One decidedly important factor in running a successful business is to determine what parameters should be utilized in your focus area and which one among them should become a priority. Besides being a favourite tool for startups and entrepreneurs, a Business Model Canvas also helps organizations in finding the critical zones and rapidly improve them in a sustainable development process.
Business Model Canvas (BMC) is a neat, straightforward and clear way of illustrating and investigating your business model, either for start-ups or operating businesses. It can help you with gathering insights about customers’ needs, value proposition, product/market fit, distribution channels, costs and expenses, income channels, key partners and more.
Founders go wrong when they start to believe [that] their business plan will materialize as written. I advise entrepreneurs to burn their business plan – it’s simply too dangerous to the health of your business.
___ Alexander Osterwalder
This quote by Alexander Osterwalder, the creator of Business Model Canvas, may sound a bit extreme but starting the process of a business model via composing a canvas is definitely going to help you to write a solid business plan where you exactly know what every chapter consists of and how they are inter-related.
“Business Plan” and “Business Model Canvas”
Compared to existing or traditional business models, it may be difficult for innovative start-ups with a brand-new idea to prepare a decent business plan, since there are many unknown factors to be discovered. For example, if you are about to start a café or restaurant, there are a tremendous number of previous cases which you can study, investigate and learn from, but if you are going to launch a new idea that has not yet been tried, how could you gather information about different segments of a business plan?
Business Model Canvas is also a great tool for innovation in running businesses. By defining and segmenting your existing business into a Business Model Canvas, you will more easily discover the missing pieces of the puzzle, possible improvements or disruptive changes, which results in an increased and sustainable growth rate of your business.
How to use the BMC
Business Model Canvas illustrates your business model through a segmented analytical approach. First, try to complete the canvas with all the information, thoughts or ideas that you have gathered so far. Then you can discuss the remaining segments with your team or use some discussion tools and brainstorming sessions to fill in the blanks, evaluate the structure, and bind segments to each other properly. Usually it will be necessary to review, adjust or correct the information that you have initially provided.
You can see 9 different segments on a BMC sheet as follows:
- Key Partners – Who are your key partners/suppliers? What are the motivations for the partnerships?
- Key Activities – What key activities does your value proposition require? What activities are important the most in distribution channels, customer relationships, revenue stream…?
- Value Proposition – What core value do you deliver to the customer? Which customer needs are you satisfying?
- Customer Relationship – What relationship that the target customer expects you to establish? How can you integrate that into your business in terms of cost and format?
- Customer Segment – Which classes are you creating values for? Who is your most important customer?
- Key Resources – What key resources does your value proposition require? What resources are important the most in distribution channels, customer relationships, revenue stream…?
- Distribution Channels – Through which channels you reach to your customers? Which channels work best? How much do they cost? How can they be integrated into your and your customers’ routines?
- Cost Structure – What are the most cost in your business? Which key resources/ activities are most expensive
- Revenue Stream – For what value are your customers willing to pay? What and how do they recently pay? How would they prefer to pay? How much does every revenue stream contribute to the overall revenues?
How to fill out a Business Model Canvas?
There are usually numbering on Business Model Canvas areas. However, this is not the order which we fill out the canvas! We will start with number 5 (Customer Segment). First we identify our target market, target customers, and their needs and interests. Afterwards, it is time to see what we have in order to address the customers’ requirements filling out the 3rd square (Value Proposition).
It is highly beneficial, and strongly recommended, to combine these two initial tasks by providing a Value Proposition Canvas. We can investigate the characteristics and fulfil the requirements for both segments in detail. The outcome of this process should be to explain your product/market fit model and strategy as clearly as possible.
Next, we will need to complete the rest of Business Model Canvas on the right-hand side, including Customer Relations, Distribution Channels, and Revenue Stream. The more information you provide, the more detailed your business model will be. However, at the same time, be careful not to spend too much time on low priority information or highly detailed processes that are probably never going to happen.
Advantages and results:
A well-articulated Business Model Canvas helps entrepreneurs and intrapreneurs to tailor their business model by being creative. It results in innovative advantages, which facilitates high competitiveness and rapid growth of business.
Focus: by removing an excess of pages from a traditional business plan, business owners and start-ups can refine their business model and focus on managing the business at its core.
Flexibility: since everything is visually accessible on a single page, you can quickly observe the relations between the segments and fine tune the model to its highest functionality.
Transparency: by using just a single sheet of paper, the internal and external stakeholders as well as team members will understand the business model and relate to your vision.
Check our Workshops page to discover more useful tools for developing your team and projects.
