The idea of a business model canvas was developed by Alexander Osterwalder & Yves Pigneur. A business model canvas (BMC) is a mono-page visual/graphical chart overview that outlines 9 key segments/variables that seek to describe the value proposition, key activities, customer details & financial aspects of a business. It’s a simple & holistic tool of mapping out the “what” & “how” of a business’ core intentions & strategies. A BMC isn’t only instrumental to those at the initial & formative stages of creating a new business; it’s also quite vital for established businesses in their quest for innovation & business enhancement.
I’m going to discuss the 9 components of a business model canvas & also touch on things that you need to bear in mind when working on developing one.
What A BMC Looks Like
|Key Partners||Key Activities|
Why Is A BMC Important?
It is just a single page therefore it carries less but comprehensive detail. This is more advantageous as opposed to combing through a business plan that can be at least 40 pages long. This is most favourable especially when you are trying to pitch to prospective investors or financiers who might not be free to sit out long presentations. Thus you will most likely get their proper and sincere attention due to less detail which commands much less time to explain.
Its visual illustration makes it easy to note & analyse relationships and interdependencies amongst the segments. This also makes it easy to assess the dynamics of exploring “what if” questions or scenarios. The segments tend to feed into each other, so by exploring “what if” scenarios you can easily note the possible effects on other segments. This is made easy by virtue of the mono-page format which allows you a holistic view in one glance.
This is an important tool in developing a new business & assessing performance (with the thrust of innovating) for an already well-established business. Normally, innovation (which entails incorporating new ways or strategies), disturbs the status quo. This then ascends the need for a business to be able to pivot during this process; a BMC significantly aids in doing exactly that.
Things to Consider When Filling in A BMC
Brainstorming sessions are commonly used to come up with details to fill the 9 segments. Another method is to refer to or use another business’ BMC as a working point of reference to guide you on what to and how to fill the segments.
Many people would wonder what order they should follow in filling in the 9 segments. There are various submissions on this aspect however people can be dynamic & flexible enough to choose to adopt any order that works for them. There is of course a particular order that echoes the sentiments & recommendations of most business experts, which is as follows:
- Focus on value propositions & customer segments first
- Then proceed to customer relationships & distribution channels
- After that move on to the 3 Ks (key activities, key resources, key partners)
- Then you wrap it up by filling up the cost structure & revenue streams
Consider this practical illustration: Liken the BMC to the layout of mounted stage; the right side being the main stage & the left being the back stage. The working principle will be that you must start filling the segments from the right going to the left & not vice-versa. Even in real life, the main stage gets more & primary attention because it’s where all eyes will be on. That summarises the order of steps listed prior.
A Brief Look At The 9 Segments
This refers to key groupings of people central to your business e.g. financiers, suppliers etc. This also includes a look at partnerships you have & why they are necessary for the business.
Here you are looking at the key processes or modus operandi that capacitate & drive the business to manage to effectively uphold its value proposition. Aspects such as how you monitor to guarantee quality assurance, troubleshooting etc are covered here.
There are numerous types of resources that a business requires to deliver on its key performance areas. Financial, human, material or immaterial resources are some of the many resources to detail here.
The thrust of a value proposition is outlining the uniqueness your business wields or promises that distinguishes it from other businesses making it more appealing to customers. That uniqueness can lie in pricing, quality, quick service etc.
You are focusing on the types of relationships you will build & how you will foster continual back & forth engagement with your customers.
Here you detail who your key customers are i.e. your target markets. Their characteristics e.g. gender, location or demographics, why & how you will target them are aspects you also cover here.
Be it your business provides a product or service it has to increasingly spread to more and more customers. Therefore this segment focuses on which channels & what strategies you’ll employ to distribute your product or service.
Here you outline the nature & types of costs your business incurs to operate & generate profit. You look at things like fixed or variable costs, economies of scale etc.
You point out the means by which & how the business generates and earns revenue. Examples of revenue streams are affiliate marketing, direct sales, service fees etc.
Most local business players might not be abreast with or even knowledgeable on the existence of a business model canvas. This is a great business tool that businesses, new & established alike, must adopt to revolutionize their business endeavours. Working on a BMC inculcates the need to work together & that goes a long way in nurturing teamwork and corporate unity. Most importantly, it births & enhances innovation.