The Business Model Canvas template is a strategic planning tool that managers use to illustrate and develop their business model. It clearly identifies the key elements that make up a company’s operations and simplifies the plan into a summary.
History
The Business Model Canvas was first introduced in 2004 by Alex Osterwalder, who published the idea in his dissertation. Since then, it has been taught in business schools and refined to work with niche companies. The idea of the Canvas is to help companies visually plan their strategies so they have a guide to how their product or service will evolve over time.
Structure of the Business Model Canvas template
The Business Model Canvas template consists of nine basic building blocks:
- Key/Major Partners
- Key/ fundamental activities
- Key Resources
- Value propositions
- Customer Relationship & Management
- Distribution Channels
- Customer segments
- Cost structure
- Revenue streams
Each of these nine elements is important and, in concert with the others, contributes to the success of your business.
Partners
Your business partners are the people and companies you work with to build a long-term strategic relationship. One example is the distribution partnerships in your supply chain.
Here are some things to consider in your partnerships:
- The benefits of the partnership help your business in terms of resources.
- The main activities that will be carried out by the partners.
- Is there a motivation from the business to work with these key partners?
- The specialty/uniqueness that only they can offer.
- Will they help to reduce costs?
Activities
Key activities in the business model canvas template represent specific tasks that are fundamental to your business. An example of a key activity would be sourcing fresh produce in bulk for a restaurant.
Here are a few things to keep in mind about your activities:
- The key activities are necessary to deliver on your value proposition.
- The key activities that differentiate your business.
- The difference in the revenue streams, distribution channels, or customer relationships from those of your competitors.
- The impact of activities on the other factors in the business.
- Do you need to source specific niche resources?
- Do you need to rationalize to keep costs and prices down?
Key resources
Key resources are the assets required to operate and deliver your value proposition. For example, a company that mines diamonds needs machinery or a mine to run its business, but an automotive company needs people with expertise when it comes to designing cars.
Here are a few things to consider in your key resources:
- The specific assets needed to run the business and deliver on your value proposition.
- The resources necessary to make your sales channels and revenue streams work.
- The resources are necessary to maintain customer relationships and customer satisfaction.
- Does your business require significant capital or human resources?
Value proposition
The value proposition is the most important element of a business model. It clearly expresses what you want to offer your customers, and it determines how all parts of the business operate. For example, Spotify‘s value proposition states that there should be a choice of music for everyone on the platform.
Here are a few things to consider in your value propositions:
- The product or service your company wants to offer customers.
- The problem your company or business is trying to solve.
- The needs that your organization satisfies.
- What do you offer that is different from others and satisfies the needs of your customers? (Price/ Quality/ Design/ Status)
Customer Relationships
The relationship a company has with its customers consists of the different types of interactions they have. For example, a designer suit company will help its customers customize their needs and work directly with them to design the suit they want.
Unlike telecom companies, a designer suit company has a more intense and fulfilling customer relationship. The reason for this is that they do not use aggressive or predatory sales practices as many of their competitors do through call centers.
Here are some things to consider in your customer relations:
- The kind of relationship your company has with its customers.
- Does your company offer dedicated support?
- The way customers are expected to take care of their own particular needs via the support channels provided.
- The methods used by the company to interact with its customers.
- The methods used by the company to interact with different customer segments.
- The frequency of the company communicating with its customers.
- How much support does your company provide?
Channels
Channels in the business model canvas template are the various structures and methods that exist to deliver your company’s product and value proposition to its customers. Channels include all of a company’s delivery, sales, and marketing channels. For companies like Amazon, it’s important to make sure they work cohesively. In this example, that means thinking about how fulfillment centers are integrated with shipping services – both of which require prompt shipments.
Here are a few things to consider with your channels:
- The communication of your value proposition.
- The methods adopted for reaching different customer segments.
- The different channels are being utilized.
- Integration of the delivery, sales, marketing, and communication channels. Are they cost-effective?
- The efficient utilization of resources.
Customer segments
Customer segments in a business model canvas template are the different types of customers a company deals with. A company that produces different products must interact with different types of customers.
Airlines offer tickets to the economy, business, and first-class customers. First-class passengers have access to exclusive benefits and luxurious travel arrangements, while passengers in the back of the plane are provided with much less support and lower prices, but also more people.
Here are a few things to consider about your customer segments:
- The primary focus of the value proposition.
- The individuals you are creating value for.
- Identification of the most important customers.
- The behavior and requirements of the most important customers.
- The likes and dislikes of the most important customers.
- The different types of customers of your business.
- Study and understanding of the customer market.
- What is the company targeting: a small niche community or a mass-market?
Cost structure
A company’s cost structure refers to how it spends money on operations. It consists of the major costs and the degree of focus the company has on the subject of costs. If a company is cost-oriented, it means that it will try to minimize prices for its customers and focus less on value creation.
If, on the other hand, a company is value-oriented, it means that it will focus more on creating something of high quality for its customers without taking as much time to reduce expenses, for example, by cutting prices or neglecting other aspects that are not directly related to making products, but rather to improving efficiency elsewhere in the company.
Here are a few things to consider in your cost structure:
- Recognize the most important costs in your business model.
- The key cost drivers of your business.
- The contribution of the key activities and resources to your cost structure.
- How do your costs relate to your revenues?
- Is the company efficiently leveraging economies of scale?
- The proportion of fixed and variable costs.
- What is the company focused on: Cost optimization or value creation?
Revenue streams
Revenue streams are the different ways your business generates money. You can have more than one revenue stream. Revenue streams are the source of a company’s cash flow. They are the final element of the Business Model Canvas template. Revenue streams can be distinguished as different ways of generating money, i.e., your company’s value proposition that generates revenue. For example, Apple has multiple revenue streams across its various products and services, such as Apple Music
Here are a few things to keep in mind about your revenue streams:
- Does the company have multiple methods of generating revenue?
- The pricing strategy for the products/services offered by your company.
- The payment channels used by customers.
- Does the company offer multiple payment methods? (Prepayment/ Payment plans/ Financing)
Conclusion
The Business Model Canvas template is a strategic planning tool that has proven effective for various companies over the years. Each element of the Business Model Canvas template is essential to the business and should be given the attention it deserves. If you use this planning tool properly, it will do wonders for your business.
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