Module 5: Business Modeling
Business Model Canvas
Why should you use the Business Model Canvas?
Each business model consists of different components that need to come together to make the business work successfully. By describing the components in the Business Model Canvas, you can visualize the whole business model and are able to analyze and communicate it.
- A way to lay out the design of a new business model
- A way to clarify and communicate an existing business model
- Builds an understanding of how different parts of your business model are related
- Reveals elements in need of change or further development
What are the elements of the Business Model Canvas?
The value proposition and customers are the most essential component because if you don't have a value proposition for paying customers and/or end-users, no one will pay for your product.
Value Proposition: What value your business offer customers? There are different kinds of value propositions your business can have:
- Functional value
- Problem solving
- Time saving
Customer Segments: Who are the customers you are trying to serve and what are their characteristics? How is your customer base segmented? For instance, you might describe one of these segments:
- Mass Market
- Niche Market
- Multi-sided Market
These are the ways that you interact with your customers and delivery value to them.
Delivery Channels: What are the methods you use to reach your customers? Do you need a sales force? Do you need a social media presence? Do you need a website? Do you need a physical retail outlet?
Relationships: How do you interact or connect with the customer? There are several types of relationships you can have with your customers:
- Personal assistance
These are the main operations and assets that make your value proposition a reality and make your business model successful.
Key Resources: What are your special connections, capabilities, skills, intellectual or physical assets like patents or manufacturing facilities?
Key partners: With whom do you need to work with to deliver value to your customers? Look around in your ecosystem and understand who your suppliers, your complementors, and other ecosystem participants are. What value do they bring to your business model? And what kinds of partnerships do you have with these people?
Key Activities: What do you need to do to create, deliver, and capture value? Do you need to design and produce products to create value? if you're a consulting company or a health care company, you may be more Problem-Solving oriented, and finding the solutions is the value-adding activity. If you're an intermediary, you may need to expand your network and manage risk.
The financial structure is how you determine how the money comes in and goes out of your company.
Financial Structure: What are your revenue streams and projected costs? What are the costs of creating and delivering value to your customers? What are the costs of maintain relationships with you customers? There are many different ways to generate revenue from one-time transactions to subscriptions or licensing.
How can you apply this method?
Startups and established companies might approach filling out a business model canvas with different goals, but they can both follow a similar process. The following steps are an example of how you can use the business model canvas to formulate your business structure. Each step should take 10 minutes in order to complete the canvas within 1 hour and 10 minutes.
0. Prepare for the workshop
Invite the team involved in the business creation. A group can provide much more insights and ideas than an individual. Make sure you print the canvas large enough or prepare an online template that participants can work on.
1. Name Your Purpose
- Spend the first 10 minutes with your team talking about your overarching purpose or mission.
- Put the purpose statement at the top of the business model canvas or on the wall where it is visible to everyone which can help inform other elements of the business model, and most importantly, help you evaluate whether or not your business is meeting your team’s goals throughout the workshop.
2. Identify Your Customer
- On one sticky note each, write down your customers or desired customers and list their characteristics, needs, and goals. You can do this by creating Customer Personas synthesized from your Needfinding process.
- Group these sticky notes into customer segments and add a segment type sticky note to label each group.
3. Connect Your Value Proposition
- To ensure that the customers and value proposition connect, start by writing a sticky note for each customer segment to indicate how the customer’s needs are currently being addressed (or how they’re not).
- Then write your value proposition on another sticky note that should address what is unaddressed in current solutions or improve them.
4. Name Your Delivery Channels and Customer Relationships
- On sticky notes, write down the channels through which you will reach your customer base to get the word out or deliver your service to them.
- Next, write down the relationship(s) your customers will have with your company. Below each relationship, list the ways in which the customer will interact with your company.
- If you are stuck on these points, refer to the Business Model Zoo™ or Business Model Navigator to understand what the relationship is between your business and its customers.
5. Identify Key Resources, Activities, and Partners
- On sticky notes, list the key resources needed to execute your business plan.
- Group your resources by what you currently have and what you will need for your business to work.
- Next, list the key activities you must perform to create, deliver, and capture value.
- Finally, list who you need to work with to create and deliver your value.
6. Cost Structures and Revenue Streams
- On sticky notes, write down all of the potential costs for your business to run key activities and deliver value to customers.
- Next, list all the possible revenue streams. Consider which makes the most sense for your company in delivering your value proposition.
7. Link the Boxes
Elements of the Business Model Canvas may be interdependent, and all of the elements should connect back to your purpose, value proposition, and customers.
- Identify all of the stakeholders included in your Business Model Canvas, and list them off to the side of your canvas. Going down the list, write a note indicating if they give and/or receive value.
- Flag stakeholders that only TAKE value. This could be a parasite in your business model. Discuss ways that they could give value back, and if not, consider eliminating them from the business model.
- Flag stakeholders that only RECEIVE value. These stakeholders might end of drained and flee. Discuss ways that the business could offer them value in return.
- Finally, go through each of the boxes on the canvas, and ask your team whether the elements you’ve written on sticky notes contribute to the value proposition and/or purpose. If not, move the sticky notes to an area below your canvas to be reconsidered or revised.
What’s Up Next?
Now that you have a business model down on paper, it’s time to test and validate it.
Business Model Template, print out in A1/24 x 33 inches or online version, Post-its, markers