Business Model Canvas – The Framework
Once you’ve started to address the market characterization and prototyping, the next big issue in the entrepreneurial process is the Business Model Canvas.
We look at it, at 1st, in this week lecture, as a framework to guide the execution of a venture. We use the canvas developed in the Business Model Generation by Alexander Osterwalder. There are other valuable representations of the business model, but this one is, by far, the most popular due to the very large reach of the book.
From this execution perspective, the business model canvas is a system comprised of 9 building blocs, each one describing a core question in the process of turning a project into a real life venture.
The 9 bloc business model canvas are:
The value proposition (and how it is turned into a product or a service)
The target market (these 2 blocs represent the foundation of the venture and preparation work before actually designing the business model)
The sales channel or distribution strategy
The customer relationship (how you interact with your customer outside the product/service offering)
The revenue model (who pays and for what)
The Key activities (what you need to do to build and operate the business)
The Key resources (what are the resources you need to build and operate the business)
The Key Partners (Who are the key partners you plan to outsource part of the job)
The resulting cost structure (represented in investment, fixed cost variable cost)
This 9 blocs can be viewed as the value on the right part (bloc 1, 2, 3, 4) and how it is turned into a revenue engine (bloc 5). The left part captures the organization (bloc 6, 7, 8) and the resulting cost structure (bloc 9).
This framework comes as a very helpful guide for conducting the execution job, leading to address one by one the core questions to build and later on operate the venture.
We recommend to print the Business Model Canvas and write down physically on post-it’s the initial set of hypothesis for each bloc and then start testing them one by one. Every time a hypothesis is confirmed, it is written as a confirmed learning directly on the canvas.
The first round of execution is then complete, when all the post-its have been replaced by confirmed learning.
This is the first level of use of the Business Model Canvas.