The Business Model Canvas or BMC is a strategic business tool that will help you create and conceptualize a competitive and innovative business model for your company. Canvas presents this model visually on a single canvas so that anyone on the team can easily understand it. The Canvas model was developed by Alexander Osterwalder (Austrian Theorist) together with the Belgian computer scientist Yves Pigneur, and was published in the successful book: Business Model Generation. This text has served as the basis for creating many modern companies and startups. Every time I want to work on a new project for a client, I use this model, which has been effective for me due to its simplicity and clarity. But it is used not only for new business projects but also to modernize or innovate an existing business. In short, this model seeks to transform business ideas into innovative actions.
What is a business model?
A business model is the formula that a company must follow to ensure business success, depending on the type of solution they providing to the market. Thinking about a business model before going out into the world with your product would be best. It is the key information that will help you get clients and investors and, a little later, create the business plan that will set your project in motion. There are many cases of successful business models, such as:
McDonald: This company innovated the traditional model of providing restaurant food service, moving from personalized attention and sitting at a table to a fast food service. Later, this model evolved until it reached the real estate business.
Uber: Using digital technology, Uber created a new business model in which users no longer contact the taxi driver or the radio taxi company; they now connect with an application that acts as an intermediary between the taxi driver and the user.
Advantages of the Business Model Canvas
With a Business Model Canvas, you can detect the keys to your business model, visualize the ideas, the key partners for your business, and the actions to be carried out. Using it will help you visualize your customer information, the value propositions you offer, through what channels, and how your company makes money. Additionally, you can use the Canvas model to understand your business model and that of your competitors.
The Canvas model is made up of nine boxes that integrate the key activities and essential components of a business plan for a company. We share an example of each block based on the Canvas model of a cafeteria so you will know how to complete yours. We share a Canvas model to download here.
The nine components of the Canvas model.
The Model Canvas consists of nine key building blocks that represent different facets of a business:
Customer Segments
Value Propositions
Channels
Customer Relationships
Revenue Streams
Key Resources
Key Activities
Key Partners
Cost
To start filling out the business model canvas, just start by breaking it down into its 9 basic blocks and analyze them each individually. Try to get the decision-makers and leads from your various departments together and proceed to break down each of these segments and discuss how they relate to your business.
1.- Customer Segments
These are the groups of people or companies that you are trying to target and sell your product or service to. Segmenting your customers 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.
2.- 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).
3.- Channels
This block is to describe how your company will communicate with and reach out to your customers. Channels are the touch points that let your customers connect with your company. 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.
4.- Customer Relationships
In this section, you need to establish the type of relationship you will have with each of your customer segments or how you will interact with them throughout their journey with your company.
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.
Automated services: this includes automated processes or machinery that helps customers perform services themselves.
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.
Communities: these include online communities where customers can help each other solve their own problems with regard to the product or service.
5.- Revenue Streams
Revenues streams are the sources from which a company generates money by selling their product or service to the customers. And in this block, you should describe how you will earn revenue from your value propositions. A revenue stream can belong to one of the following revenue models,
Transaction-based revenue: made from customers who make a one-time payment
Recurring revenue: made from ongoing payments for continuing services or post-sale services
6.- Key Resources
This is where you list down which key resources or the main inputs you need to carry out your key activities in order to create your value proposition.
There are several types of key resources and they are:
Human (employees)
Financial (cash, lines of credit, etc.)
Intellectual (brand, patents, IP, copyright)
Physical (equipment, inventory, buildings)
7.- Key Activities
What are the activities/ tasks that need to be completed to fulfill your business purpose? In this section, you should list down all the key activities you need to do to make your business model work. These key activities should focus on fulfilling its value proposition, reaching customer segments and maintaining customer relationships, and generating revenue. There are 3 categories of key activities;
Production: designing, manufacturing and delivering a product in significant quantities and/ or of superior quality.
Problem-solving: finding new solutions to individual problems faced by customers.
Platform/ network: Creating and maintaining platforms. For example, Microsoft provides a reliable operating system to support third-party software products.
8.- Key Partners
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
9.- Cost.
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).