Find Out What a Business Model Canvas Is
The Business Model Canvas (BMC) is a simple yet powerful tool that enables the strategic planning and articulation of a company’s business model.
If you or your team want to develop a new business model or adapt or document an existing one, a BMC is enormously helpful. It will guide you by focusing on the 9 core elements required for a successful business model.
Okay, but why do you call it a “canvas?”
The canvas title refers to the fact that it is typically developed on a large one-page sheet (probably stuck to a wall or a whiteboard) for writing, drawing, or adding sticky notes when constructing a business model with colleagues. It allows you to visualize the business, its customers, how it might operate, what resources it requires, how it will make money, and multiple other critical factors. Along the way, it helps identify the interdependencies and trade-offs between the different elements of a business’s model.
Furthermore, it presents the whole business on a single page, allowing (or forcing) you to think of the interconnection between each of the nine frames of the canvas. This helps to promote whole-system thinking and avoids the risk of focusing on some parts of your business while missing critical points on others.
Let’s say you wanted to start a business selling premium tea leaves. At a bare minimum, you would need to articulate what your business offers, identify your target audience, consider how you will source and receive your core product, and where you will store it. You will also have to define how to market the product, sell it, and deliver it to your customers. Of course, you’d want to work out how you will make money doing all of this! That’s quite a lot to consider, and the Business Model Canvas guides you through the process in a simple, visual approach (and who knows, after using your canvas, you might give life to that business that you’ve been only dreaming about until now.) 🙂
At the most simple level, this process is about working out:
The idea - What is the core business idea? How does it help its potential customers?
The audience - Who is the business helping? Or who will buy the business’s product or service?
The value - What is the value that it creates for the customer?
The money - How does it make money (if you like, how does it get some value back for what it has provided)? And what does it cost/what does it take to deliver the value you are creating?
While thinking of it at this simple level is probably quite helpful, there are generally more factors at play.
The Business Model Canvas consists of nine blocks representing these different factors. By completing each block, you build a complete picture of the many moving parts of the business, and that’s exactly what we’ll be doing together over the following few chapters.
Discover the Advantages of Using a BMC
Besides helping articulate your business idea, a Business Model Canvas provides several benefits for business owners/leaders, the most obvious of which are listed below:
Focus
Arguably, it would be perfectly reasonable to develop a business model without using a tool like a canvas. Still, it’s important to recognize that you must consider multiple elements, even with the simplest business proposition. A canvas helps focus on the most critical parts and can remind you to consider things you might otherwise have missed!
Conciseness
A Business Model Canvas is a simple, clear visual representation of a business model on one page.
If you hand it to a colleague, a new partner, an investor, or a new employee, they should understand how the business operates quickly and clearly.
Compare this to a fully formed business plan, which may often be more than 100 pages long. This is a separate, valuable document, which provides more detail, and complements the BMC. We won’t be covering business plans in this module.
Speed and Agility
The Business Model Canvas can be completed on the wall at one’s own pace with a group of people contributing. Because of its ease of use, you can achieve a lot quickly. In addition, the shared experience means that you can capture the contributions of all relevant stakeholders. Finally, the simplicity of the canvas, and its visual nature, means that you can be agile and change direction at your own rhythm.
Built Around the Value Proposition
The value proposition is at the center of the Business Model Canvas. Any business needs to offer products or services that will provide value to potential customers. In return, they will pay the company back in some way, usually in the form of payment.
Here’s an example of how the value proposition articulates this value exchange simply:
The company provides a service to reduce the cost of painting your home.
The perceived value of the service to its customers is quite high, and they are willing to pay well for it.
Thus, the company providing the service receives some value back.
It guides the behaviors and activities of the business and the value it creates for its customers, providing the guiding direction for all aspects of the company.
So what exactly is a value proposition?
Strategyzer answers this question with the following quote:
Rest assured, you will discover all about the value proposition later in the course 😉
Understand the Risks of Not Using a BMC
First, let’s look at the success rate of startup businesses. Although figures vary, most studies agree that an alarmingly high number of new business ventures are unsuccessful.
It’s a competitive landscape, with lots of new entrants all the time. As a result, startups must gather resources, employ people, and engage with partners, among other operating priorities, which can also be volatile and difficult to manage.
Why do many early-stage businesses fail?
According to Failory, there are several common reasons why early-stage businesses fail, which include:
Getting the market wrong.
Having an inexperienced team.
Not understanding their audience.
Lacking funds.
Companies can mitigate these reasons by using a simple tool like the Business Model Canvas.
Furthermore, many businesses that have been operating for years with a defined business model are now finding themselves disrupted by new entrants coming into their marketplace with adapted or new business models. The need to adapt has never been greater.
As discussed, the Business Model Canvas helps uncover your company’s core elements; and by doing so, you can recognize and act on areas needing improvement. It also reveals clear paths on which to build your strategy.
Gaining a better understanding of your business is crucial for its success. It helps you communicate your goals to your team and focus on 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 all types of businesses.
Let’s Recap!
A Business Model Canvas is a simple but powerful tool that enables the strategic planning and articulation of a company’s business model.
For a business to succeed, it must define the business idea, the target audience, the value it creates for its customers, and a way of making money.
A solid business model using a BMC will increase a business’s chances of success!
I bet you’re eager to understand more about the Business Model Canvas and try using one yourself. In the next chapter, we’ll look closely at Alex Osterwalder’s BMC and what the nine blocks cover. Read on!
