial health
  • Are there untapped revenue streams you could explore?

Example Revenue Streams:

  • Sale of products or services
  • Monthly or annual subscriptions
  • Licensing intellectual property
  • Commission from third-party sales
  • Online advertising revenue

6. Key Resources

Key resources are the assets required to make your business model work. This includes physical, intellectual, human, and financial resources. Identifying these is essential for carrying out key activities and achieving business objectives.

  • What are the critical resources needed for your business to operate effectively?
  • How do these resources support your value propositions and revenue streams?

Examples of Key Resources:

  • Physical assets like machinery, buildings, or vehicles
  • Intellectual property such as patents, copyrights, or proprietary knowledge
  • Skilled personnel and team expertise
  • Financial resources or capital for investment and operations.

7. Key Activities

These are the most important actions your business undertakes to deliver its value proposition. It could be manufacturing, problem-solving, or platform management, depending on the nature of your business.

  • What critical activities must your business perform to deliver on its value proposition?
  • How do these activities interlink with your customer relationships and channels?

Examples of Key Activities:

  • Product development and innovation
  • Marketing and sales operations
  • Customer service and support
  • Supply chain and logistics management
  • Quality control and assurance processes

8. Key Partnerships

Strategic alliances, joint ventures, and supplier relationships fall under this category. Partnerships are formed to optimize operations, reduce risks, and acquire resources.

  • Who are your key partners and suppliers?
  • What resources or strengths do they bring to your business?
  • How do these partnerships contribute to your business goals?

Examples of Key Partnerships:

  • Suppliers providing essential materials or components
  • Marketing agencies for promotional activities
  • Technology partners for software and IT support
  • Strategic alliances with complementary businesses for joint ventures or collaborations

9. Cost Structure

Understanding the costs involved in operating your business model is crucial. This includes fixed and variable costs, and the focus can be on cost minimization or value maximization, depending on your business strategy.

Questions for Reflection:

  • What are the major cost drivers in your business?
  • How do these costs impact your pricing and profitability?
  • Are there opportunities to reduce costs without compromising quality or value?

Examples of Cost Structure:

  • Fixed costs like rent, salaries, and utilities
  • Variable costs such as material costs or transaction fees
  • Marketing and advertising expenses
  • Research and development costs

In conclusion, the Business Model Canvas is a valuable tool for entrepreneurs and businesses of all sizes. Its visual nature, holistic approach, and flexibility make it an indispensable asset for strategy development, innovation, and growth.

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COMMENTS

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    According to Bruce Gitlin, SCORE mentor and business development expert, the Business Model Canvas can help entrepreneurs address specific risks and acquire more information about competitors, costs, customer segments or a market niche.

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