In a previous post, I spoke about the art and practice of strategic planning and how various models exist for helping organizations plan.
The Business Model Canvas is one such model that is available for use under the Creative Commons license. The original source of the tool can be found at Strategyzer.com.
The Business Model Canvas was originally developed by Alexander Osterwalker. He then collaborated with Professor Pigneur and 470 other entrepreneurial thinkers in 45 different countries to innovate and refine the model using shared vision and insight.
The tool is called a “canvas” because the user builds their model on one piece of paper (or often one piece of large poster board or a large white board).
The Business Model Canvas is used today in organizations all around the world. The model helps organize all of the various aspects of an organization. As you build the model, you can also use it to brainstorm ways to change, innovate, or grow your organization.
How do you use the Business Model Canvas?
The nine steps are listed below in a step-by-step guide, but these steps can actually be completed in any order.
Step-by-Step Guide to the Business Model Canvas
- Step 1: Activities
- Step 2: Resources
- Step 3: Partnerships
- Step 4: Customer (User) Segments
- Step 5: Relationships with Customers (Users)
- Step 6: Channels
- Step 7: Costs
- Step 8: Revenues
- Step 9: Value Proposition(s)
I like to think of these activities as a series of questions to ask. I have provided some sample questions for you to consider at each step. As you build your canvas, ask other questions within each category that might expand, explore, or help you think differently about the category.
Step 1: Activities
The key activities are the “most important things a company must do to make its business model work” (Osterwalder & Pigneur, 2010). I suggest starting with activities because they are often the simplest items to list.
Ask these types of questions as you build the canvas:
What are the key activities that the organization is involved in?
What types of new activities or opportunities might we consider?
Step 2: Resources
The key resources are the “most important assets required to make a business model work” (Osterwalder & Pigneur, 2010). Think of resources as both tangible and intangible; human and technological; internal and external.
What are the key resources that are involved in creating value?
Do we need to seek new resources?
Step 3: Partnerships
The key partnerships are “the network of suppliers and partners that make the business model work” (Osterwalder & Pigneur, 2010). Consider partnerships that may be internal as well as external.
What are the key partnerships involved in helping the organization run, grow, provide products or services?
What new partnerships might we consider to expand or improve?
Step 4: Customer Segments
The Customer Segment “defines the different groups of people or organizations an enterprise aims to reach and serve” (Osterwalder & Pigneur, 2010). In their book, Osterwalder & Pigneur (2010) list several types of customers such as: mass market, niche market, segmented, and diversified.
Who benefits from our organization’s products or services?
Who might benefit?
What additional segments might we consider?
Step 5: Customer Relationships
The customer relationship “describes the types of relationships a company establishes with specific customer segments” (Osterwalder & Pigneur, 2010). As you think about relationships, also consider whether or not these relationships are personal, automated, or could be fostered in different ways.
What type of relationship do we have with each of our users?
How can we create sustainable relationships?
Step 6: Channels
Channels are “how a company communicates with and reaches its customer segments to deliver a value proposition” (Osterwalder & Pigneur, 2010). These channels could be how you are advertising or reaching your market of customers.
What channels are used to deliver the value?
Are there new ways to reach our users?
Step 7: Costs
“The cost structure describes all costs incurred to operate a business model” (Osterwalder & Pigneur, 2010).
What are the cost structures?
How can we reduce cost?
Step 8: Revenues
A revenue stream “represents the cash a company generates from each customer segment” (Osterwalder & Pigneur, 2010).
What are the revenue streams?
Do we need to build new revenue streams?
Step 9: Value Proposition(s)
The value propositions are “the bundle of products and services that create value for a specific customer segment” (Osterwalder & Pigneur, 2010). I suggest reviewing value propositions at the end of the process, but it might also be useful as step one.
What is it about our organization that sets it apart from other initiatives?
Where might we expand?
Remember, the steps presented here can be completed in any order.
As you build your canvas, consider posting it on the wall so that a team of individuals can work on the canvas together. Osterwalder & Pigneur (2010) suggest using sticky note paper or white board markers. The canvases often include both words and pictures within each step of the model. It can be useful to draw arrows or connections where applicable.
Osterwalder, A. & Pigneur, Y. (2010). Business model generation. Hoboken, NJ: Wiley.