parts of business model canvas

Business Model Canvas: Explained with Examples

Got a new business idea, but don’t know how to put it to work? Want to improve your existing business model? Overwhelmed by writing your business plan? There is a one-page technique that can provide you the solution you are looking for, and that’s the business model canvas.

In this guide, you’ll have the Business Model Canvas explained, along with steps on how to create one. All business model canvas examples in the post can be edited online.

What is a Business Model Canvas

A business model is simply a plan describing how a business intends to make money. It explains who your customer base is and how you deliver value to them and the related details of financing. And the business model canvas lets you define these different components on a single page.   

The Business Model Canvas is a strategic management tool that lets you visualize and assess your business idea or concept. It’s a one-page document containing nine boxes that represent different fundamental elements of a business.  

The business model canvas beats the traditional business plan that spans across several pages, by offering a much easier way to understand the different core elements of a business.

The right side of the canvas focuses on the customer or the market (external factors that are not under your control) while the left side of the canvas focuses on the business (internal factors that are mostly under your control). In the middle, you get the value propositions that represent the exchange of value between your business and your customers.

The business model canvas was originally developed by Alex Osterwalder and Yves Pigneur and introduced in their book ‘ Business Model Generation ’ as a visual framework for planning, developing and testing the business model(s) of an organization.

What Are the Benefits of Using a Business Model Canvas

Why do you need a business model canvas? The answer is simple. The business model canvas offers several benefits for businesses and entrepreneurs. It is a valuable tool and provides a visual and structured approach to designing, analyzing, optimizing, and communicating your business model.

• The business model canvas provides a comprehensive overview of a business model’s essential aspects. The BMC provides a quick outline of the business model and is devoid of unnecessary details compared to the traditional business plan.
• The comprehensive overview also ensures that the team considers all required components of their business model and can identify gaps or areas for improvement.
• The BMC allows the team to have a holistic and shared understanding of the business model while enabling them to align and collaborate effectively.
• The visual nature of the business model canvas makes it easier to refer to and understand by anyone. The business model canvas combines all vital business model elements in a single, easy-to-understand canvas.
• The BMC can be considered a strategic analysis tool as it enables you to examine a business model’s strengths, weaknesses, opportunities, and challenges.
• It’s easier to edit and can be easily shared with employees and stakeholders.
• The BMC is a flexible and adaptable tool that can be updated and revised as the business evolves. Keep your business agile and responsive to market changes and customer needs.
• The business model canvas can be used by large corporations and startups with just a few employees.
• The business model canvas effectively facilitates discussions among team members, investors, partners, customers, and other stakeholders. It clarifies how different aspects of the business are related and ensures a shared understanding of the business model.
• You can use a BMC template to facilitate discussions and guide brainstorming brainstorming sessions to generate insights and ideas to refine the business model and make strategic decisions.
• The BMC is action-oriented, encouraging businesses to identify activities and initiatives to improve their business model to drive business growth.
• A business model canvas provides a structured approach for businesses to explore possibilities and experiment with new ideas. This encourages creativity and innovation, which in turn encourages team members to think outside the box.

How to Make a Business Model Canvas

Here’s a step-by-step guide on how to create a business canvas model.

Step 1: Gather your team and the required material Bring a team or a group of people from your company together to collaborate. It is better to bring in a diverse group to cover all aspects.

While you can create a business model canvas with whiteboards, sticky notes, and markers, using an online platform like Creately will ensure that your work can be accessed from anywhere, anytime. Create a workspace in Creately and provide editing/reviewing permission to start.

Step 2: Set the context Clearly define the purpose and the scope of what you want to map out and visualize in the business model canvas. Narrow down the business or idea you want to analyze with the team and its context.

Step 3: Draw the canvas Divide the workspace into nine equal sections to represent the nine building blocks of the business model canvas.

Step 4: Identify the key building blocks Label each section as customer segment, value proposition, channels, customer relationships, revenue streams, key resources, key activities, and cost structure.

Step 5: Fill in the canvas Work with your team to fill in each section of the canvas with relevant information. You can use data, keywords, diagrams, and more to represent ideas and concepts.

Step 6: Analyze and iterate Once your team has filled in the business model canvas, analyze the relationships to identify strengths, weaknesses, opportunities, and challenges. Discuss improvements and make adjustments as necessary.

Step 7: Finalize Finalize and use the model as a visual reference to communicate and align your business model with stakeholders. You can also use the model to make informed and strategic decisions and guide your business.

What are the Key Building Blocks of the Business Model Canvas?

There are nine building blocks in the business model canvas and they are:

Customer Segments

Customer relationships, revenue streams, key activities, key resources, key partners, cost structure.

• Value Proposition

When filling out a Business Model Canvas, you will brainstorm and conduct research on each of these elements. The data you collect can be placed in each relevant section of the canvas. So have a business model canvas ready when you start the exercise.  

Let’s look into what the 9 components of the BMC are in more detail.

These are the groups of people or companies that you are trying to target and sell your product or service to.

Segmenting your customers based on similarities such as geographical area, gender, age, behaviors, interests, etc. gives you the opportunity to better serve their needs, specifically by customizing the solution you are providing them.

After a thorough analysis of your customer segments, you can determine who you should serve and ignore. Then create customer personas for each of the selected customer segments.

There are different customer segments a business model can target and they are;

• Mass market: A business model that focuses on mass markets doesn’t group its customers into segments. Instead, it focuses on the general population or a large group of people with similar needs. For example, a product like a phone.  
• Niche market: Here the focus is centered on a specific group of people with unique needs and traits. Here the value propositions, distribution channels, and customer relationships should be customized to meet their specific requirements. An example would be buyers of sports shoes.
• Segmented: Based on slightly different needs, there could be different groups within the main customer segment. Accordingly, you can create different value propositions, distribution channels, etc. to meet the different needs of these segments.
• Diversified: A diversified market segment includes customers with very different needs.
• Multi-sided markets: this includes interdependent customer segments. For example, a credit card company caters to both their credit card holders as well as merchants who accept those cards.

Use STP Model templates for segmenting your market and developing ideal marketing campaigns

Visualize, assess, and update your business model. Collaborate on brainstorming with your team on your next business model innovation.

In this section, you need to establish the type of relationship you will have with each of your customer segments or how you will interact with them throughout their journey with your company.

There are several types of customer relationships

• Personal assistance: you interact with the customer in person or by email, through phone call or other means.
• Dedicated personal assistance: you assign a dedicated customer representative to an individual customer.  
• Self-service: here you maintain no relationship with the customer, but provides what the customer needs to help themselves.
• Automated services: this includes automated processes or machinery that helps customers perform services themselves.
• Communities: these include online communities where customers can help each other solve their own problems with regard to the product or service.
• Co-creation: here the company allows the customer to get involved in the designing or development of the product. For example, YouTube has given its users the opportunity to create content for its audience.

You can understand the kind of relationship your customer has with your company through a customer journey map . It will help you identify the different stages your customers go through when interacting with your company. And it will help you make sense of how to acquire, retain and grow your customers.

This block is to describe how your company will communicate with and reach out to your customers. Channels are the touchpoints that let your customers connect with your company.

Channels play a role in raising awareness of your product or service among customers and delivering your value propositions to them. Channels can also be used to allow customers the avenue to buy products or services and offer post-purchase support.

There are two types of channels

• Owned channels: company website, social media sites, in-house sales, etc.
• Partner channels: partner-owned websites, wholesale distribution, retail, etc.

Revenues streams are the sources from which a company generates money by selling their product or service to the customers. And in this block, you should describe how you will earn revenue from your value propositions.  

A revenue stream can belong to one of the following revenue models,

• Transaction-based revenue: made from customers who make a one-time payment
• Recurring revenue: made from ongoing payments for continuing services or post-sale services

There are several ways you can generate revenue from

• Asset sales: by selling the rights of ownership for a product to a buyer
• Usage fee: by charging the customer for the use of its product or service
• Subscription fee: by charging the customer for using its product regularly and consistently
• Lending/ leasing/ renting: the customer pays to get exclusive rights to use an asset for a fixed period of time
• Licensing: customer pays to get permission to use the company’s intellectual property
• Brokerage fees: revenue generated by acting as an intermediary between two or more parties
• Advertising: by charging the customer to advertise a product, service or brand using company platforms

What are the activities/ tasks that need to be completed to fulfill your business purpose? In this section, you should list down all the key activities you need to do to make your business model work.

These key activities should focus on fulfilling its value proposition, reaching customer segments and maintaining customer relationships, and generating revenue.

There are 3 categories of key activities;

• Production: designing, manufacturing and delivering a product in significant quantities and/ or of superior quality.
• Problem-solving: finding new solutions to individual problems faced by customers.
• Platform/ network: Creating and maintaining platforms. For example, Microsoft provides a reliable operating system to support third-party software products.

This is where you list down which key resources or the main inputs you need to carry out your key activities in order to create your value proposition.

There are several types of key resources and they are

• Human (employees)
• Financial (cash, lines of credit, etc.)
• Intellectual (brand, patents, IP, copyright)
• Physical (equipment, inventory, buildings)

Key partners are the external companies or suppliers that will help you carry out your key activities. These partnerships are forged in oder to reduce risks and acquire resources.

Types of partnerships are

• Strategic alliance: partnership between non-competitors
• Coopetition: strategic partnership between partners
• Joint ventures: partners developing a new business
• Buyer-supplier relationships: ensure reliable supplies

In this block, you identify all the costs associated with operating your business model.

You’ll need to focus on evaluating the cost of creating and delivering your value propositions, creating revenue streams, and maintaining customer relationships. And this will be easier to do so once you have defined your key resources, activities, and partners.  

Businesses can either be cost-driven (focuses on minimizing costs whenever possible) and value-driven (focuses on providing maximum value to the customer).

Value Propositions

This is the building block that is at the heart of the business model canvas. And it represents your unique solution (product or service) for a problem faced by a customer segment, or that creates value for the customer segment.

A value proposition should be unique or should be different from that of your competitors. If you are offering a new product, it should be innovative and disruptive. And if you are offering a product that already exists in the market, it should stand out with new features and attributes.

Value propositions can be either quantitative (price and speed of service) or qualitative (customer experience or design).

What to Avoid When Creating a Business Model Canvas

One thing to remember when creating a business model canvas is that it is a concise and focused document. It is designed to capture key elements of a business model and, as such, should not include detailed information. Some of the items to avoid include,

• Detailed financial projections such as revenue forecasts, cost breakdowns, and financial ratios. Revenue streams and cost structure should be represented at a high level, providing an overview rather than detailed projections.
• Detailed operational processes such as standard operating procedures of a business. The BMC focuses on the strategic and conceptual aspects.
• Comprehensive marketing or sales strategies. The business model canvas does not provide space for comprehensive marketing or sales strategies. These should be included in marketing or sales plans, which allow you to expand into more details.
• Legal or regulatory details such as intellectual property, licensing agreements, or compliance requirements. As these require more detailed and specialized attention, they are better suited to be addressed in separate legal or regulatory documents.
• Long-term strategic goals or vision statements. While the canvas helps to align the business model with the overall strategy, it should focus on the immediate and tangible aspects.
• Irrelevant or unnecessary information that does not directly relate to the business model. Including extra or unnecessary information can clutter the BMC and make it less effective in communicating the core elements.

What Are Your Thoughts on the Business Model Canvas?

Once you have completed your business model canvas, you can share it with your organization and stakeholders and get their feedback as well. The business model canvas is a living document, therefore after completing it you need to revisit and ensure that it is relevant, updated and accurate.

What best practices do you follow when creating a business model canvas? Do share your tips with us in the comments section below.

Join over thousands of organizations that use Creately to brainstorm, plan, analyze, and execute their projects successfully.

FAQs About the Business Model Canvas

• Use clear and concise language
• Use visual-aids
• Customize for your audience
• Highlight key insights
• Be open to feedback and discussion

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Amanda Athuraliya is the communication specialist/content writer at Creately, online diagramming and collaboration tool. She is an avid reader, a budding writer and a passionate researcher who loves to write about all kinds of topics.

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The Business Model Canvas

Understanding what makes your company successful.

By the Mind Tools Content Team

Do you know what your company's business model is? How well do you understand it? And why does this matter?

A company's business model determines how it generates its revenue, operates successfully, and makes a profit. If your company's business model is out of date or wrong for its market, then it's likely to fail.

Understanding your company's business model is an important part of developing the "commercial awareness" you need to solve problems effectively, make good decisions, and become known as a trusted leader in your organization.

This article explores a useful model that you can use to think about your business model.

What Is the Business Canvas Model?

Alex Osterwald and Yves Pigneur developed their Business Model Canvas in 2010.

They collaborated with 470 members of the Business Model Innovation Hub – an online forum for business professionals and researchers – who contributed case studies, examples, and critical comments to their research. As such, the Business Model Canvas represents the collective experience of a community of business people.

It appears as a template of nine basic building blocks, as shown in figure 1, below. These form a blueprint, based on which business models can be systematically designed, explained and challenged.

Figure 1: The Business Model Canvas

The Business Model Canvas is the property of BusinessModelGeneration.com / strategyzer.com , and it is distributed under a Creative Commons copyright license .

How to Use the Business Model Canvas

To use the Business Model Canvas, think about each building block using the questions below. You may want to download our worksheet to help with this.

CS: Customer Segments

Your customer segments are your target markets – the specific groups of people or organizations that your business serves.

Instead of trying to satisfy everyone, all of the time, group your customers according to common attributes like their location, needs, or behaviors, and decide which segments to focus on. This way, you can deliver a product or service that is closely tailored to the specific needs of particular groups.

See our article on market segmentation for more on this.

Record your results in the CS block of the canvas.

VP: Value Propositions

The value propositions block defines how you'll deliver value to your customers. You can create value in many ways, including offering a low price, a high standard of design, good accessibility, convenience, and high performance. Consider these questions:

• How do you create value for your target market?
• What problem or need does your product or service solve for the customer?
• How does your product or service differ from your competitors' offerings?

If you are struggling to crystallize your value proposition, conduct a USP Analysis and Core Competency Analysis to assess how your product or service stands out from those of your competitors.

Write your value proposition in the VP block of the Business Model Canvas.

R$: Revenue Streams

In this block, you analyze how each customer segment pays for your product or service.

There are many different ways to pay for a product or service. For example, is the price fixed, or will you charge customers for each use, by subscription, or with ongoing payments? Will any negotiation or bargaining be involved? And who, ultimately, is the customer? (Your customer may be an advertiser, for example, rather than the user of the service.)

Consider these additional questions:

• What do your customers currently pay for similar products or services?
• How do they pay for this?
• What do you charge for your product or service?
• Do customers get any free services or perks that your competitors don't offer?

Record this in the R$ block of the Business Model Canvas.

CH: Channels

The word "channel" refers to the way you deliver your value proposition to each customer segment. Channels include a direct sales force, web sales, own brand stores, partner stores, and wholesalers. Consider these questions:

• How do you make your customers aware of your products and services?
• What channels do your customers prefer to use?
• How will you help customers evaluate your value proposition?
• How do customers want to buy your products and services?
• How do you provide customer support?

Record your answers in the CH block of the Business Model Canvas.

CR: Customer Relationships

This block defines the type of relationship you want to foster with each of your customer segments. There are several categories to consider here.

• Dedicated personal assistance – This is where the wants and needs of each customer are handled by a dedicated customer service representative. For example, many types of business dedicate an account manager to highly valued clients.
• Personal assistance – Here, customers can communicate with a customer service professional during and after the sales process. This can happen in person at the point of sale, or through a call center, email, or IM.
• Self-service – Customers can purchase products without assistance.
• Automated Service – An automated service recognizes individual customers through a login or other identifier. This provides a customized service that "remembers" the customer's preferences and presents options accordingly.
• Communities – Here, the organization builds communities using social networking and blogs to encourage customers to communicate with one another, share ideas, and solve problems.
• Co-creation – In these relationships, organizations go beyond the traditional customer-vendor relationship by encouraging customers to take a more active role in shaping what the product or service might be. For example, some companies encourage their customers to review their products, or create content that can be shared with others.

To think about how your business develops relationships with customers, you can use the Buy-Sell Hierarchy , Focus Groups , and Customer Experience Mapping to understand what your customers want from their experience, and then use this information to build the customer relationships you need.

Record your findings in the CR block of the Business Model Canvas.

KR: Key Resources

Your key resources are the things you most need to make your business model work, and different types of business need different types of resource.

Key resources may be owned by your company, leased, or used through some other arrangement with key partners.

Consider these questions:

• What human resources will you need?
• What financial resources will you need?
• What physical resources will you need?
• What intellectual property resources will you need?

Conduct a VRIO analysis to explore how you can make best use of the resources you have available.

Make a record of these key resources in the KR block of the Business Model Canvas.

KA: Key Activities

Your key activities are the most important business processes that your organization must use to operate successfully. Examples of these include designing, manufacturing, and delivering a product; providing new solutions to customers; or providing a platform on which customers are able to complete transactions.

List your key activities in the KA block of the Business Model Canvas.

KP: Key Partnerships

This is the network of partners, stakeholders and suppliers that you rely upon to make your business model work. Consider these questions:

• What strategic alliances do you have in place to bring your product or service to market?
• What partnerships are needed to access key resources such as areas of expertise, raw materials, or access to customers?
• What partnerships allow you to access economies of scale?
• Who have you joined forces with to minimize risk and uncertainty?
• Who are the key stakeholders for your product or service? How can you create strategic partnerships with these people?

Conduct a Stakeholder Analysis to identify who has the most power and influence. And, as you evaluate potential partners, use our 10 Cs of Supplier Evaluation checklist to evaluate them carefully.

Write your key partnerships – both potential and present – in the KP block of the Business Model Canvas.

C$: Cost Structure

The last block you need to analyze is your cost structure. This looks at all of the operating costs that your business incurs as part of its business model. These costs should be easy to identify, now that you've defined your key resources, activities, and partnerships.

Record your findings in the C$ block of the Business Model Canvas.

Applying What You Have Learned

By working through the Business Model Canvas for your own company, you'll get a good insight into the things that really matter for your business.

You can use this understanding to make informed decisions about business areas that you are responsible for by checking, in particular, that your decision won't undermine the wider business in any way. You can also quickly identify business areas that will be improved by your decision, and this will help you "sell" your recommendations.

It also gives you a head start when you're scanning the business news or industry press for changes that will positively or negatively affect your business. You'll know the core things that your business depends on, and you can watch out for changes that affect these.

Another advantage of the Business Model Canvas is that it clarifies how your own part of the company affects, and is affected by, other departments. This helps all parts of the business co-operate with one another more efficiently.

The Business Model Canvas was developed by Alex Osterwald and Yves Pigneur, in collaboration with a community of business professionals at the Business Model Innovation Hub. It is a useful tool for designing and analyzing business models in an objective, structured way.

The Business Model Canvas incorporates nine building blocks:

Block 1: Customer segments.

Block 2: Value propositions.

Block 3: Channels.

Block 4: Customer relationships.

Block 5: Revenue streams.

Block 6: Key resources.

Block 7: Key activities.

Block 8: Key partnerships.

Block 9: Cost structure.

You can use the Business Model Canvas to develop a new business model, or refresh an outdated one; analyze the viability of a new business idea; and even to analyze your competitors' business models to discover opportunities for making your own business stand out.

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How to Build a Product Roadmap Based on a Business Model Canvas

Could you list all of the key building blocks you need to develop, manage, maintain, market, and sell a product on a single sheet of paper? With the business model canvas, you can! Using the business model canvas approach is a great way to force yourself to focus on the most strategically important elements of your product. As the name suggests, the typical use case for this tool is to outline the fundamental building blocks of a business, but it also can work really well for a product.

Today we’ll show you how the business model canvas works and how you can use it to come up with a high-level product strategy.

What is a Business Model Canvas?

As you can see from the sample example below (thanks, Strategyzer.com), a business model canvas is a one-page summary describing the high-level strategic details needed to get a business (or product) successfully to market.

The categories or buckets contained in a canvas can be customized. But most will look similar to the one here—covering such key areas as:

• The product’s value propositions (what it does and promises)
• Customer segments (who it’s for)
• Key activities (the steps the team must complete to make it successful)
• Key resources (what personnel, tools, and budget the team will have access to)
• Channels (how the organization will market and sell it)
• Customer relationships (how the team will support and work with its customer base)
• Key partners (how third parties will fit into the plan)
• Cost structure (what it costs to build the product as well as how to sell and support it)
• Revenue streams (how the product will make money)

If you think about it, that’s a fairly comprehensive set of building blocks you’ll need to think through for your product before you begin developing it. There will certainly be additional factors that’ll affect your strategy, but if you can fill in these high-level details—which, as you can see, should fit comfortably on a single page—you’ll have a useful strategic guide for developing your product roadmap.

Why Should I Use a Business Model Canvas to Develop a Product Roadmap?

Okay, but why? What’s the benefit of building a business model canvas (or the, even more, stripped-down variation, the lean canvas) to guide my product roadmap ?

There are plenty of reasons. But simply put, you can think of a business model canvas as a mission statement for your product roadmap. It’s a handy reference you can refer to, to make sure your roadmap always reflects all the strategic elements needed for your product’s success.

Tweet This: “Think of a business model canvas as a mission statement for your product roadmap.”

Our co-founder Jim Semick has a couple of great short videos explaining the business model canvas concept, which you can check out in the player below.

As Jim explains, here are a few of the benefits of using a business model canvas to think through product strategies:

1. You can use a business model canvas to roadmap quickly.

You can use this canvas approach in just a few hours (and as Jim says, you can even do it with sticky-notes).

This way, rather than trying to write out every detail about your product plan beforehand, you can just document the highlights—and then you can get rolling translating the canvas into your product roadmap.

2. A business model canvas will be more agile.

One problem with the old structure of documenting a business model—the traditional business plan—was that it was almost always inaccurate as soon as the author finished drafting it.

These meaty plans included detailed cost estimates, revenue projections going years into the future, and long-term plans for growing the staff. How could any of that remain accurate for long?

In product terms, you can think of the business plan as resembling an MRD (Market Requirements Document). It’s long, detailed, and probably mostly untrue by the time it’s done.

But because you can put a canvas together so quickly, it will much more accurately reflect your strategic thinking and your company’s current reality. And if things change, it’ll be easier than a long and detailed plan to adjust. This brings us to Jim’s third benefit…

3. Business model canvas roadmaps allow you to pivot as needed.

If you build a business model canvas to guide your business roadmap , and something happens that forces you to re-prioritize or pivot your product , it will be a lot easier to update this short, high-level document than it would be if you had some monster MRD or business plan to tear apart and edit.

With a one-page business model canvas acting as the strategic undergirding for your roadmap, you’ll always be able to quickly spot any items or plans that need updating whenever priorities change or new realities demand that you adjust your approach.

How Can I Use A Business Model Canvas to Guide My Product Roadmap?

The alexa example.

Let’s talk through a hypothetical example, using Amazon’s Echo device (“Alexa”) as our guide.

Imagine that as they were talking through what belonged in the “Revenue Streams” bucket of the business model canvas, Amazon’s Echo team came up with three sources of revenue to start with:

1) Selling Echo devices.

2) Using the device to sell other stuff as customers ask it to connect to the Amazon marketplace. (“Alexa, please add laundry detergent pods to my shopping cart.”)

3) Licensing Echo’s proprietary speech-recognition technology to other businesses.

Now, if the Echo product team put these on their business model canvas, they’d know that they need to make room for budget, time, and resources on their product roadmap for all of these revenue streams.

Another Hypothetical Example of the Business Model Canvas: Channels

Or think about the Channels bucket in the business model canvas. If your team was building out a canvas, maybe you’d have several ideas for reaching customers:

1) The in-house sales team. 2) Affiliate partners. 3) Word-of-mouth advertising from users.

It’s easy to write. But how are you going to translate that “word-of-mouth” strategy into an actual plan?

Maybe you’ll need to budget time and resources for developing things right into your product that make it easier for users to share their experiences with friends, such as a handy tool to help them tweet about it. Maybe you’ll even want to include an “Invite a friend” feature that lets users easier send a trial license to friends, or a couponing feature that offers some reward to a user who brings in two more users.

The point is, your business model canvas can serve as a great strategic reminder of the things you’ve determined are important enough to make it onto your product roadmap .

So you can always look back and see immediately—it’s just one page, after all—if you’re still working on all of the essential elements of your product, or if you’ve inadvertently strayed from them and gotten lost in the wrong details.

That’s why we’re big proponents of the business model canvas approach to guiding your product roadmap .

Do you have an opinion about using the business model canvas approach for developing and documenting your product’s strategy? Feel free to share them in the comments section.

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What is a Business Model Canvas: A Miro Insider Guide

Table of Contents

Diving into the business strategy and innovation world introduces various tools and methodologies to navigate current markets. Among these, the Business Model Canvas (BMC) stands out as a strategic management tool that has revolutionized how entrepreneurs, innovators, and business leaders visualize, design, and reinvent their business models.

The BMC provides a concise, visual framework that encapsulates how organizations create, deliver, and capture value. This article aims to explore the BMC in-depth, offering insights and practical advice on leveraging this tool to its fullest potential.

Decoding the Business Model Canvas

What is the Business Model Canvas? At its core, the Business Model Canvas is a strategic management tool designed to visualize, design, and reinvent business models. It's your canvas (pun intended!) to paint a comprehensive picture of how your organization creates, delivers, and captures value. Alexander Osterwalder pioneered this concept, making it a cornerstone for entrepreneurs, innovators, and business leaders worldwide.

Key components of the Business Model Canvas:

1. value propositions.

Your value proposition is the core of your Business Model Canvas. It essentially answers the question: What sets you apart from your competitors, and why would customers choose you over them? It's more than just your products or services; it's about your exclusive benefits and solutions. A compelling value proposition is concise, straightforward, and directly addresses the customer's problem or need. So, it's like your pitch to your target market that you can deliver in an elevator ride.

2. Customer segments

Who are you creating value for? This section requires you to segment your market into groups of customers with similar needs, behaviors, or characteristics. Understanding your customer segments allows you to tailor your value propositions, communication, distribution channels, and more to each specific segment. It's about being precise in whom you serve to maximize your impact and efficiency.

3. Channels

Channels are the touchpoints through which you communicate with your customer segments and deliver your value propositions. They cover the entire customer journey, from awareness and evaluation to buy and post-purchase. Channels can be direct, like your website, or indirect, like retail partners. The goal here is to find the most effective and efficient way to reach your customers where they are.

4. Customer relationships

How do you intend to establish and sustain relationships with your customers? This aspect involves identifying the kind of relationship you wish to maintain with each customer group, ranging from personalized assistance to self-service, automated services, communities, and co-creation. Your chosen relationship strategy should align with customer expectations and your business model's cost structure.

5. Revenue streams

Revenue Streams refer to how your business can generate income by converting value into financial returns. These streams may include selling assets, lending, leasing, subscription fees, licensing, and advertising. It is important to associate each revenue stream with a specific customer segment and to clearly understand what your customers are willing to pay for and how they prefer to pay.

6. Key resources

Key resources are the assets required to make your business model work. They can be physical (buildings, vehicles), intellectual (brands, patents, data), human (expertise, knowledge), or financial. Identifying and securing these resources is vital for delivering your value propositions, reaching markets, maintaining customer relationships, and earning revenue.

7. Key activities

What must you do to ensure your business model functions effectively? Key activities in the Business Model Canvas could involve production, problem-solving, or platform/network maintenance, depending on your business type. These are the most important tasks your company must undertake to fulfill its value propositions, reach markets, and sustain operations.

8. Key partnerships

Few businesses operate in isolation. Key partnerships and networks can help you optimize your business model, reduce risks, or acquire resources and activities. Partners can include suppliers, manufacturers, collaborators, and even competitors in some cases. The aim is to forge alliances that help your business focus on its core value proposition and outsource or collaborate on the rest.

9. Cost structure

Finally, the cost structure outlines the major costs of operating your business model. Understanding your cost structure is crucial for ensuring your business is financially viable. Costs can be fixed (unchanged regardless of output), variable (scale with production volume), or a mix of both. The goal is to create a cost structure that allows your business to deliver its value propositions sustainably and competitively.

Each of these components interconnects to paint a comprehensive picture of your business model. When thoughtfully completed, the Business Model Canvas not only guides your strategic planning but also serves as a dynamic blueprint that evolves with your business.

Do you need a Business Model Canvas?

Whether you're a startup or an established company, BMC is your Swiss Army knife for business model innovation. It's particularly useful when:

Launching a new product or service, providing a holistic view of its potential.

Entering a new market , helping you understand your unique value proposition.

Pivoting your business , enabling rapid conceptualization of new directions.

Benefits of using a Business Model Canvas:

Clarity and focus.

The BMC provides a clear, concise framework that condenses complex business models into a single visual document. This clarity is invaluable, as it allows you to see the relationships between different business model components—how your value propositions align with your customer segments, how your channels and customer relationships support your value delivery, and how your revenue streams fit with your cost structure. This focused overview enables you to identify your business model's strengths, weaknesses, and opportunities for innovation.

Alignment and communication

One of the BMC's greatest strengths is its ability to facilitate alignment and communication within teams and across departments. By having a shared, easily understandable visualization of the business model, everyone from the CEO to the newest intern can have a common understanding of the company's strategic direction. This alignment ensures that all efforts are coordinated towards the same objectives, reducing conflicts and enhancing productivity. It also makes it easier to onboard new team members and communicate with external stakeholders.

Flexibility and adaptability

Adaptability is key to survival and growth in today's fast-paced business environment. The BMC is inherently designed for flexibility, making it easier to pivot and iterate on your business model as market conditions change, new technologies emerge, or customer preferences evolve. This adaptability allows for rapid experimentation and validation, enabling businesses to effectively innovate and respond to opportunities or threats.

Streamlined strategy development and execution

The BMC streamlines the process of strategy development and execution. Breaking down the business model into nine fundamental components simplifies complex strategic considerations, making it easier to identify which areas require attention, improvement, or innovation. This streamlined approach helps businesses more efficiently allocate resources, prioritize initiatives, and execute their strategies more precisely.

Enhanced customer understanding

The BMC encourages a deep dive into who your customers are, what they need, and how they want to interact with your business. This enhanced understanding is crucial for creating value propositions that truly resonate with your target audience and developing customer relationships that foster loyalty and advocacy. You can maintain a customer-centric approach that drives sustained business growth by continuously refining your customer segments and value propositions based on feedback and market research.

Risk management and cost efficiency

The BMC helps identify potential risks and areas where costs can be optimized by providing a holistic view of your business model. Understanding the key activities, resources, and partnerships essential to your business model allows you to make informed decisions that minimize waste and reduce vulnerabilities. This proactive approach to risk management and cost efficiency can significantly improve your business's operational effectiveness and financial health.

Innovation and competitive advantage

Lastly, the BMC is a powerful tool for fostering innovation. By visualizing your business model, you can easily spot opportunities for disruptive innovation, whether through new value propositions, untapped customer segments, novel revenue streams, or more efficient channels. This ongoing pursuit of innovation helps maintain a competitive edge, ensuring that your business remains relevant and capable of capturing new market opportunities.

Application of BMC in different roles

Product managers.

Scenario: Launching a new app.

Validate customer needs and tailor the app's value proposition.

Identify key features as Key Activities.

Design a user acquisition strategy through Channels.

Business managers

Scenario: Expanding into a new market.

Assess the market's Customer Segments and adapt the value proposition accordingly.

Reevaluate Key Partnerships for local market access.

Adjust Cost Structure for market entry.

Strategists

Scenario: Exploring new revenue streams.

Analyze current Revenue Streams and brainstorm alternatives.

Evaluate new Customer Segments for expansion.

Consider innovative Channels and Customer Relationships to enhance value delivery.

How to complete a Business Model Canvas: Step-by-Step

1. start with the value propositions.

Clearly define the unique benefits your product/service offers.

Tools/Frameworks: The Value Proposition Canvas is an excellent tool here. It allows you to get into your customers' shoes, understanding their needs, pains, and gains deeply. This detailed exploration helps craft compelling value propositions that resonate strongly with your target market.

2. Identify your customer segments

Understand who your customers are and what they need.

Tools/Frameworks: Market Segmentation Analysis is crucial. Use data analytics tools like Google Analytics for an online audience or customer surveys and interviews for direct feedback. Personas and empathy maps also offer valuable insights into customer motivations and behaviors, helping you to segment your market more effectively.

3. Map out channels

Determine how you'll reach your customers.

Tools/Frameworks: The Five Channels Framework by Clayton Christensen is a powerful way to think about how you reach your customers. Additionally, A/B testing platforms can help you experiment with different channels and measure their effectiveness in reaching your customer segments.

4. Design customer relationships

Plan how to interact with your customers.

Tools/Frameworks: Customer Journey Mapping tools enable you to visualize the entire customer experience and identify key touchpoints where you can strengthen relationships. CRM (Customer Relationship Management) software can then help you manage these relationships at scale.

5. Define revenue streams

Explore how you'll make money.

Tools/Frameworks: For this component, Business Model Scenarios can be particularly useful. This involves creating various "what-if" scenarios to explore different revenue models and their implications. Financial modeling software or spreadsheets are essential tools for quantifying these scenarios and projecting their financial outcomes.

6. List key resources

Identify what you need to operate.

Tools/Frameworks: Resource Analysis is a systematic approach to identifying your essential resources. Tools like SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis can help you critically assess your internal capabilities and resources.

7. Outline key activities

Pinpoint what actions are necessary.

Tools/Frameworks: Process Mapping tools can help you visualize and optimize the key activities required for your business model to succeed. Lean methodology and Kanban boards effectively identify and focus on value-adding activities, minimizing waste in your processes.

8. Select key partnerships

Choose who will help you succeed.

Tools/Frameworks: Partnership Mapping is a strategy that can clarify how and with whom you should collaborate. Tools like the Partner Ecosystem Canvas can help you identify potential partners and define the nature of these partnerships in alignment with your business objectives.

9. Analyze cost structure

Break down your costs.

Tools/Frameworks: Cost Analysis Tools , such as cost-benefit analysis frameworks and financial modeling software, are invaluable. They allow you to break down your costs into fixed and variable components, understand your cost drivers, and explore ways to optimize your cost structure for efficiency and sustainability.

Avoid these pitfalls when building your BMC

Overcomplication.

Problem: Adding too much detail or too many elements can make the BMC confusing and less actionable. It's essential to keep the model clear and concise to maintain focus and ensure it's easily understood by all stakeholders.

Solution: Stick to the core elements of your business model. Use simple language and avoid industry jargon. If necessary, create additional documents for in-depth analyses, but keep the BMC as your strategic overview.

Ignoring customer feedback

Problem: Building a BMC based on assumptions without validating these assumptions with real customer feedback can lead to a misalignment between your business model and market needs.

Solution: Regularly engage with your customers through surveys, interviews, and prototype testing. Use these insights to continually refine your value propositions and customer segments in your BMC.

Inflexibility

Problem: Treating the BMC as a static document rather than a living, evolving tool can stifle innovation and responsiveness to market changes.

Solution: Periodically review and update your BMC to reflect new insights, changes in the market, and strategic pivots. Encourage a culture of flexibility and continuous improvement.

Lack of alignment among team members

Problem: Without a shared understanding and consensus among team members regarding the BMC, there can be misalignment in execution, leading to inefficiencies and dilution of strategic efforts.

Solution: Regularly discuss and review the BMC with all team members and stakeholders. Ensure clear communication and alignment on the business model's key components and strategic direction.

Focusing only on the present

Problem: Focusing solely on current operations and ignoring future opportunities and threats can make your business vulnerable to disruption.

Solution: Use the BMC as a tool for both current state mapping and future scenario planning. Regularly brainstorm potential changes in customer needs, technological advancements, and market dynamics that could impact your business model.

Underestimating the importance of key partnerships

Problem: Neglecting to carefully consider and nurture key partnerships can lead to missed opportunities for leveraging external expertise, resources, and market access.

Solution: Identify and actively manage relationships with partners that can provide critical resources, channels, or customer access. View these partnerships as strategic assets.

Failing to prioritize and sequence activities

Problem: Attempting to tackle all components of the BMC simultaneously without clear priorities can lead to resource strain and loss of strategic focus.

Solution: Identify the most critical components of your BMC that will drive most of your value creation and revenue generation. Focus your efforts and resources on these areas before expanding to others.

Not leveraging technology and tools

Problem: Manually managing and updating your BMC without using digital tools can limit collaboration and reduce the efficiency of iterations.

Solution: Use platforms like Miro for collaborative BMC creation and iteration. These tools offer templates, easy updates, and the ability to share your canvas with stakeholders for feedback and collaboration.

By being mindful of these pitfalls and implementing the suggested solutions, you can ensure that your Business Model Canvas remains a dynamic, effective tool that drives your business strategy forward. Remember, the goal is to use the BMC not just as a planning tool but as a framework for ongoing innovation and strategic agility.

Building your BMC with confidence

Creating a Business Model Canvas is an ongoing journey, not a one-time task. Here are some final nuggets of wisdom:

Iterate Relentlessly: Your BMC should evolve as your business grows.

Seek Diverse Perspectives: Collaboration enriches your business model.

Use Visual Tools: Platforms like Miro offer an interactive way to build and share your BMC.

As we come to a close, it's important to emphasize that the Business Model Canvas is more than just a tool - it's a way of thinking that encourages creativity and innovation in your business strategy. Whether you're a product manager, business manager, or strategist, using the BMC framework can help you clearly articulate, develop, and pivot your business model with confidence. So embrace it, and discover how your business ideas can flourish in ways you never thought possible.

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What is a business model canvas? Overview with template

In 2013, I co-founded a startup in the Indian online gifting industry with three friends. It was my first involvement with a startup. Startups are fascinating — they’re small, agile, and quick. However, another key feature of startups is their ability to creatively solve problems.

At that time, we aimed to target India’s gifting market, which was more than 90 percent offline. We had plans to establish an online shop selling a wide variety of gifts. But before we got started, we decided to document our idea. Amidst many templates, we discovered the business model canvas, a lean tool for outlining business models. It was neat, straightforward, and free. This tool brought remarkable clarity to our idea.

Despite shutting down the startup in 2015, I gained a wealth of knowledge during those two years. One major takeaway was the tools and techniques I learned along the way. The business model canvas was one of them. Even after seven years, I still use the business model canvas in my role as a product manager.

In this blog post, we’ll explore how product managers and entrepreneurs can effectively use a business model canvas.

What is a business model canvas?

The business model canvas is a template introduced by Alexander Osterwalder in 2005 as part of his Ph.D. studies under the supervision of Yves Pigneur. The business model canvas outlines nine crucial elements of a business model in an easy-to-understand visual template: customer segments, value proposition, channels, customer relationships, revenue streams, key activities, key resources, key partnerships, and cost structure.

Various companies, including startups, scale-ups, and large software organizations, have utilized this template since its inception to simplify their business strategy and improve their understanding of the overall business structure. However, before we delve into what a business model canvas entails, it’s important to comprehend why simplifying business strategy and structure is essential.

The last company I was part of employed 10,000 individuals. It ran more than 20 different businesses, each generating millions in revenue. When operating on such a large scale, it’s vital to have a clear strategy that outlines the business models. This strategy should define who the customers are, identify key partners, elaborate on the value proposition, and explain the cost structure, among other things.

The strategic blueprint serves as a go-to source of information whenever confusion arises. While this is true for large corporations, it’s equally applicable to smaller scale-ups and startups. It’s crucial to understand the business strategy and models from the onset. This comprehension aids in crafting a framework that can be applied when tackling complex issues or determining priorities.

This is where the business model canvas proves invaluable. It assists in laying out business models in a straightforward, user-friendly format.

What are the 9 components of the business model canvas?

The business model canvas comprises nine key elements:

Customer segments

Value proposition, customer relationships, revenue streams, key activities, key resources, key partnerships, cost structure.

These components cover the three main areas of a business: desirability, viability, and feasibility. The nine components also aim to bring transparency and understanding to a broad audience, which can include upper management and internal teams such as engineering, design, product management, marketing, sales, legal, and customer service.

Collectively, these elements capture the essence of a business model. They help map the relationship between these elements and how they intertwine with one another. Let’s take a more in-depth look at each element.

Everything starts with the customers, which is why this is the first element of the business model canvas. This component identifies the different customer segments a company targets. These can vary across business models.

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For example, while working at Zalando (one of Europe’s largest fashion eCommerce companies), there were multiple business models. One focused on end customers, while another focused on partners selling products on Zalando. The business model canvas helps outline these customer segments in a single snapshot.

Try to avoid being too detailed. Mention who the partners are, but there’s no need to note the demographics, age, gender, etc., of the customer segment unless required.

This term refers to the unique advantage or value a business provides. It’s what sets the business apart from competitors. This could be a product or a service that the business uses to solve a customer’s problem.

For instance, Uber’s value proposition is its ability to help customers travel from point A to point B on demand.

Channels are the various ways through which a business intends to interact with customers and/or partners. For Airbnb, their website and apps are the primary channels. But they also leverage social media, offline hoardings, email marketing, and community forums to reach their audience.

This element addresses the various ways a business interacts with customers to improve satisfaction and the overall experience. Monitoring customer feedback and how they interact with a company’s product is critical in a competitive landscape.

Amazon, a company that prioritizes customer focus, includes 24/7 customer support, personalized recommendations, regular newsletters, ratings and reviews, Amazon Prime membership, and community engagement as part of its customer relationships.

This component lists the different ways a company plans to generate revenue. For Google, revenue streams include advertising, the Google Play Store, Google Cloud, and hardware sales.

This section includes all necessary activities needed to keep the business functioning smoothly and to deliver value to all users. Microsoft’s key activities, for example, include software development, hardware development, cloud computing, gaming, research and development, and VR.

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As the name implies, key resources are the essential tangible and intangible resources needed to keep the business operational. These resources incur costs, making their documentation vital. An online gift-selling company would require a website/app, collaborations with manufacturers, and marketing capabilities.

This element focuses on the partnerships or collaborations a business might have with other companies to better serve customers, reduce risks, and increase profits. For Facebook, key partners include regular users who generate content, advertisers, and influencers who create content at scale.

This element outlines the costs and expenses associated with a business. For companies like Google and Facebook, costs can be substantial given their value propositions. While it may be difficult to capture the cost structure of these giants in a small space, it becomes easier and beneficial for smaller companies.

For example, McDonald’s cost structure would include manufacturing costs, service-based costs (such as employee costs), franchise costs, and infrastructure costs.

What are the benefits of using a business model canvas?

Indeed, using a business model canvas offers many advantages for businesses of all sizes. To summarize, some of the key benefits include:

Visual representation

A business model canvas provides a visual overview of all the critical elements of a business. This allows stakeholders to see how these elements relate to each other, facilitating understanding and decision-making.

The visual nature of the canvas makes it accessible to various stakeholders, including top management, engineers, designers, customer service, and operations teams.

Clear collaboration, communication, and alignment

Developing and managing products often require the input and collaboration of multiple stakeholders . A business model canvas provides a clear, concise tool for aligning all these parties, promoting better communication and collaboration. It also helps product managers secure buy-in from stakeholders at an early stage, reducing risks and fostering better alignment, especially in a cross-functional environment.

Strategic long-term thinking and analysis

By design, a business model canvas encourages long-term strategic thinking. It helps identify business strengths and weaknesses, facilitates brainstorming new ideas and improvements, and shapes long-term strategies to better serve customers.

Flexibility

Businesses and ideas evolve, and a business model canvas accommodates these changes. It offers a flexible template that can be easily modified, often featuring version numbers to track document evolution. This flexibility supports an iterative approach, ensuring the canvas captures all necessary information as the business evolves.

Business model canvas template

The internet is replete with various business model templates. A quick Google search will return 34,200,000 results. Here’s a quick template that I created on Google Sheets:

Click here to access the business model canvas template. You can click File > Make a copy to download the canvas and customize it for your business.

Example of successful use of the business model canvas in product management

Here’s an example of a business model canvas for Facebook:

How do I create a business model canvas for my business?

After you fill out the nine components we went over earlier, there are some other key points to keep in mind to successfully create a business canvas model.

Involve all the stakeholders early on

Since a business model canvas has elements ranging from tech to marketing, sales, and customer service, it’s important to involve these stakeholders right at the start. This reduces the risk and helps to bring everyone on the same page.

Keep it simple

Don’t use complex sentences while explaining the pointers under every element. Use simple and short words. Simplicity will make it easier for the audience to consume the information effectively.

Be data-driven

Let every pointer included in the business model canvas be data-driven. This will help lay down a strong foundation for long-term decision-making.

Focus on an iterative approach

It’s difficult to come up with a business model canvas right at the first go. Hence, it’s important to keep an iterative approach and let the document evolve depending on the feedback from the contributors. You can use versioning to keep track of all the changes.

Consider external factors

Currently, the growth of many businesses is slow and it’s projected to be the same for the entire year. It’s important to consider these external factors while coming up with a business model canvas since it helps to consider factors that might not be in control of a business.

Conclusion and key takeaways

A business model canvas can be a very effective tool if used right away. Product managers can use this tool before starting a product or a feature. It can help them have clarity on the idea before the actual development work starts.

Also, since it involves all the major stakeholders right at the start, a business model canvas can help mitigate risks early on. It’s a great tool for validating business ideas, products, or a feature.

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Understanding Your Business Model Canvas: A Step-By-Step Guide

This step-by-step guide will help you understand the Business Model Canvas and how to create one for your business. Learn how to identify key resources, assess the viability of your business plan, and create a roadmap for success. Get the information you need to start working on your business model today!

The canvas is a tool used to visualize business ideas and help entrepreneurs and owners develop a comprehensive strategy for their business. By comprehending the business model canvas guide you can gain an in-depth understanding of the key components that make up a successful business model.

The business model canvas also provides a comprehensive overview of the various elements of the business, including the customer segment, value proposition, revenue model, cost structure, and distribution channels.

Furthermore, having a high quality business model canvas helps entrepreneurs and business owners to identify potential sources of revenue and identify risks and opportunities.

What is a business model canvas?

The Business Model Canvas is a visual representation of the core components of your business. It's a great tool to help you to think about which elements of your business are most important, and how they interact with each other. Think about your overall vision for your business. You can use it to identify new opportunities and to help you to prioritize your ideas. The canvas can help you to flesh out your ideas and to start to think about how your various business elements fit together.

What are the nine key components of a business model canvas?

The business model canva provides the framework to define the nine core components of a business model, which are:

• Value proposition
• Customer segmentation
• Key activities
• Partnerships
• Cost structure
• Revenue streams
• Potential success
• Potential failure

What is a good example of a business model canvas?

The business model canvas is meant to help you identify your most valuable customer and find ways to make their lives easier. A landing page is one way to do this. Landing pages are meant to collect customer data and convert prospects into leads. They can be used as a business model canvas component to collect customer data and ensure your marketing message is on target.

How can I use the business model canvas to develop a better understanding of my business?

That understanding developes by giving you a visual overview of what your business is currently doing. Every business has a model, even if it hasn't been fleshed out or thought about -and the canvas helps you define that model-. The canvas also helps you track your business development and growth so you can see your model take shape over time.

How can I use the business model canvas to define the value proposition of my business?

When you're building a startup, you're trying to solve a problem for a customer. You need to understand what problem you're solving for them, and why your solution is better than the competition.

The business model canvas helps you understand your customers and where your business fits into the market. It also helps you define your value proposition. To answer the question of how to use the business model canvas, you need to understand the value that your business is providing to customers. The canvas helps you understand how your product or service fits into the marketplace and what makes it unique.

What is customer segmentation and how is it used to improve the business model canvas?

Every business needs to find their niche. The reason for this is that if you try to appeal to everybody, you will end up appealing to nobody. Finding the right target audience is the first step to success. Once you have them, you can find ways to get them to buy your products.

Finding customers who are willing to pay more for your product or service is often the way to go. These are the customers who are most likely to buy from you again. If you can find a way to target these customers, you will have a great business model. Then, this information is used to improve the business model canvas.

How can I use the business model canvas to better understand my customer base?

The canvas offers a straightforward way to analyze the market by putting all the facts in one place. An entrepreneur can assess the market situation and customer needs by answering a few questions:

• Who is the target audience?
• What do they need?
• How do they currently solve their problem?
• How can I improve their situation?
• How can I reach my clients?
• What is the pricing model?
• What is my brand image?
• How can I build a relationship with my clients?

By answering these questions and placing them on the canvas, you can better understand your customer base.

What are the key activities necessary to run my business?

Every business is unique, so there's no one-size-fits-all answer to this question. However, there are a few common activities that most businesses will include. These include:

• Marketing and sales
• Finance and accounting
• Customer service
• Human resources
• Legal and compliance

There are many others, but these are some of the most important. Depending on the business, some of these areas may be more important than others. For example, customer service is essential for a retail business but may not be as important for a software company.

How can I use the business model canvas to define the key areas of my business?

Essentially, you can use the business model canvas to visualize every step of your business, from where it originates to where it ends. This will help you focus on your business model, but more importantly, you can show others where your business starts and ends.

What are the partnerships necessary for my business to succeed?

There are several important factors to consider when answering this question

First , the entrepreneur should identify areas where they need help and find a partner who can provide that assistance.

Second , the entrepreneur should make sure the partnership is a good fit for both parties involved.

Third , the entrepreneur should make sure the partnership is legally binding.

Finally, the entrepreneur should be aware of potential risks associated with partnering with another party.

How can I use the business model canvas to define the cost structure of my business?

Your business model canvas will give you an idea of what you need to do to get your business off the ground. But, before you can get there, you have to consider whether you have the resources to do so. For example, are you ready to make the financial investment required to get your business off the ground? Spending time reflecting on your personal finances as an individual and as a business owner can help you answer this question and make a more informed decision about whether you have the capital required to get started.

What are the revenue streams associated with my business?

Depending on the nature of your business, you may have multiple revenue streams. We would suggest that you start by listing them all, then take a look at the ones that are most promising and start thinking about how you can optimize them. Try to come up with a plan for each revenue stream so that you know what you're working towards and what you need to do to make it happen.

Can I use the business model canvas to evaluate the potential success of my business?

The most important thing to remember when evaluating the potential success of your business is that no one can predict the future. No matter how much experience you have or how many experts you consult, there are simply too many variables that can affect the outcome. So rather than trying to predict the future, focus on what you can control.

Identify your key objectives and goals, and develop a plan for achieving them. Continuously track your progress, and adjust your plan as needed. By focusing on what you can control, you can put yourself in the best position to succeed without getting bogged down by uncertainty.

What strategies can I use to make sure my business is successful?

It's easy to get swept up in the excitement and drama of your business and lose sight of the big picture. To ensure your success, you need to be hyper-aware of your goals and targets and constantly check in with yourself to make sure you're on the right path. A lot can happen in a day, or even an hour, so you'll need to be diligent about staying on track.

We recommend setting aside 10 minutes every day to reflect on your business and make sure it's on track to meet your goals. This doesn't mean you can slack off on the tasks at hand, but it will keep you from getting distracted by details and keep you on the right path.

How can I use the business model canvas to help me make decisions?

You can spend hours, days, or weeks researching every single aspect of your business, but if you don't take action and start moving forward, you will never accomplish anything. That's why we think the business model canvas is so helpful. It forces you to focus on the most important aspects of your business and figure out how you're going to get them done.

It's easy to get overwhelmed with all the details, but the business model canvas forces you to narrow it down to the most important parts of your business. Once you've chosen the most important parts of your business, you can start working on them and taking action.

What are the highlights associated with my business model?

The answer to this question should focus on the vision you have for your company. Your company is unique and you should be able to point out the benefits that make it so. You should be able to articulate the vision behind your company and the mission it has.

How can I use the business model canvas to adjust and improve my business model over time?

Ask yourself these questions:

• What is working well?
• What is not working well?
• What are the opportunities?
• What are the threats?

By answering these questions, you can adjust your business model to become more successful and improve over time.

The Canvas allows entrepreneurs to quickly evaluate the customer base and make decisions based on the data they have collected. Additionally, the canvas can be used to adjust and improve the business model over time. To ensure the potential success of a business, entrepreneurs should consider the key questions when creating their business model canvas, as well as any potential risks associated with the model. With the right tools and strategies, entrepreneurs can use the business model canvas to establish and grow a successful business.

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Business Model Canvas Explained with Examples

In this article:

In this article, we’ll examine the nine steps needed to create your first business model using the Business Model Canvas. We’ll also look at the business models of Google, Uber, and Gillette to bring the theory to life and integrate all nine steps.

Before we jump in and look at the Business Model Canvas, let’s take a moment to define what we mean when we use the phrase “business model”.

What is a business model?

A business model is defined as:

• A plan for the successful operation of a business, identifying sources of revenue, the target customer base, products, and details of financing.

Essentially it tells us how the key drivers of a business fit together.

Now if you think about writing all this down in a document, then it’s obviously going to require multiple pages to capture all of that information. Now think about trying to get all of this information into your brain at the same time and its easy for business models to overwhelm us.

That’s where the Business Model Canvas comes in. It gives you a way to create a pretty clear business model using just a single sheet of paper. And what is great about it is it can be used to describe any company – from the largest company in the world to a startup with just one employee.

Advantages of the Business Model Canvas

The reason why you might want to create a Business Model Canvas is that they have the following advantages:

• Easy to understand : Because the canvas on just a single page and is very visual it’s very easy to understand.
• Focussed : It removes any fluff that might have been present in a traditional business model. It’s all killer no filler.
• Flexible : It’s quick and easy to make changes to your model and sketch out different ideas.
• Customer Focused : the canvas forces you to think about the value you’re providing to your customers, and only then what it takes to deliver that value.
• Shows Connections : The single page graphical nature of the canvas shows how the different parts of the model interrelate to each other. This can be really difficult to ascertain from a traditional business plan.
• Easy to Communicate : Because the canvas is so easy to understand you’ll be able to share and explain it easily with your team, making it easier to get them on board with your vision.

Using the Business Model Canvas

The first thing to notice is that there are nine elements or building blocks which make up the canvas:

We’ll look at each building block of the canvas in more detail shortly, but briefly, each segment tries to answer the following questions:

• Customer Segments : Who are your customers?
• Value Proposition : Why do customers buy from you? What is the gain you provide or the need you satisfy?
• Channels : How are your products and services delivered to the market?
• Customer Relationships : How do you get, keep, and grow your customers?
• Revenue Streams : How does your business earn money?
• Key Resources : What unique strategic resources does your business have or need?
• Key Activities : What unique strategic activities does your business perform to deliver your value proposition?
• Key Partnerships : What non-key activities can you outsource to enable you to focus more on your key activities.
• Cost Structures : What are the major costs incurred by your business?

Left/Right Split

Before we dig deeper into the detail of each of these elements, there’s just one thing to be aware of…

Broadly speaking we can say that those elements on the lefthand side of the canvas represent costs to the business, whereas elements on the righthand side generate revenue for the business.

With that, let’s dig into each of the nine building blocks in a little more detail.

1. Customer Segments

In this building block, you enter the different customer segments or that you will serve. If you can, create one or more persona for each segment you serve. A persona is simply a relatable description of each customer type you serve. They try to highlight your customers’ motivations, their problems and capture the “essence” of who they are.

One really important point to get across here is that customers don’t exist for you, but rather you exist to serve your customers.

Many businesses will serve just one customer segment, but not all. For example, Google serves two customer segments, people performing searches as well as advertisers.

If you think about breaking down the advertiser customer segment into personas, then there are many different types of advertisers you might identify. For example, Fortune 500 companies such as Nike with massive advertising budgets might be one persona, whereas small one-man businesses might form another.

2. Value Proposition

The value proposition describes the value that you deliver to each customer segment. What problems do you solve for each customer segment? What needs do you satisfy? The Value Proposition answers the question, “why will customers buy from us?”.

Some of the most common value propositions are:

• High performance.
• Ability to customize.
• Brand/Status.
• Cost reduction.
• Risk reduction.
• Convenience.

3. Channels

Channels refer to how your products or services are sold to customers. To complete this section ask yourself how do your customers want to be reached? How are you reaching them now?

Broadly speaking you can either have your own channels or partner with someone else.

Your own channels might include any combination of stores you own, a sales force you employ, or your website.

Partner channels could include a multitude of options, from using a wholesaler to working with affiliates to sell your products or even using Google Adsense.

4. Customer Relationships

The Customer Relationships building block answers the question of how you get, keep, and grow customers.

• Get : How do customers find out about you and make their initial purchase? For example, this could be through advertising on Google.
• Keep : How do you keep customers? For example, excellent customer service might help keep customers.
• Grow : How do you get our customers to spend more? For example, you could send out a monthly newsletter to keep them informed about your latest products.

The easiest way to define all of this is to walk through the entire customer journey in detail. That is how do customers find out about you, investigate whether to buy your product, purchase it and how are they managed after purchase.

5. Revenue Streams

Where does the money come from? In this building block, you state where your revenue is generated.

This might sound super simple but it isn’t. You’re actually trying to figure out what strategy you’ll use to capture the most value from your customers? Will customers simply pay a one-time fee? Will you have a monthly subscription fee? Perhaps you give away your product for free like Skype and hope that some portion of customers upgrade to the paid premium product?

Consider Google. Advertisers pay Google to place their ads in front of users with buying intent. For example, if you search for “Nike trainers” you will see ads. If you search for something without purchasing intent, such as “picture of flowers” you probably won’t see any ads.

In fact, you could say that Google operates searches without purchase intent as a loss leader to keep people using the Google system.

Taking a Step Back

If you look at what we have done so far we’ve filled in our Value Proposition and the building blocks to the right of it.

In a nutshell, we’ve developed our understanding of everything that relates to our customers.

Now we need to work on the area to the left of the value proposition. We need to build our infrastructure to be able to best provide the value proposition.

So with that let’s move on to the first infrastructure building block, Key Resources.

6. Key Resources

This building block describes your most important strategic assets that are required to make your business model work.

Broadly speaking resources can fall into one of four categories:

• Physical : such as buildings, vehicles, machines, and distribution networks.
• Intellectual : such as brands, specialist knowledge, patents and copyrights, partnerships, and customer databases.
• Human : sometimes your people will be your most key resource, this is particularly true in creative and knowledge-intensive industries.
• Financial : such as lines of credit, cash balances etc.

7. Key Activities

The Key Activities are the most important strategic things you must do to make the business model work. Key Activities should be directly relatable to your value proposition.

If your Key Activities are not relatable to your Value Proposition then something is wrong, because the activities you view as most important aren’t delivering any value to customers.

Key Activities can typically be broken down into three broad categories:

• Production : refers to delivering your product. You will typically do this to either a high quality or a high quantity.
• Problem Solving : Consultancies and other service organizations often have to come up with new solutions to individual customer problems.
• Platform/Network : Networks, software platforms can function as a platform. For example, a key activity for Facebook is updating the platform.

When completing this section, it is a mistake to list all the activities of your business, instead only include activities which are absolutely core to delivering your value proposition.

8. Key Partners

In this building block, you list the tasks and activities that are important but which you will not do yourself. Instead, you will use suppliers and partners to make the business model work.

Let’s look at Spotify. Spotify’s key activity is updating its platform. However, as it doesn’t produce its own music one of the key partnerships of Spotify will be the deals it strikes with record labels and publishing houses, without which it would have no music!

There are usually three reasons for creating a partnership:

• Economies of scale.
• Reduction of risk and uncertainty.
• Acquisition of resources or activities (e.g. music for Spotify).

9. Cost Structure

In the Cost Structure building block, we want to map key activities to costs. We also want to ensure that costs are aligned with our Value Proposition.

It should be straightforward to determine your most important costs and your most expensive after you’ve defined your Key Resources, Key Activities, and Key Partnerships.

Business Model Canvas Examples

That’s the theory out of the way. However, the Business Model Canvas comes to life when you see it in action.

So let’s look at three different examples of the Business Model Canvas so you can see just how useful it can be.

Example 1: Google

The first thing you should know about Google’s business model is that it is multi-sided. This means that it brings together two distinct but related customers.

In Google’s case, its customers are its search users and its advertisers. The platform is only of interest to advertisers because search users are also present. Conversely, search users would not be able to use the platform free of charge were it not for advertisers.

The Business Model Canvas for Google is shown below:

As you can see the diagram gives you an immediate understanding of the key parts of Google’s business model.

We can see that:

• Google makes money from the advertiser customer segment, whose ads appear either in search results or on web pages.
• This money subsidizes a free offering to the other two customer segments: search users and content owners.

Google’s business model has a network element to it. That is, the more ads it displays to web searchers the more advertisers it attracts. And the more advertisers it attracts the more content owners it attracts.

Google’s Key Resource is its search platform including google.com, Adsense (for content owners) and Adwords (for advertisers).

The key strategic activities that Google must perform are managing the existing platform including its infrastructure.

Google’s key partners are obviously the content owners from whom a large part of its revenues is generated. OEMs (Original Equipment Manufacturers) also form a key partner.

OEMs are companies who produce mobile handsets to whom Google provides its Android operating system to for free. In return, when users of these handsets search the internet they use the Google search engine by default, thus bring more users into the ecosystem and generating even more revenue.

A Word on Color Coding

There are no hard and fast rules when it comes to using color within your canvas. Some people prefer to use color to represent the links between elements, as we have done in this article. Others like to use different colored elements or sticky notes to represent related elements.

The choice is up to you. What is important is that any relationships between elements are easy to identify and easy to understand.

Example 2: Skype

In the diagram below you can see the Business Model Canvas for Skype.

From the Business Model Canvas we can see that Skype has two key value propositions:

• The ability to make calls over the Internet, including video calls, for free.
• The ability to make calls to phones cheaply.

Skype operates a freemium business model, meaning the majority of Skype’s users (the Free Users customer segment) use the service for free to make calls over the internet, with just 10% of users signing up to the prepaid service.

We can see from the customer relationship building block that customers typically have a help themselves relationship with Skype. Typically this will be by using their support website.

The channels Skype uses to reach its customers are its website, skype.com, and partnerships with headset brands.

Looking at key partnerships, key activities, and key resources together, the main thing to notice is that Skype is able to support its business model of offering cheap and free calls because it doesn’t have to maintain its own telecoms network like a traditional telecoms provider. Skype doesn’t need that much infrastructure at all, just backend software and the servers hosting use accounts.

Example 3: Gillette

The Business Model Canvas for Gillette is shown below:

Gillette’s business model is based on the “Bait & Hook” business model pattern. This model is characterized by an attractive, inexpensive or even free initial offer that encourages ongoing future purchases of related products or services. With this business model, the bait is often provided at a loss, subsidized by the hook.

In Gillette’s case, an inexpensive razor handle forms the bait, and continued purchases of the blades represent the hook.

The business model is very popular in SaaS (Software as a Service) businesses, where typically a free initial month leads to a monthly subscription.

In the diagram above we have used the thickness of the arrows to indicate the size of revenue generated. In Gillette’s case, all revenues are generated by just one customer segment, but the vast majority of revenues come from Frequent Blade Replacements, with just minor revenues coming from the purchase of handles.

If you look at the left-hand side of Gellettes Business Model Canvas you will notice how all major costs are aligned with delivering the value proposition. For example, marketing costs help to build Gillette’s strong brand and R&D costs help to ensure that the blade and handle technology is unique and proprietary.

Key Takeaway

Through these three Business Model Canvas examples, you should be able to see just how easy it is to represent the complete business model of any company on just one single sheet of paper.

Creating Your First Business Model

If you’re going to do create your first Business Model Canvas, then here are some tips to help you get started:

• Don’t go it alone: Don’t try to create your model singlehandedly. Instead get a small team of 3-5 people together so you can brainstorm ideas.
• Use a whiteboard if you can.
• Have plenty of different colored whiteboard pens and sticky notes handy.
• Plan on the process taking about an hour to complete your first draft Business Model Canvas.
• Decide which building block you’re going to fill in first. Usually, it makes sense to start with Customer Segments or Value Proposition and then work from there.

The Business Model Canvas provides a way to show the key elements of any business model on a single sheet of paper. The canvas is based on nine building blocks and the interrelationships between them. You can use the canvas regardless of whether you are trying to understand a startup with two employees or a Fortune 500 company with over 50,000 employees.

Cite this article

Minute Tools Content Team, Business Model Canvas Explained with Examples, Minute Tools, Oct, 2018 https://expertprogrammanagement.com/2018/10/business-model-canvas-explained/

Originally hailing from Dublin, Denis has always been interested in all things business and started EPM in 2009. Before EPM, Denis held a leadership position at Nokia, owned a sports statistics business, and was a member of the PMI's (Project Management Institute’s) Global Executive Council for two years. Denis now spends his days helping others understand complex business topics.

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Business Model Canvas Explained: Definition, Pros, Cons, and Building Blocks

So, here's the thing. We all know that we need structure to work effectively, but where do we start with so many options available? One tool worth considering is the Business Model Canvas (BMC) . Used effectively, it can give solid structure to your planning. 

In this article we will examine how the model works and a few ways to use it effectively. Then, we will describe its best practices and some recommendations on getting started. Finally, we will explore possible alternatives. 

Ready to get to know all about the BMC? Let's begin.

The Business Model Canvas, explained

The Business Model Canvas is a strategic management tool that helps businesses visualize and analyze their business models. It consists of 9 fundamental building blocks that describe the core aspects of a company's value proposition, infrastructure, customers, and finances (more on that later, we promise). 

By using it, organizations can gain a deeper understanding of their overall business model , identify areas for improvement, and develop new strategies for growth. One of the key benefits of the BMC format is that it's very visual. Used adequately, it allows organizations to create a display of their business model in alignment with strategic business objectives and the overall value proposition.

The nine BMC building blocks were initially presented in 2005 by Alexander Osterwalder. They were based on his Ph.D. work on business model ontology, supervised by Yves Pigneur. Since its release, the authors have developed other related tools, such as the Culture Map and the Value Proposition Canvas, which have helped the BMC tool to evolve and added value to it.

Business Model Canvas examples

Some examples of the BMC include:

• Strategy planning
• Business planning
• Business modeling

Lean Canvas vs. Business Model Canvas

Both the Lean and Business Model Canvas enable you to capture your entire model on a single page. The primary difference between them is that the Lean Canvas focuses mainly on solving a particular problem. The Business Canvas Model, on the other hand, is more sales orientated and usually focuses on selling products or services. 

Advantages and disadvantages of the Business Model Canvas

Even though the BMC offers a series of features in order to effectively visualize and analyze your organization's business model, there are also some possible drawbacks to be aware of – and avoid. 

To start on the right note, the benefits of the Business Model Canvas include:

• A clear and comprehensive business model overview in a single visual format. This makes it easier to understand, articulate, and communicate.
• Strong collaboration and breaking down silos. Using the BMC approach incentives people to work as one team, as it involves all stakeholders, and enables them to actively participate in developing, improving, and refining the business model.
• Colleagues constantly progressing with feedback (to borrow from an ITIL principle). The BMC approach allows for a fast and efficient testing of different business model configurations, speeding up the innovation process and reducing the time to market.
• A structured and systematic approach to analyzing and designing business models, which helps identify areas for improvement and innovation.
• A flexible approach that enables innovation instead of limiting it. The framework can be adapted to different types of businesses, industries, and customer groups.

However, if you choose to work with this management tool, you need to consider its potential disadvantages :

• Using the BMC approach effectively can be challenging without prior knowledge of business modeling concepts and terminology. You will need to put the work in and do some pre-reading to get the most out of it.
• Because it's so visual, it may oversimplify the complexity of a business model, making it more challenging to articulate some of the aspects of the organization's operations and performance. This makes it unsuitable for highly-specialized or complex businesses.
• Because it's a framework rather than a prescriptive standard that must be strictly adhered to, it doesn't provide detailed guidance on implementing or executing the business model, which can lead to difficulties in translating the canvas into action.
• It can rely on assumptions and hypotheses, which may not always be accurate or relevant for real-world situations.

The 9 building blocks of a Business Canvas Model

The Business Model Canvas is organized in nine  building blocks that represent a business model's key elements. These building blocks are:

• Value Proposition - The unique value the business provides to its customers and how it differentiates itself from competitors. In other words, it’s what sets your business apart, what makes it special, and what value it brings.
• Customer Segments - The different groups of customers the business targets with its products or services. This building block looks at your most important customers.
• Customer Relationships - The business' relationships with its customers and how it interacts with them. This is a fundamental building block as not only does it help you build and maintain a relationship, it also enables you to map out the cost and deliverables needed to continue to improve that relationship.
• Channels - T he different channels that the business uses to reach and interact with customers, including physical and digital channels.
• Key Partnerships - The relationships and collaborations that the business has with its suppliers, vendors, and other external partners.
• Key Activities - The key activities that the business must perform to deliver its value proposition and operate successfully. This building block helps you to define your most mission-critical actions and prioritize them accordingly.
• Key Resources - The key resources the business requires to operate, including human resources, physical assets, and intellectual property. This can also include relationships, distribution channels, and virtual assets.
• Revenue Streams - The different sources of revenue that the business generates from its customers, including one-time sales, recurring revenue, and other revenue streams. This building block also helps determine how each stream contributes to the business profit.
• Cost Structure - The various costs that the business incurs to operate, including fixed costs, variable costs, and other expenses. It also helps you identify your most expensive assets and activities to make effective financial plans for the future.

How to build a Business Model Canvas in 14 steps

The Business Model Canvas is flexible – no one size fits all. But for our money, there are 14 steps to effectively build it.

Step 1: Define the purpose 

The first step is to define the purpose of the Business Model Canvas. Where are you now, and where do you want to be? What do you hope to achieve? Who is the target audience? Have you double-checked to ensure what you want to achieve is in line with the strategic objectives of the rest of the business?

Step 2: Identify the nine building blocks

Identify the nine building blocks of the BMC, review each in relation to your business, and understand their purpose.

Step 3: Define the Value Proposition

What will add value? Start by defining the unique value that your business offers to customers. This will be the foundation of your canvas.

Step 4: Identify your Customer Segments 

Define the different groups of customers your business targets and their specific needs and preferences so you can focus and direct your efforts accordingly.

Step 5: Define Customer Relationships 

Identify your business' relationships with its customers and how it interacts with them. You can also use this step to identify your most important relationships so you can focus more effort on maintaining and improving them.

Step 6: Determine the Channels

Identify your business's channels to reach and interact with its customers, including physical and digital channels. From a service desk perspective, this could be offering a tier 0 channel with self-service or AI-enabled support capabilities before providing tier 1 and level 2 channels which offer a more people-centric user experience .

Step 7: Define Key Partnerships

Identify your business's relationships and collaborations with its suppliers, vendors, and other external partners. Remember, it's not just relationships with customers and stakeholders that matter, your suppliers are part of your team, so manage those relationships appropriately.

Step 8: Identify Key Activities

Define the key activities that your business must perform to deliver its value proposition and operate successfully.

Step 9: Determine Key Resources

Identify the key resources that your business requires to operate, including people, knowledge and wisdom, financial assets, and IT assets.

Step 10: Determine Revenue Streams 

Identify the different sources of revenue that your business generates from its customers. If you have a finance team,  work with them to identify current revenue streams and plan for future ones.

Step 11: Determine Cost Structure

Work with your finance team to identify the various costs that your business incurs to operate, CAPEX, and OPEX costs. 

Step 12: Build the Canvas

Once you have defined all of the building blocks, you can start creating the canvas to visualize what you are planning to accomplish.

Step 13: Review and refine

The BMC isn't a one-and-done approach. Review your model and seek feedback from your stakeholders to correct the course when needed.

Step 14: Keep going! 

In the words of Walt Disney, "Keep moving forward." Build and refine your model over time to reflect current and future activities more accurately. 

How to complete a Business Model Canvas

No one likes a blank page, do they? The difficult part is always getting started, but I promise, if you follow these steps, you'll be off to a great start: 

• Start with the Value Proposition - Before you do anything else, fill in the Value Proposition block in the center of the canvas. This should describe the unique value that your business provides to customers and how it differentiates itself from competitors. Focus on getting this point right because value is everything in terms of the BMC.
• Add in your enablers - This will include your key activities, customer segments, relationships (both customer and supplier relationships) assets, key activities, and channels.
• Add in your financials - Put in your revenue dreams and your cost models to make your BCM more transparent and ensure there are no hidden costs.
• Progress iteratively with feedback - Once you have filled in all the building blocks, review your canvas, iterate, and redefine  as needed. Seek input from stakeholders and make adjustments.
• Give the gift of clarity - Remember, this is a visual model, so don't get too stuck on the details or use too much jargon. The effect you're looking for is clear, concise, and visual.
• Relationships matter - We are talking about the relationship between each building block, so ensure they are correctly represented in your diagram.

Six alternatives to the Business Model Canvas

While the Business Model Canvas is a popular tool for developing and communicating a business model, other options are available too. Some alternatives include:

• Lean Canvas - This tool is similar to the BMC but focuses on startups and small businesses. It includes fewer blocks and focuses on validating hypotheses and testing assumptions quickly.
• SWOT Analysis - This tool helps to identify a business's strengths, weaknesses, opportunities, and threats. This can be a valuable tool for assessing the current state of a company and identifying areas for improvement.
• Business Model Innovation - This involves developing a new business model that is different from the traditional one used in the industry. It can be done through creative thinking, exploring new technologies, or adopting a new approach to customer relationships.
• Blue Ocean Strategy - This framework helps businesses to create new markets and uncontested market space. It involves identifying and focusing on areas of innovation that competitors have not explored.
• Value Proposition Canvas - This tool helps businesses to define and communicate their value proposition to customers. It focuses on the customer's needs, desired outcomes, challenges, and how the company can better meet those needs than its competitors.

Key takeaways

The Business Model Canvas or BMC is a strategic management tool that helps businesses visualize, design, and analyze their business models. Some of its common applications include business planning, value propositions, and modeling.

If you want to give it a shot to plan your organization’s strategy, make sure that you have your BCM template ready with the nine key elements that need to be completed. And don’t forget to follow through our six tips on how to get started!

  Frequently Asked Questions

How do you make a good business model canvas .

To make a good Business Model Canvas, clearly define the unique value proposition of your business and ensure that the key building blocks of the canvas (such as channels, revenue streams, and cost structure) are aligned with the overall strategic objectives of the business. Review and improve the canvas as needed to continue improving and aligning with business needs.

What are the four types of business models? 

The four types of business models are product, service, platform, and sub-subscription-based.

What are the three sections of the Business Model Canvas? 

Value Propositions, enablers, and financial planning.

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What’s in a Business Model Canvas? Understanding the Parts

A deep and comprehensive grasp of the nine elements that make up the business model canvas—including the likes of key resources, customer segments, channels, and revenue streams—is of paramount importance when analyzing a business strategy effectively. By dissecting and studying these components, entrepreneurs and managers can garner a deeper understanding of their own business workings or those of their competitors.

This heightened sense of comprehension lays the groundwork for the development of innovative methods and well-informed decisions, which in turn shape the trajectory and profit dynamics of a given company.

Unraveling the Intricacies of the Business Model Canvas

The genesis and development of the business model canvas.

Devised first by the strategic management scholar Alexander Osterwalder back in 2005, the Business Model Canvas emerged as a new tool to aid businesses in defining, refining, and articulating their business ideas. Comprising vital elements of a business plan or a product concept, the canvas neatly condenses and presents them on a single page, taking into account both the internal workings and the external influences shaping a business.

The crucial element, the Value Proposition, symbolizes the value exchange between a business and its customers. Devising accurate customer personas and understanding customer segments is a crucial step in defining a business. Similarly, importance must be given to Channels, customer relationships, key activities, key resources, key partnerships, cost structure, and revenue streams. The Business Model Canvas, thus, serves as a holistic framework for trapping and exploiting multiple business ideas or concepts.

Business Model Canvas: A Toolkit for Crafting Business Ideas

Analysing popular brands: apple computers & nike.

Both Apple Computers and Nike stand as paragons to illustrate the capabilities of the Business Model Canvas. For a brand like Apple, the crux of its value proposition lies in its commitment to innovation and user-friendly technology. Contrarily, Nike has staked its claim in the market through its premium athletic footwear and apparel. Both these multinational companies have not only understood their customer segments but effectively aligned their products to serve them.

They have succeeded in establishing strong customer relationships, utilizing digital platforms to offer personalized experiences. Apple and Nike use diverse channels to optimize their customer reach, including online platforms and strategic partnerships with retail outlets. They excel in key operational activities such as product development and marketing, backed by invaluable resources, including a skilled workforce and intellectual property rights.

Strategic collaborations with suppliers and manufacturers reinforce their value propositions. Their adept control over cost structure and shrewd optimization of their revenue streams through effective pricing policies and brand loyalty have assured their overall business success . These examples clearly put forth how the Business Model Canvas helps businesses coordinate their activities and carve out successful models of operation.

The Nine Building Blocks of the Business Model Canvas

Anatomy of the business model canvas template: a component-wise breakdown.

At the heart of the canvas lies the Value Proposition, a determinant of the value exchanged between a company and its clients. Deeper insights in customer segments, market demographics, and persona creation lead to enhanced customer understanding. The Customers Relationships component reveals the dynamics of business-customer interactions.

Additionally, Channels represent the mediums that facilitate customer engagement. The role of Key Activities is to discuss the crucial steps necessary for value proposition achievement, while Key Resources provide information about the tangible and intangible assets needed. The significance of Key Partners lies in forging alliances with other businesses or suppliers to fortify the enterprise. Lastly, elements like Cost Structure and Revenue Streams focus on the financial foundations of the business. The Business Model Canvas, thus, stands as a comprehensive framework that embodies various aspects of any business idea or concept.

Practical Importance and Illustrative Examples of the Business Model Canvas

Practical application: process and case study of the business model canvas.

True to its purpose, the Business Model Canvas lends a practical framework for conceptualizing and structuring a business idea by outlining its critical elements without getting entangled in unnecessary details. At the center lies the Value Proposition that encapsulates the value exchange between a business and its customers. Through an in-depth understanding of their customer segments and their specific needs, businesses can craft a dynamic value proposition.

Customer Relationships shed light on how a business interacts with its customers, be it face-to-face, over the phone, or via digital platforms. Recognizing potential channels for customer engagement is a key determinant of business success. Key Activities and Resources explain the processes and resources necessary for turning the value proposition into a reality. Crafting strategic alliances with relevant partners is vital for delivering customer value.

Lastly, the Cost Structure and Revenue Streams dissect the financial dimensions of the business. Clever pricing of services or products forms an inherent part of business success. The canvas is thus a simple yet effective tool to grasp the nuances and develop a business concept.

Alternative Approaches: Variations of the Business Model Canvas

There are numerous adaptations of the Business Model Canvas, each tailored to suit specific business needs and scenarios.

For example, the Lean Canvas devised by Ash Maurya is meticulously designed keeping startups in focus. These modified canvases offer a quick, easy, and effective way to map out a business idea, promptly identify the critical components, and allows for efficient planning and alignment towards business objectives. Such variations provide entrepreneurs with the required toolkit to enhance their business model and consequently their chances at success in the industry.

Controversies and Substitutes to the Business Model Canvas

While the Business Model Canvas enjoys widespread usage, it’s not without its detractors. Some critics argue that the canvas is too rigid and static, and struggles to capture strategic shifts or changes in the business model effectively. They contend that it fails to provide detailed insights into how different components interact and their cumulative impact on the functioning of business models.

Critics also point out that it tends to focus excessively on the organization, often overlooking the broader industry structure or influence of external stakeholders, including society and the environment.

To address these issues, alternatives like the Lean Canvas, developed by Ash Maurya, have been created. This variation is agile, flexible, and better suited to startups, offering more comprehensive solutions and addressing some of the limitations identified in Osterwalder’s original canvas.

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Everything You Need To Know About Business Model Canvas

If you are here, I’m quite sure that you are looking to gain a better understanding of the business model canvas. Well, if I’m right, you’ve come to the right place. This blog post will cover everything you need to know about the business model canvas, which is such a popular tool used by entrepreneurs and business leaders. By the end of this post, you’ll have a solid understanding of the business model canvas and how to apply it to your own business.

1. What is the Business Model Canvas?

At the beginning of the day, it’s important to understand what the Business Model Canvas is. In short, it is a lifesaver for business owners. I used it when starting my own business, and it was a game-changer. Why is that? Well, it provides a roadmap-like visual representation of all the key components of your business, helping you understand how they interact and fit together. In this way, it helps you quickly identify areas that need improvement and make informed decisions about your next steps.

But the canvas is more than just a tool for structure. It encourages you to think outside the box and come up with innovative ways to increase customer value and generate revenue streams . You can uncover new opportunities and transform your business into a game changer by exploring different customer segments , value propositions, and key resources. I can assure you that it is not easy without this tool.

The best part? This way of doing things encourages collaboration and fosters a sense of collective ownership among all stakeholders. As well, it helps make decision-making and problem-solving processes quicker and more efficient .

In short, the Business Model Canvas is a must-have if you are looking to create a profitable and scalable business model. Whether you’re starting from scratch or pivoting an existing business, the canvas will save you time and effort and give you a competitive edge . That, I believe, is what we’re all looking for.

2. How to Use the Business Model Canvas

To fully leverage the benefits of the canvas, it’s important to have a clear understanding of its structure and how it can be applied to your specific business needs. Here’s “how to,” step-by-step:

Step 1: Familiarize Yourself with the Canvas

The first step is to become familiar with its components. The canvas is made up of nine blocks that show the most important parts of a successful business model. These are customer segments, value propositions, key activities, key resources, customer relationships, channels, revenue streams, cost structures, and key partners. The goal here is to look at how these parts work together so you can learn more about how your business works and find places where it could be better.

Step 2: Identify Your Customer Segments

One of the most important elements of the business model canvas is the customer segmentation block. In order to create a successful business model, it is critical to understand who your customers are and what their needs are. If I bolded this point, it’s because I didn’t use sufficient powerful words to highlight the importance of this step. You’re like a shooter with his eyes closed if you don’t know what your customer needs .

Step 3: Develop Your Value Proposition

As part of your strategic planning , the value proposition block is where you define what sets your business apart from your competitors. In other words, why choose your business instead of others? Ask yourself: What unique benefits do you offer to your customers that they can’t find anywhere else? Most of the time, this point is forgotten, and our business becomes just another “one.”

Step 4: Identify Key Activities and Resources

The key activities and key resource blocks are where you determine what it takes to deliver your value proposition. Is your business engine. Without them, your business will be tight from the start. could be the processes, skills, and resources you need to bring your value proposition to life. By identifying these key components, you can assess the feasibility of your business model and have a good chance of making the right decision about how to put your resources in the right budget pocket. By figuring out these key parts, you can figure out if your business model is likely to work and have a good chance of making the right decision about where to put your money.

Step 5: Evaluate Your Revenue Streams

The revenue streams block is where you identify how your business will generate income. Consider this point the lifeblood of your business. Think about the different ways you can make money from your value proposition and decide which ones are most likely to work. Without a constant revenue stream, you don’t have a business.

Step 6: Determine Your Cost Structure

The cost structure block is like a rainbow, built from different colors. Generally speaking, these are the costs you need to pay to deliver your value proposition and make money. This extends the context to build a clear perspective about pricing and profitability.

Step 7: Leverage Key Partnerships

The key partnership block is where you consider the relationships you need to build in order to bring your business model to life. They are critical dots. If you miss them, your business will burn a lot of fuel without having a good chance to take off. Consider it an external vane system connected to yours. Here, the key is your ability to create quality connections. In other words, to be the master of networking.

Step 8: Fine-Tune Your Business Model

Every new day is an opportunity to do things better. Let’s talk about this step as being Kaizen, or continuous improvement . The Business Model Canvas is not a one-time exercise; it’s a work in progress. So, use the canvas to review and improve your business model as you learn more about your customers and market and gather more information. You need to continue tweaking your business model so you can stay ahead of the curve and remain a force to be reckoned with.

So, there you go. These are all steps involved in the process. Now, let’s move on.

3. What business model canvas to use?

The original Business Model Canvas, created by Alexander Osterwalder and Yves Pigneur , detailed above, is the most commonly used and well-known canvas for mapping out a business model.

But there are also different versions and changes to the original Business Model Canvas, each with its own set of building blocks and ways of thinking.

For example, the Lean Canvas is a simplified version of the Business Model Canvas that focuses on solving problems and testing assumptions, while the Business Model You Canvas helps you create a personal business model, which could be an interesting exercise to do.

Ultimately, the choice of which business model to use will depend on the specific needs and goals of your business. If you are just starting out and are looking for a simple, visual tool to help you get a handle on your business idea , the Lean Canvas might be the best choice.

If your business is already up and running and you want to better understand and explain your current business model, the original Business Model Canvas may be a better fit.

4. Benefits of Using the Business Model Canvas

Sometimes, our attention can be caught by different business tools without a clear understanding of their benefits. Now, let’s be the lawyers of the devil and break the Business Model Canvas benefits into small parts.

To solve this problem, let’s look at the different parts of the canvas and how they can help you make a business model that is strong and scalable.

A Complete Look at Your Business: The Business Model Canvas encourages you to look at your business as a whole, find the key parts of your business model, and look into different customer segments, value propositions, key resources, and partnerships. We could conclude that this holistic approach helps you see the big picture and make informed decisions without getting lost in the weeds.

Brainstorming and Working Together: Using this model, you can set up a good environment for brainstorming and working together, which will help everyone involved feel like they own the project as a whole. With everyone on board, decision-making and problem-solving become quicker and quite effective.

Identifying Areas for Improvement ( Kaizen ): This helps you make data-driven decisions and stay ahead of the curve by quickly identifying areas that need improvement or re-evaluation. One Kaizen step every day will increase your chance to remain in the game.

Creating new revenue streams: This point encourages businesses to think beyond their own products or services and consider how they can use partnerships, technology, or new customer segments to create new value propositions and revenue streams. This creative approach can lead to game-changing innovations that can help you stand out in a crowded market .

A Better Understanding of Your Business Model: This doesn’t mean that we don’t know our business numbers. However, by providing a framework for understanding the structure of a business model, the Business Model Canvas gives you an understanding of how your business model works.

In conclusion, the Business Model Canvas is a great tool for making a business model that is strong and scalable, and it could be a real bright spot in the business world. So, if you’re caught between a rock and a hard place trying to navigate the complexities of business, the Business Model Canvas might just be the breath of fresh air you need.

5. Why is the business model canvas important?

Let’s face it: if we are looking only at the dry words and numbers without visual representation, it’s difficult to have a clear perspective on our business structure.

This model lets you look at your business as a whole and find the most important parts, such as customer relationships, value propositions, key activities, key resources, customer segments, key partnerships, revenue streams, cost structure , and so on. And so, in just one or two pages, we can map entire business pockets.

6. Examples of Companies That Use the Business Model Canvas

Let’s take a look at a couple of them who embrace this model.

Airbnb, the popular home-sharing platform, used the Business Model Canvas to reimagine the traditional hotel industry and disrupt the market with its innovative business model.

Spotify: The music streaming service leveraged the Business Model Canvas to better understand its customer segments, value propositions, and revenue streams and to create a successful business model that can sustain its growth and profitability.

Dropbox: The file hosting service used the Business Model Canvas to identify key components of its business model.

Tesla used the business model canvas to design and launch its new business model, which included innovative product offerings, customer segments, and revenue streams.

Amazon: The e-commerce giant used this model to analyze its existing business operations and identify opportunities for growth and innovation.

These are just a few examples of companies that use the Business Model Canvas and demonstrate its versatility and usefulness in a variety of business contexts. In the actual competitive market, your business needs to be a well-oiled machine with everything and everyone working together seamlessly. Moreover, we need to be nimble and adaptable in an ever-changing market. Of course, one of the answers that can sustain these efforts is this tool: the business model canvas.

7. Conclusion

Now, let’s wrap up: we could definitely say that the business model canvas is a must. It gives a structured way to design and develop a business model, but you also need to know a lot about your business and market.

However, by using the canvas to its full potential, you can be a breath of fresh air in an otherwise crowded market and ultimately transform your business into a high-runner. Let it be your roadmap to success, and you’ll be a master of the business model generation game in no time.

About the Author

Liviu Prodan

Liviu is an experienced trainer and LifeHacker. He’s been living the ‘Corpo life’ for more than 15 years now and has been a business developer for more than 12 years. His experience brings a lot of relevancy to his space, which he shares on this blog. Now he pursue a career in the Continuous Improvement & Business Development field, as a Lean Six Sigma Master Black Belt, a path that is coherent with his beliefs and gives him a lot of satisfaction.

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Using the Business Model Canvas for your marketing strategy

• Written by Daniel Lee
• February 11, 2023

It can be a challenge to align your marketing with the broader business. Marketing can become even more of a challenge with a large organisation where the business model can become rather complex

Luckily, there is a great tool available that can help you to layout your business model on a single page. That tool is called the Business Model Canvas . Read on to find out what the Business Model Navigator is and how it can help your marketing.

What is the Business Model Canvas?

The Business Model Canvas (BMC) is a strategic management tool created by Alexander Osterwalder in 2005. You can use this tool to develop and document new and existing business models. The Business Model Canvas often takes the form of a one-page template featuring nine boxes.

Why use the Business Model Canvas?

The Business Model Canvas allows you to plan out a business model on a single page quickly. Since you plan out the business model on one page, it is easy to get a clear, top-level overview of the organisation. You can then use the insights you gain from the BMC in other areas of the business.

How can the Business Model Canvas be used for marketing?

When planning your marketing strategy, it is crucial to understand the business plan. The Business Model Canvas allows you to communicate the core elements of the business model to the team responsible for creating the marketing strategy.

The Business Model Canvas is useful for businesses or in-house teams. However, the BMC is also helpful for marketing consultants and agencies to better understand their clients’ business models.

How to use the Business Model Canvas

To use the BMC, all you need to do is complete the nine boxes in the template with information about your business model.

The nine elements of the Business Model Canvas

The nine boxes used in the Business Model Canvas template correspond to nine elements of a business model. These nine elements are grouped into one of four categories: infrastructure, offering, customers, and finances.

Infrastructure

Key partners.

Key partners refer to all organisations or individuals with whom you have a business alliance. Examples of key partners include suppliers, distributors, sub-contractors, importers, service providers, and complementary businesses with whom you partner.

To use this for your marketing, think about how you currently communicate with each of your partners. Can you improve your comms with partners? Possible marketing ideas for partners include collaboration on content, or you could contribute content to your partners’ websites. You could even do something as simple as mutual ‘shout outs’ on social media platforms.

Key activities

Key activities are the business activities critical to delivering on your value proposition. For example, a supermarket needs to ensure they have a cost-effective and efficient supply chain to keep costs down and maintain fully stocked shelves. If necessary delve into the actions required to complete the key activities successfully.

The key activities you identify may be suitable for content marketing. One example would be ‘behind the scenes’ content. Often, your target would appreciate an inside look at how your organisation operates. If we take Tesla as an example, many of their fans and customers will find the production of their electric vehicles and the development of their technology interesting.

Key resources

Key resources are the assets required to be able to achieve your key business activities. Resources can take many forms, including physical, financial, human and intellectual.

Your key resources can be used for marketing. Of course, financial resources can be used to fund marketing activities. However, physical, human and intellectual resources can also be used for marketing. People can be a great resource. If you have experts in a particular field, they can produce insightful thought leadership content for your website and social media. Physical and intellectual resources can also be used for content marketing.

Value proposition

Your value proposition is the value that you are providing to your customers. Which problems are you solving for your customers, and which of their needs are you satisfying. The characteristics of your value proposition can include:

• Usability and convenience
• Customisation/Personalisation
• Performance
• Brand or status
• ‘Getting the job done’ or effectiveness
• Cost reduction
• Risk reduction
• Accessibility

Remember that your value propositions can be quantitative and qualitative.

Identifying your value proposition is vital for your marketing and communications. When building your campaigns, think about how you can incorporate your value proposition into your comms. You want to clearly communicate to your audience what makes your organisation different to its competitors, and the value that your offering provides.

Customer relationships

The customer relationship section refers to the types of relationships your organisation has with its customers. Think about how you will get more customers, how you will keep your customers, and how you can grow revenue from your existing customers. Some of the types of relationships you can develop with your customers include:

• Personal assistance in the form of direct employee-customer interaction
• Dedicated personal assistance is more hands-on for a small subset of customer than just ’personal assistance’
• Self-service is a relationship where the organisation is hands-off and provides the tools for the client to provide the service to themselves
• Automated personalisation of services
• Communities allow groups of customers to interact and provide value to each other, as well as the organisation providing value by facilitating the community platform
• Co-creation is where the customer directly has input into the service they receive

Understanding customer relationships is important for your marketing. For example, if you provide ‘dedicated personal assistance’ to your customers, you could use this as a benefit, communicating this service throughout your content, website and advertising.

Which channels are you using to provide value to your customers? How are you using the various marketing channels to communicate with your customers? Channels to consider include:

• Physical stores
• Search engines
• Social media
• Printed publications
• Direct mail

The channels that you use to provide value to your customers are vital for your marketing. For example, your website is an important marketing channel if you use it to provide valuable information to your customers. In this situation, you will also want to look at the channels link to your website for more opportunities, such as search engines, social media and affiliates.

Customer segments

To complete the customer segments box, you need to identify the different types of customers you have. Once you have listed the different types of customers, you need to determine which of these groups are the most important. You can use this information to plan your marketing approach, e.g., mass marketing or niche markets.

Customer segment insights can be used to build personas of your target audience. This information can then be used to refine which channels you use to market, optimise your website and your improve your content based on your specific audience’s wants and needs.

Cost structure

When it comes to costs, identify the expenses necessary to deliver your key business activities. Identify which of your resources and activities are the most expensive.

You should think about whether the business model is costs-driven or value-driven. Costs-driven generally means focused on lower costs at the expense of quality (budget). Value-driven often means focused on high quality (premium) but typically comes with higher costs.

The costs structure box is also where you should identify any economies of scale and economies of scope.

Cost structure can also be used to improve your marketing. For example, depending on whether the business model is costs-driven or value-driven will impact whether you are market your offering as a budget-friendly option or whether is a high-end premium solution.

Revenue streams

Revenue streams refer to the most important ways your business model will generate income. Take a look at what customers are currently paying and what they would be willing to pay. How do your customers pay and how would they prefer to pay? Work out the relative difference between your revenue streams. Which sources of income contribute the most? Note down whether you will be using fixed pricing or dynamic pricing.

Some examples of revenue streams include:

• Asset sales
• Subscription fees
• Advertising

Understanding how your organisation actually monetises is vital to a successful marketing campaign. Identifying where revenue could be increased and where you should focus your marketing efforts is the difference between a positive or negative ROI.

After you have completed your Business Model Canvas, it is time to take a step back and look at your business model holistically. Can you see any marketing opportunities now that you could not see before? You can also use the completed BMC template to double-check any marketing initiatives against to ensure you align your marketing with the wider business’ priorities.

Download our Business Model Canvas template

So, you want to get started using the Business Model Canvas for your organisation or idea? Instead of making one yourself, we have a prepared a hand Business Model Canvas template for you to use. Click on the links below to download either the Word/.doc version or a PDF version.

Download Word/.doc template for the Business Model Canvas

Download the PDF template for the Business Model Canvas

Wrapping up

To sum up, the Business Model Canvas is a tremendous strategic management tool. The BMC provides an overview of your business model, which you can use to inform your marketing strategy.

If you would like any help with your digital marketing strategy, you contact us about our digital marketing services by emailing [email protected] .

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