What is the Business Model Canvas?

business model canvas

The business model canvas is a strategic planning template used by businesses  to plan and develop their business model. The business model canvas template explains the key elements of the business. Plus it simplifies the business plan into a condensed form. In short, the business model canvas template acts like a short but full summary for the business structure.

Why was Business Model Canvas Introduced 

The business model canvas template was originally introduced in 2004 by Alexander Osterwalder. Since then, it has been taught at business schools and Courses.

Business Model Canvas

Business Model Canvas Template Structure 

The template is divided into 9 main areas of an business: 

#1. Key Partners

Key Partners can be people or companies a business works with.e.g suppliers, distribution or lawyers etc. 

Key Partners points to note:

  • The key resources your company receives from these partners?
  • Activities which are performed by these partners?
  • What motivates your company to work with them? 
  • Anything Special that only they can provide? E.g they are low in cost.

#2. Key Activities

Specific tasks or activities that are fundamental to the operation of your company. 

key activities points to note:

  • Key activities which are necessary to deliver your value proposition?
  • Activities which set your company apart from competitors?
  • How or why do your revenue streams, customer relationships  and distribution channels differ from competitors?
  • Are procure specific niche resources required?
  • Is Streamline needed to keep costs and prices low?

#3. Key Resources for business model canvas

Assets which are necessary to operate and deliver your value proposition are Key Resources. E.g developer and team is required to run a digital agency

Key resources points to note:

  • Specific resources which are necessary to operate your business to deliver your value proposition.
  • Resources for your distribution channels and revenue streams funtioncialy.
  • Resources required to maintain customer relationships and satisfaction.
  • Does a company require significant capital or human resources?

#4. Value Propositions

The most important point of a business model canvas template is Value Propositions. Value proposition defines the fundamental offering the business plans to give its customers. 

Value propositions points to note:

  • The offering Company wants to provide to their customers.
  • What problem is your Business wanting or trying to solve?
  • What’s different in your offer that satisfies the demands of your customer segments (e.g. price, quality, design, status, etc.)?

#5. Customer Relationships

Types of Interactions a company has with its customers is called Customer relationships. 

Customer relationships points to note:

  • Type of relationship your customers will have with your Business. e.g do you provide dedicated assistance or are they expected to self-serve their needs through provided support channels?
  • Business interaction with customers based on differences between customer segments.
  • Does your company frequently communicate with customers?
  • How much support is provided by your business?

#6. Channels for business model canvas

Channels are the different methods which are used to deliver your company’s value proposition to its customers. Company’s supply, distribution, and marketing are few of channel examples. It is very important to consider all channels of a business plus make sure they are functioning cohesively. e.g Amazon to plan how its fulfillment centers and shipping services are integrated to send out timely shipments.

Channels points to note:

  • How to deliver your value proposition?
  • How do you reach your customer segments? What channels are used?
  • Are your supply, distribution, marketing, and communication channels well-integrated and cost-efficient? Are they being utilized effectively?

#7. Customer Segments

Different types of customers that a company manages are called Customer Segments. Companies need to think about the customer they want to target for their products and sometimes each product or service has its own Segment. 

e.g Airlines offer tickets for economy, business, and first-class customers. Each customer level has its own advantages and disadvantages

Customer segments points to note:

  • Which customers are the main focus of your value proposition? Who are you creating value for?
  • Your most important customers: What are they like, need or enjoy?
  • What is the customer market like? E.g Is your business targeting a mass market or small niche community?

#8. Cost Structure

How your company spends money on operations is called cost structure. Business’s key costs and the level of focus on costs are the key factors. e.g

  • Cost-driven company: focuses on minimizing costs and prices for customers. 
  • Value-driven company: focuses on creating value for its customers and less focus on cost.

Live example : fashion retailers: 

  • Forever 21  – a cost-driven company: is a fast-fashion company focused on delivering the newest styles at low costs. 
  • Gucci – a value-driven company : is a luxury brand focused on delivering high-quality clothes and accessories designed with the latest trends in the fashion industry.

Cost structure points to note:

  • Key costs in your company’s business model.
  • Major drivers of cost.
  • Key activities and resources which contribute to the cost structure.
  • Cost relationship with your revenue streams.
  • Is your Business properly utilizing economies of scale?
  • Which proportion of your company’s costs are fixed and variable?
  • Is your company focused on cost-optimization or value?

#9. Revenue Streams

Company’s source of cash flows is called Revenue streams. It’s the final element of the business model canvas template. Revenue streams are the different ways your business generates money from. A company might have different revenue streams. For example, Google has multiple revenue streams between its variety of products and its services, such as Google adwords.

Revenue streams points to note:

  • Does your Business have different methods of generating revenue?
  • What is the pricing strategy for the products or services offered by your Business?
  • Which channels are used by your customers to pay you?
  • Does your business offer multiple forms of payment e.g up-front, payment plans or financing, etc.)?