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What is Business Model Canvas?
The Business Model Canvas is a strategic management and planning tool that provides a visual framework for describing, analyzing, and designing a business’s key building blocks and how they interact to create value.
What is the purpose of Business Model Canvas?
The purpose of a Business Model Canvas is to describe, analyze, and design a business model and outline high-level strategic decisions needed to get a business or product onto the market. Designed by the economic theorist Alexander Osterwalder and the computer scientist Yves Pigneur in 2005, the template comes in the form of an intuitive one-page business plan summary consisting of the nine key building blocks, from customer segments to cost structure.
When to use Business Model Canvas?
The Business Model Canvas is an adaptable tool with many applications. It’s commonly employed in the following scenarios:
- Initiating a business: The Business Model Canvas helps flesh out your business concept and assess whether you should proceed with it or consider modifying your approach.
- Enhancing an established business: If you’re dissatisfied with your business’s performance, the Business Model Canvas can assist in pinpointing areas that require improvement.
- Introducing a new product or service: The Business Model Canvas provides insights into how your new product or service aligns with your existing business and the necessary adjustments to ensure its success within the organization.
How can Business Model Canvas benefit established businesses?
- Structural Guidance: It provides a visual framework for structuring your business model, ensuring that the canvas evolves in line with your strategy.
- Value Proposition Focus: The Canvas emphasizes the core value proposition, keeping your business aligned with its fundamental purpose and acting as a guiding principle.
- Efficient Planning: Whether you have a defined model or are exploring alternatives, the BMC template enables rapid and efficient completion, promoting swift ideation and iterative development.
- Holistic Understanding: It offers a comprehensive view of the interconnected elements within your business, enhancing your perception of it as a cohesive system.
- Effective Communication: BMC can be easily shared with teams, stakeholders, advisors, and partners, facilitating clear feedback and understanding.
What should be included in Business Model Canvas (BMC)?
The Business Model Canvas should include 9 sections, each outlining the most strategically important elements of a business. The sections are as follows:
Customer Segments: What customer groups will be interested in your product or service?
Key Partnerships: Who are your partners and suppliers that make your business model work?
Key Activities: What activities do you require to make the business model successful?
Revenue Streams: How are you going to drive revenue?
Value Propositions: Why will customers buy and use your product?
Channels: How are you planning to deliver, promote, and sell your product or service?
Key Resources: What resources do you need to deliver on the value propositions ?
Customer Relationships: What customer communication channels are you planning to have?
Cost Structure: What will drive business’ expenses? How are they related to revenue?
How to create Business Model Canvas online?
For your convenience, you can quickly map out your business plan by filling in all 9 boxes of the BMC template online. There are no strict rules on which component of the BMC to spell out first. You may start by describing key partners, activities, resources, and value propositions and then move on to identifying your customer base and communication channels. The expenses and revenue boxes can be filled at the final stage.
Tips for Creating Effective Business Model Canvas
Here are four key tips to help you make the most of the Business Model Canvas:
Keep it simple. Your canvas should be clear, concise, and easy to understand. Avoid overwhelming it with unnecessary details. Focus on the core components that define your business, such as customer segments, value propositions, channels, and revenue streams. By keeping it simple, you’ll be better equipped to communicate your strategy to others and maintain a clear vision for your business.
Continuously update your canvas. Make it a habit to revisit and update your canvas regularly. Market conditions change, customer needs evolve, and competitors adapt. By regularly updating your canvas, you can ensure that your business remains aligned with current realities and emerging opportunities.
Collaborate with your team. Creating a Business Model Canvas is not a solo endeavor. Collaboration with your team is crucial. Gather input from various departments and individuals, as their perspectives can provide valuable insights. By involving your team, you can tap into their expertise and ensure everyone is on the same page regarding the company’s strategy and goals.
Test and validate your model. A business model is only as good as its real-world performance. It’s essential to test and validate hypotheses it contains. Experiment with different strategies, measure their outcomes and adjust your canvas accordingly. This iterative process of testing and refining will help you discover what works and what doesn’t, allowing your business to adapt and thrive.