9 components of the 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

More Related Articles

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.

Business Model Canvas (BMC)

What is the Business Model Canvas

Business Model Canvas (BMC) is a framework that helps determine how a business creates, delivers, and captures values. It is a visual representation of the important aspects or parts to consider when designing a Business Model.

BMC aids in constructing a shared understanding of a business by condensing it into a simple, relevant, and intuitively understandable one-page visual while not oversimplifying the complexities of how enterprises function.

This concept has been applied and tested around the world and is used in organizations such as GE, P&G, Nestlé, IBM, Ericsson, and Deloitte, including Government Services of Canada and many more [1],[2] .

The Nine Building Blocks

BMC describes a business through nine basic building blocks that show the logic of how a business intends to make money. These nine blocks cover the four main areas of a business: Customers, Offer, Infrastructure, and Financial Viability.

BMC acts as a shared language for describing, visualizing, assessing, and changing business models. It is like a blueprint for a strategy to be implemented through organizational structures, processes, and systems.

Each of these blocks is explained in more detail as follows:

1. Customer Segments (CS)

These are the groups of people or organizations that a business aims to reach and serve. Customers are the heart of a business model, and without (profitable) customers, a business cannot survive.

Customers are grouped into distinct segments with common needs, common behaviors, or other attributes. Customer groups represent separate segments if:

• Their needs require and justify a distinct offer.
• They are reached through different Distribution Channels.
• They require different types of relationships.
• They have substantially different profitability.
• They are willing to pay for different aspects of the offer.

An organization must make a conscious decision about which segment(s) to serve and which segments to ignore. Once this decision is made, a business model can be carefully designed around a strong understanding of specific customer needs.

The following two questions, if answered with clarity, help a business identify its CS.

• For whom are we creating value?
• Who are our most important customers?
• What are the customer archetypes?

Examples of some of the Customer Segments are shown in the figure:

2. Value proposition (VP)

Value Proposition describes the bundle of products and services that create value for a specific Customer Segment chosen by a business.

A VP is the reason why customers turn to one company over another. VP must solve a customer’s problem or satisfy a need. A business can have more than one VP, but each must consist of a selected bundle of products and/or services that caters to the requirements of a specific Customer Segment.

While some VPs may be innovative and represent a new or disruptive offer, others may be similar to existing market offers but with added features and attributes.

An organization’s VP must answer the following questions with clarity:

• What value do we deliver to the customer?
• Which one of our customer’s problems are we helping to solve?
• Which customer needs are we satisfying?
• What bundles of products and services are we offering to each CS?

Elements from some of the following can contribute to customer value creation:

3. Channels (CH)

Channels describe how a company communicates with and reaches its Customer Segments to deliver a Value Proposition.

Channels are customer touch points that play an important role in the customer experience and serve several functions, including:

• Raising awareness about a company’s products and services
• Helping customers evaluate a company’s Value Proposition
• Allowing customers to purchase specific products and services
• Delivering a Value Proposition to customers
• Providing post-purchase customer support

To establish an effective channel, a company must first answer the following:

• Through which Channels do our Customer Segments want to be reached?
• How are we reaching them now?
• How are our Channels integrated?
• Which ones work best?
• Which ones are most cost-efficient?
• How are we integrating them with customer routines?

There are five distinct phases (figure below) through which a channel passes, and it could cover more than one of these phases at a time.

Channels can be either direct, indirect or hybrid, as shown:

Finding the right mix of Channels to satisfy how customers want to be reached is crucial in bringing a Value Proposition to market and can create a great customer experience.

4. Customer Relationships (CR)

Customer Relationships describe the types of relationships a company establishes with specific Customer Segments. Relationships can range from personal to automated. An organization’s CR strategy may be driven by one of the following motivators:

• Customer acquisition
• Customer retention
• Boosting sales (upselling)

A business can arrive at the optimum CR by asking the following questions:

• What type of relationship does each of our Customer Segments expect us to establish and maintain with them?
• Which ones have we established?
• How costly are they?
• How are they integrated with the rest of our business model?

Several categories of Customer Relationships may co-exist in a company’s relationship with a particular Customer Segment. Some of which are:

5. Revenue Streams (RS)

Revenue Streams represent the company’s cash (earnings) from each Customer Segment and are like the arteries of any business.

There are two distinct categories of Revenue Streams:

• Transaction Revenues which are one-time customer payments
• Recurring Revenues that are ongoing payments to either deliver a Value Proposition to customers or provide post-purchase customer support

A business can arrive at its ideal revenue stream by asking the following questions:

• For what value are our customers willing to pay?
• For what do they currently pay?
• How are they currently paying?
• How would they prefer to pay?
• How much does each Revenue Stream contribute to overall revenues?

There are several ways a business can generate revenue, such as:

A business may have one or more Revenue Streams, each with different pricing mechanisms. The choice of pricing mechanism greatly influences the revenues generated.

There are two main types of pricing mechanisms, Fixed and Dynamic, as follows:

6. Key Resources (KR)

The Key Resources describe the most important assets required to make a business model work.

These resources allow an enterprise to create and offer a Value Proposition, reach markets, maintain relationships with Customer Segments, and earn revenues. Different Key Resources are needed depending on the type of business model.

For example, a chip fabrication business like TSMC [9] requires capital-intensive facilities worth billions of dollars, while a chip designer like NVIDIA [10] would need skilled manpower as its Key Resource.

Key Resources can be owned or leased by a business or acquired from its key partners. They can be identified by answering the following questions:

• What Key Resources do our Value Propositions require?
• What resources are required to sustain our Distribution Channels, Customer Relationships and Revenue Streams?

Key Resources can be categorized as follows:

7. Key Activities (KA)

Key Activities describe the most important things a company must do to make its business model work. They are required to create and offer a Value Proposition, reach markets, maintain Customer Relationships, and earn revenues.

Key Activities differ depending on the business model type. For example, Microsoft’s Key Activity is software development, while for Dell, it is Supply Chain Management. For a consultancy firm like McKinsey, Key Activity is problem-solving.

A business can identify its Key Activities by answering the following questions:

• What Key Activities do our Value Propositions require?
• What activities directly contribute to maintaining our Distribution Channels, Customer Relationships and Revenue Streams?

Key Activities can be categorized as follows:

8. Key Partnerships (KP)

The Key Partnerships describe the network of suppliers and partners that make the business model. There are four types of partnerships:

A business must ask the following questions before forming partnerships:

• Who are our key partners?
• Who are our key suppliers?
• Which Key Resources are we acquiring from partners?
• Which Key Activities do partners perform?

Primarily, there are three motivations for a business when creating partnerships, as shown:

9. Cost Structure (CS)

Cost Structure describes all costs incurred to operate a business model. A business incurs costs in creating and delivering value, maintaining customer relationships, and generating revenue. Costs are business-specific, where some are more cost-driven than others.

A business must answer the following questions to arrive at an optimum cost structure:

• What are the most important costs inherent in our business model?
• Which Key Resources are most expensive?
• Which Key Activities are most expensive?

While costs should be minimized in every business model, it is useful to distinguish between two broad classes of business model Cost Structures:

• Cost Driven : This model focuses on minimizing costs wherever possible. This approach aims at creating and maintaining the leanest possible Cost Structure, using low-price Value Propositions, maximum automation, and extensive outsourcing. Examples: No frills airlines like Southwest & easyJet, Fast food joints such as McDonald’s & KFC.
• Value Driven: Premium Value Propositions and a high degree of personalized service usually characterize value-driven business models. Examples: Luxury hotels, Expensive Cars like Rolls-Royce

Cost Structures can have the following characteristics:

Putting-it-all together

The nine business model Building Blocks form the basis for a handy tool, which is called the Business Model Canvas (figure below). This tool resembles a painter’s canvas preformatted with nine blocks that allow painting pictures of new or existing business models. It is a hands-on tool that fosters understanding, discussion, creativity, and analysis.

BMC works best when printed out on a large surface such that groups of people can jointly note, sketch, and discuss business model elements.

Example of Business Model Canvas

Nespresso [17] , a fully owned daughter company of Nestlé, changed the dynamics of the coffee industry by turning a transactional business (selling coffee through retail) into one with recurring revenues (selling proprietary pods through direct channels).

The two-part strategy involved selling their patented coffee machine to retail customers first to lock them into the brand. This generated a recurring demand for coffee refills (pods) that led to constant revenues. These pods were sold directly through mail/website/own stores, thereby eliminating middlemen/dealers, which further increased profits [1] .

Nespresso’s strategy plotted on a Business Model Canvas looks as follows:

Business Model Canvas helped Nespresso establish a solid and enduring foundation by engaging consumers directly and bringing a barista-like experience within the reach of a home or an office.

Advantages & Limitations

• Encourages Collaboration – collaborative framework, which helps put different business stakeholders in sync. This improves the likelihood of generating new ideas and their quality.
• Facilitates testing of ideas before launch – allows business owners, strategists, and managers to think through business ideas as well as test concepts that would otherwise get tested with potential customers where the stakes are higher.
• Customer-centered approach – Key customer segments, relationships, activities, and value propositions are all elements that focus on creating, delivering, and capturing value for customers.
• Clarity – Analyzing the business through the lens of nine blocks brings better clarity and structure to the business model.

Limitations

• Lacks a section for defining the start-up’s mission statement, which is crucial to understanding the goals and objectives of any business.
• Overlooks the importance of a profit mechanism beyond costs and revenues, including decisions on how to use potential profits.
• The order of the canvas is not intuitive, making it difficult to read and understand the strategic decisions in a logical sequence.
• Does not depict interconnections between different elements, which can have a significant impact on the overall business model.
• Fails to acknowledge the company’s role within its ecosystem, including its impact on the environment and local communities.
• External factors such as competition, history, and other industry-specific factors are absent from the canvas, which can greatly influence the success of a business model.

1. “A Better Way to Think About Your Business Model”. Harvard Business Review, https://hbr.org/2013/05/a-better-way-to-think-about-yo . Accessed 01 Aug 2023

2. “Business Model Generation”. Alexander Osterwalder, https://www.strategyzer.com/books/business-model-generation . Accessed 28 Jul 2023

3. “The Apple M1 is a revolution that is changing the computing world”. Citymagazine, https://citymagazine.si/en/apple-m1-is-a-revolution-that-changes-the-computer-world/ . Accessed 29 Jul 2023

4. “Mass Customization”. Corporate Finance Institute, https://corporatefinanceinstitute.com/resources/management/mass-customization/ . Accessed 29 Jul 2023

5. “Moka Pot”. Wikipedia, https://en.wikipedia.org/wiki/Moka_pot . Accessed 29 Jul 2023

6. “NetJets Homepage”. NetJets, https://www.netjets.com/en-us/ . Accessed 01 Aug 2023

7. “Distribution Channels – Definition, Types, & Functions”. Feedough, https://www.feedough.com/distribution-channels-definition-types-functions/ . Accessed 30 Jul 2023

8. “Lease from Hertz”. Hertz, https://www.hertz.com/rentacar/rental-car/car-lease . Accessed 30 Jul 2023

9. “TSMC”. Wikipedia, https://en.wikipedia.org/wiki/TSMC . Accessed 30 Jul 2023

10. “NVIDIA”. Wikipedia, https://en.wikipedia.org/wiki/Nvidia . Accessed 30 Jul 2023

11. “BMW, Daimler, Ford and Volkswagen team up on high-power charging network”. Techcrunch, https://techcrunch.com/2017/11/03/bmw-daimler-ford-and-volkswagen-team-up-on-high-power-charging-network/ . Accessed 31 Jul 2023

12. “Honda And Sony Combine Talents To Build Electric Vehicles”. Forbes, https://www.forbes.com/sites/peterlyon/2022/06/26/honda-and-sony-announce-joint-venture-to-build-electric-vehicles/ . Accessed 31 Jul 2023

13. “Uber and Spotify launch car music playlist partnership”. BBC, https://www.bbc.com/news/technology-30080974 . Accessed 31 Jul 2023

14. “Walmart Has the Scale and Infrastructure to Generate Positive Gains”. Yahoo Finance, https://finance.yahoo.com/news/walmart-scale-infrastructure-generate-positive-201822628.html . Accessed 31 Jul 2023

15. “Demand-Side Economies of Scope in Big Tech Business Modelling and Strategy”. MDPI, https://www.mdpi.com/2079-8954/10/6/246 . Accessed 31 Jul 2023

16. “The Business Model Canvas”. Strategyzer, https://www.strategyzer.com/canvas/business-model-canvas . Accessed 31 Jul 2023

17. “HomePage”. Nespresso, https://www.nespresso.com/us/en/ . Accessed 01 Aug 2023

18. “Business Model Canvas of Nespresso”. Alex Osterwalder, https://www.youtube.com/watch?v=dhQh-tryXOg . Accessed 01 Aug 2023

19. “Nespresso Capsule”. Electromall, https://electromall.net/product/nespresso-capsule/ . Accessed 01 Aug 2023

20. “The Best Nespresso Machine (But It’s Not for Everyone)”. Newyork Times, https://www.nytimes.com/wirecutter/reviews/best-nespresso-machine/ . Accessed 01 Aug 2023

21. “Business Model Canvas”. Think Design, https://think.design/user-design-research/business-model-canvas/ . Accessed 01 Aug 2023

22. “6 Problems with the Business Model Canvas”. The Pourquoi Pas, https://www.thepourquoipas.com/post/problems-with-the-business-model-canvas . Accessed 01 Aug 2023

• McKinsey 7S Model
• Elaboration Likelihood Model of Persuasion
• The Johari Window Model

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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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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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Key Components of the Business Model Canvas

• by Joel Finningley
• Business Model Canvas , Business Modelling

In 2010, Alex Osterwalder and an online community of co-creators developed, designed, and launched the book ‘Business Model Generation.’

Business Model Canvas Components

What is the business model canvas, value proposition:, customer segments:, customer relationships:, customer channels:, revenue streams:, key resources:, key activities:, key partnerships:, cost structure:, business model canvas – downloads, additional resources.

In just under a decade, the book has revolutionized, for many , the way that we plan, forecast and roll out new businesses. The book clearly defined what a business model is:

“the rationale of how an organization creates, delivers and captures value.”

And they created a strategic, visual tool known as the business model canvas. Why?

I won’t lie, innovation and entrepreneurship is really hard. Anybody who tells you something else hasn’t done it. Yet, it’s hard like any interesting profession is hard. You need to learn the skills and then practice, practice, practice. Same as becoming a doctor or architect. Trending ARPU, CAC, LTV — Alex Osterwalder🇨🇭 (@AlexOsterwalder) April 29, 2019

Innovators, entrepreneurs, executives and dreamers alike needed a tool to visually map out, share, dissect, rework, and ultimately refine their ideas and innovations into a structured format.

There are 9 Building Blocks in the Business Model Canvas.

Key Component of the Business Model Canvas

What unique value does a company’s product or service create for customers?

What group(s) of customers is a company targeting with its product or service?

How does a company plan to build and maintain relationships with the customers it is serving?

What channels does a company use to acquire, retain and continuously develop its customers?

How is a company pulling all of the above elements together to create a revenue stream(s) and generate cashflow?

The above 5 Building Blocks represent the right side of the canvas, and contribute to the Revenue side of the business model .

What assets and knowledge does a company possess that allow it to deliver its value to customers in ways that other companies can’t?

What activities does a company engage in that allow it to execute its strategy and either establish a presence in the market or gain market share?

What strategic and cooperative partnerships does a company form to increase the scalability and efficiency of the business?

What are the key costs associated with running the business and how can key partnerships/resources be leveraged to reduce the cost structure?

The remaining 4 Building Blocks come together to form the left side of the canvas, and contribute to the Cost Structure of the business model .

Business Model Canvas – PDF Download

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Business Model Canvas – KEY(note) Download

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Business Model Canvas: The 9 Elements Explained

This article is an excerpt from the Shortform book guide to "Business Model Generation" by Alexander Osterwalder and Yves Pigneur. Shortform has the world's best summaries and analyses of books you should be reading.

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What are the nine elements of the Business Model Canvas? How are the elements related?

There are nine elements in the Business Model Canvas: 1) customer groups, 2) customer touchpoints, 3) customer interactions, 4) value proposition, 5) key resources, 6) network, 7) key activities, 8) revenue streams, 9) expenses. These elements are interdependent components that impact the effectiveness of the other elements. So, changes to one element can reduce or amplify the effects of other elements.

In this article, we’ll first briefly define what the Business Model Canvas is. Next, we’ll explore each of the nine overarching elements that you need to consider to create a successful business model.

What Is the Business Model Canvas?

Osterwalder and Pigneur developed a flexible template that they refer to as the “ Business Model Canvas ” to help you understand and focus on the nine overarching elements that they believe make up any successful business model. The template offers a visual framework to describe, assess, update, or design business models. You can use it to analyze the strategies of your competitors, to evaluate or to create new strategies for your existing business, or to design an entirely new business.

(Shortform note: The Lean Canvas is a popular adaptation of the Business Model Canvas. Developed by Ash Maurya, the author of Running Lean , it’s designed specifically for action-orientated start-up companies that rely on continuous experimentation to develop their products and services. Consequently, it places more emphasis on defining customer problems and identifying competitive solutions .)

The 9 Elements of the Business Model Template

Osterwalder and Pigneur encourage you to consider each of the nine Business Model Canvas elements as interdependent components that impact the effectiveness of the other elements. In other words, changes to one element can impose constraints or amplify the effects of other elements. Therefore, as you work on your business models, consider how you can leverage all of your elements to work together.

As you work on your business models, consider how you can leverage all of your elements to work together.

Element 1: Define Your Customer Groups

Define the different groups of customers your business intends to target—Osterwalder and Pigneur refer to this element as “Customer Segments.” You may serve one group of customers or several groups of customers depending on the needs you intend to fulfill. The authors state that your customers represent different groups if you need to:

• Create different products and services to meet their needs
• Reach them through different channels of distribution
• Develop different types of relationships with them
• Adapt your pricing structures to accommodate their needs

Once you’ve categorized your customers into distinct groups based on their needs or the way they interact with you, you can target these groups by designing your business model around their specific customer needs.

(Shortform note: The Four Steps to the Epiphany , by Steve Blank, emphasizes the importance of identifying and validating your customer groups before you develop your business model. The book includes a four-step customer development process to help businesses effectively define and target customer groups: 1) discover customers for your product or service, 2) validate your product and touchpoints, 3) create demand for your product or service, and 4) build strategies focused on customer management.)

Osterwalder and Pigneur argue that you need to approach each of your customer groups in specific ways when planning your business model. They provide the following examples of different types of customer groups:

Mass Market

For Mass Markets, the focus is on one large customer base with similar needs. Therefore, it isn’t necessary to distinguish between different customer groups when planning each of the other elements in your business model. For example, Colgate doesn’t need to differentiate its customers since toothpaste is an essential, widely-used personal care product. Therefore, Colgate can align all of its business model elements towards appealing to and engaging as many people as possible.

Niche Market

For Niche Markets, business models need to cater to specific customer groups and tailor each of the other elements to effectively target these specialized needs. For example, Lush targets customers who care about vegetarian products (no animal testing) and eco-friendly practices. Therefore, they align all of their business model elements to ensure the business focuses on environmentally friendly methods.

Subdivided Market

For Subdivided Markets, business models offer slightly different products and services to accommodate the needs of each of their customers. The way that they position each different product and service defines how they approach each of the elements. For example, an estate agent’s customers all want to buy or rent property. The estate agent can segment these customers into groups based on their income and on whether they wish to buy or rent. The higher the customer is willing to pay, the more emphasis the estate agent may have to put on developing customer relationships. This in turn affects the overall costs involved in targeting individual customer groups.

Diversified Market

Businesses that cater to two or more unrelated customer groups with different needs, have to base their business models around distinct products and services. All of the elements need to accommodate these distinct products and services. For example, Johnson & Johnson provides healthcare products and services to consumers. However, they also provide medical devices and equipment for hospitals. Johnson & Johnson has to target both of these customer groups separately to effectively cater to them.

Multi-Sided Market

Businesses that serve interdependent customer groups need to create products and services of equal value for each customer group. For the business model to function, each element needs to accommodate the full range of products and services on offer to both parties . For example, online marketplaces need to accommodate both buyers and sellers to operate efficiently—they can’t serve one group without the other group’s active participation.

Element 2: Define Your Touchpoints

Define your touchpoints, how you’ll communicate with your customers and deliver your products and services—Osterwalder and Pigneur refer to touchpoints as “Channels.” For your communication, sales, and distribution touchpoints, you have the option of using your own touchpoints (assets under your direct control such as your website or your store), or partner-owned touchpoints (external touchpoints that result from cooperation with marketing agencies or distribution partners), or a mix of both. In addition, the authors also make a distinction between direct touchpoints (communication you control such as your blog), and indirect touchpoints (communication you can’t control such as user reviews). 

The authors state that there are five distinct stages to consider when defining your touchpoints:

• Advertise your products and services to customers
• Differentiate the value your products and services offer to customers
• Enable transaction processes so customers can buy your products and services
• Distribute your products and services to your customers
• Support customers after they’ve bought your products and services

Touchpoints and Interactions (Element 3) are closely linked—consider the level of interaction you want to have with your customers when defining your touchpoints.

Element 3: Define Your Interactions 

Define the type of interactions you want to establish for each of your customer groups—Osterwalder and Pigneur refer to this element as “Customer Relationships.” The authors advise that you consider what your motivations are for communicating with your customers as your approach will differ depending on whether you intend to acquire new customers, retain existing customers, or upsell to existing customers. 

It’s important to note that the interactions customers have with your business deeply influence how they experience your products and services, so you need to carefully consider how you can meet their needs and create the right balance. The authors provide a list of ways to interact with your customers:

• Dedicated customer representatives for specific customers
• Customer representatives
• Self-service
• Automated services
• Communities and Forums
• Content co-creation

Element 4: Define Your Value Offer

Define how you intend to offer value to these customers—Osterwalder and Pigneur refer to this element as “Value Propositions.” Your value offer outlines the benefits you intend to provide in the form of products and services. The authors state that successful value offers align with the needs of your customers and differentiate themselves from existing solutions.

When creating your value offer, consider these questions:

• Do you intend to disrupt the market with an innovative value offer, or do you intend to improve upon what’s already out there?
• What specific value do you intend to deliver to the customer?
• How will you adapt your value offer for each of your customer groups?
• What makes your value offer more appealing than that of your competitors?

(Shortform note: Osterwalder and Pigneur’s Value Proposition Design delves further into the topic of creating, testing, and improving your value offer.)

Element 5: Define Your Resources

Define what resources you need to create and deliver your products and services to your customer—Osterwalder and Pigneur refer to this element as “Key Resources.” According to the authors, you can own, lease, or acquire the resources you need. All resources fall into the following categories:

• Material: raw materials, buildings, factories, vehicles, and machinery
• Monetary: cash, credit, and stock options
• Intellectual: brand equity, copyrights, patents, and knowledge databases
• Human: experienced staff members and specialists

Element 6: Define Your Network

Define the alliances you need to form to optimize your business model and increase market share, acquire resources, or reduce risk—Osterwalder and Pigneur refer to this element as “Key Partnerships.” In other words, what alliances will provide you with a sustainable competitive advantage and help you to grow quickly? The authors distinguish between four different types of alliances:

• Alliances between non-competitors (eBay and Paypal)
• Alliances between competitors (Apple and Microsoft’s patent-licensing agreement)
• Joint Alliances to develop new products and services (Ford and Toyota develop hybrid trucks)
• Buyer-supplier Alliances (Samsung supplies Apple)

(Shortform note: Innovation expert, Rosabeth Moss Kanter, author of Think Outside the Building , compares strategic alliance relationships to marriage—like marriage, many strategic alliances fail to live up to expectations. In other words, both suffer from a high failure rate. However, Kanter argues that strategic alliances are more likely to succeed if businesses focus on creating strong foundations built on shared values and mutual benefits .)

Element 7: Define Your Critical Actions

Define the core actions you need to take to operate successfully and meet customer demands—Osterwalder and Pigneur refer to this element as “Key Activities.” The authors state that your actions will fall into the following categories:

• Production: designing, manufacturing, and delivering products
• Troubleshooting: finding solutions to problems
• Infrastructure management: managing interactions between multiple applications and parties

(Shortform note: Osterwalder and Pigneur don’t provide practical advice here since different business models rely on different activities to operate successfully. Measure What Matters provides an effective goal-setting process that you can use to define the objectives (your end goal) and key results (how you will achieve your end goal) for each of your business model elements. For example, if you intend to manage platform interactions between different customer groups, your objective could be to acquire X number of customers in each group. Your key results could be: grow platform visitors by 5% every month, increase organic traffic by 10% every six weeks, and so on.)

Element 8: Define Your Profit Sources

Define how you intend to profit from the value you provide to your customers—Osterwalder and Pigneur refer to this element as “Revenue Streams.” The authors state that there are two types of income streams to consider, profits from single transactions , and profits from ongoing payments such as subscriptions . You may have multiple income streams for each of your customer groups. Further, each of these income streams may involve different pricing mechanisms depending on whether you choose to set a fixed or variable price for your products and services.

The authors include the following ways to generate profits:

• Selling physical products
• Charging a usage fee for a product or service
• Supplying services for subscription
• Leasing products and assets
• Licensing intellectual property 
• Providing an intermediation or brokerage service

Element 9: Define Your Expenses

Define the expenses of operating all of the elements you’ve defined in your business model—Osterwalder and Pigneur refer to this element as “Cost Structure.” Your expenses will vary depending on whether you choose to minimize costs and offer an inexpensive product or service, or if you choose to create premium-priced products and services. The authors state that your costs structures will include at least one of the following characteristics:

• Fixed costs: salaries, rents
• Variable costs: costs vary in proportion to the volume of goods or services produced
• Economies of Scale: bulk purchase rates lessen cost per unit rates
• Economies of Scope: a single resource or activity supports multiple operations or services

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How to Use a Business Model Canvas to Deliver & Capture Value

• What is a Business Model Canvas?

A business model canvas is a great way to visualize and describe how your organization creates and captures value. You can use the canvas when creating a new business or to strategically evaluate your existing model.

It's also a great way to clarify your vision for the organization. That vision is critical if you hope to work through the strategic planning process or implement other business frameworks like a balanced scorecard to set and track your goals.

Get started with the template below or jump ahead to one of the following sections:

Table of Contents

Get started with a business model canvas template, the 9 components of the business model canvas, how to use the business model canvas framework, when to use the business model canvas, use gliffy to capture & share ideas across your organization.

Filling out the canvas can be a daunting task at first. Rather than doing this exercise alone, grab some of your most strategic teammates to help! With their input, you’ll be able to focus on what’s most important and capture the right amount of detail. You can find this template in the template library when you create a new diagram in Gliffy for Confluence. 

Each of the nine sections in the canvas are ways to differentiate yourself from other competitors or think about how your primary activities contribute to your success.

Key Partners

Your key partners are external teams, technologies, or organizations that contribute to your business model. If your company chooses to outsource shipping activities, for example, the company responsible for order fulfillment would be considered one of your key partners. 

Key Activities

The day-to-day things your company does to deliver on your value proposition are your key activities. A marketing agency, for example, could specialize in web design, branding, digital marketing, consulting, social media marketing, or combinations of other areas of expertise. 

Key Resources

Your key resources will include everything from intellectual property to machinery or raw materials. For a bakery, an oven, pastry chef, sugar, and a storefront would all fit this section. While that may sound broad, try to be thoughtful about what resources are most critical to your success and capture those in the canvas.

Value Propositions

The value proposition is the problem you intend to solve with your business. It should be directly related to the needs of your customer. You may have multiple value propositions for different audiences. For example, a grocery delivery service could be a fast option for busy students who need snacks as well as a major time-saver for parents who don’t want to bring their children into the store.

Customer Relationships

This section describes how your business interacts with and maintains relationships with customers. In the case of traditional investment advisors, for example, you’ll describe personal phone calls or in-office meetings — a very hands-on service approach focused on relationship-building. A fintech investment app, on the other hand, may aim to support customer relationships via in-app chat with service representatives.

In this section, you’ll detail where you communicate with your target customer. These could include social media, apps developed for your business, radio advertising, and more. These channels are often where you’ll want to invest in marketing.

Customer Segments

Customer segments are the ways that you define your target customers. Understanding how these segments are unique is critical to your success. If you have an event space, for example, you may have a segment of corporate audiences that has very different needs and priorities than wedding planners. You may know these segments as “personas.” 

Cost Structure

Costs associated with your business activities fit in this section. For a restaurant, this could be payroll, raw ingredients, kitchen equipment rentals, and new furniture for the dining area. Typically, your most important costs will be associated with the activities and resources you outlined in the sections above.

Revenue Streams

These are the ways that your business generates revenue. Revenue models can be things like subscriptions, payments for each purchase, service fees, dividends, and more. A flower delivery service may have both a subscription model generating recurring revenue in addition to individual purchases. Detail any and all revenue streams your business plans to support.

This framework will help you describe your business idea or gain a better understanding of an existing business model. But, there are a lot of details to sift through. Follow these steps to make sure you have a productive experience.

Step 1: Assemble a Team

Allocate at least an hour of undisturbed time with a few of your teammates. You can take the old-school route and use a whiteboard and sticky notes, or use online collaboration software like Gliffy to work together from anywhere. We'd recommend trying Gliffy — our sticky notes are unlimited 😉

Try Gliffy free

Tip: For an extra-strong start, consider doing some prework, too. Other business frameworks like SWOT analysis , PEST analysis , and value chain analysis can help you better understand the competitive environment and what differentiates key players.

Step 2: Brainstorm High-Level Elements

As you start filling out your canvas, remember that you don’t need to go in any particular order! If anything, start with the teal area of our business model canvas template and focus on the value propositions, your customer relationships and segments, and channels. This is a great way to center your team on the customer and their needs.

Step 3: Dig Into the Details

Take a quick break and then revisit your canvas. What details are missing to give a holistic overview of your business? Complete the picture by adding extra data or details that help describe what makes something unique or particularly important. For example, if you documented two different revenue streams, you may add that one stream accounts for over 70% of your total revenue, while the other is just under 30%. 

Step 4: Look for Gaps

Every customer segment should be connected to a clear value proposition and at least one revenue stream, so there may be a gap in your model or strategy if these things are missing!

You may also want to start considering the future state of your business — use a separate color shape or sticky note to add ideas where you’d like to add resources, channels, or perhaps a new customer segment. (If you want to further explore ideas for the future of your business, you may also want to conduct a gap analysis .)

Review the areas in teal and ask yourself the following questions:

• Do I have a clear value proposition for every customer? 
• Am I in the right channels for this value proposition and customer segment?
• Is there enough demand for this business model?

Review the areas in yellow and ask yourself the following questions:

• Do I have the resources I need to support this business model?
• What additional partners or resources should I use?
• Do all of my key activities support our value propositions and customers?

Last, review the areas in blue to evaluate whether this is a viable business model:

• Are your costs lower than your revenue? If not, when do you expect this to shift?
• Are there any unnecessary costs you can minimize?
• Are there any revenue streams you should add? Based on your customers, how would they be willing to pay for your services in other ways?

Step 5: Share and Refine

If you used a whiteboard or paper to create your canvas, now’s a great time to go digital. Using a diagramming tool like Gliffy, digitally visualize your work so that you can easily add it to presentations and documentation. It’s also a great resource for employee onboarding or potential investors in conjunction with your business plan.

Once your work is in a more shareable format, be ready to get some feedback and new ideas from your team. Take all of these in stride — there may be some great opportunities that come up! Edit your canvas as needed or create an action plan to address any gaps.

This exercise is great whether you’re starting from scratch or analyzing an existing business. It gives you the opportunity to understand your competitors, expand your offering, or identify ways to differentiate yourself.

Create or Evaluate a New Business

Completing this exercise can be a great way to get started on a more detailed business plan. It can also help you identify gaps in your business plan or refine an idea. 

Understand Your Competitors

You don’t have to use a business model canvas for your own business! Learn more about your competitors and their business models by trying to complete the canvas with whatever information you can find about them. Then, you can compare a competitor’s canvas against your own to identify differentiators in how you create value.

Along with business frameworks like a situational analysis or SWOT analysis , the balanced scorecard will give you a more complete view of the competitive environment.

Expand or Refine an Existing Business

This exercise can be a great way to determine how a new product line, service, or revenue stream fits with your existing business activities, relationships, and resources. If an idea easily fits within your existing business model, that can be a great sign that it’s a viable opportunity to pursue.

Business model canvasing is a powerful exercise for any leader, but don’t keep that knowledge all to yourself! Use Gliffy Diagrams for Confluence or Gliffy Online to capture and refine your ideas, then share them with the partners you care about most. 

Regardless of your tool of choice, you’ll get a free trial to get started. From there, it’s easy! Just drag and drop the shapes you need to build out the process models , flowcharts , and other business frameworks you need to hit your goals.

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The Business Model Canvas: A Quick How-To Guide

Every company is a story. Anyone looking to invest in a company will need to know this story. The Business Model Canvas is one popular format for presenting your company’s story. Let’s take a look.

A canvas for your business model

Your company story isn’t a marketing ploy: it does not need to be new, innovative, or made-up. In fact, you already have your company story—it’s your business model. The business model canvas is one framework for sharing your story, or business model, with potential investors.

This strategic management framework was first developed by Alexander Osterwalder in the mid-2000s. While the original canvas is applicable to any business, regardless of size, history, or budget, additional canvases have popped up in various niches.

The simplicity of the business model canvas is what makes it so successful. The canvas is plain, looking much like a billboard or whiteboard. It’s comprised of nine criteria that express the important character traits for your business’ story, ranging from who you know to how you make money to what you have. The canvas acts as an advertisement to attract business investors or other founders.

There are several benefits of using this framework:

• Simplicity. This single, straightforward sheet means there’s no filler. Your canvas highlights the basics of your business, so you should already know the answers to most of these. The compiling of information might be overwhelming, but the business model canvas ensures a simple process.
• Customer focused. Your canvas shows how you think about and interact with your customer, and it can help expose any weaknesses.
• For any company. Whether you’re a one-person start up or part of a multi-national company, the business model canvas works.

Know your audience: 3 tips

Before we explore the nine criterion of your canvas, it’s important to consider your audience when creating a canvas. Your audience is potential investors, and these three tips will help strengthen your business model canvas.

When creating a canvas, you should assume these things about your audience:

• They are smarter than you. Be clear, be concise. There is no reason for great exposition. This is a place to create a bullet point list for the reasons why you’ll succeed. Let the audience see the data and piece it together.
• They see through your mask. There is a little room for embellishment—after all, you want to stand out. But too much embellishing can kill a project because your audience can see it. There is a fine line between confidence and foolishness, and if you can’t tell the difference, stick to talking straight.
• They hope you are The One. Your audience wants, more than anything, for you to succeed. They want to find a good match. They do not take the time to listen and read these just because they enjoy critiquing everything that passes over their desk. They enjoy the thrill of finding The One.

9 criteria of the business model canvas

The nine criteria are subsets of four major categories in the business model canvas:

Infrastructure

Each major category is comprised of one or a few criterion.

This section is all about the things you need— people, processes, technology, and partners —to run your business.

• Key activities. What does your business do? Are you managing large software teams? Do you have to manage a large supply chain? These are activities essential to the business. If your business is a salon, for examples, your key activities might be hiring and training staff, cutting and styling hair, opening and closing the shop, sending emails and offers, and making thank you cards to improve customer relations.
• Key resources. These are the things you need to perform your key activities, in order to create value . The key resources of a salon are staff, a physical location, marketing, and customers. Which resources do you have that are unique to you and give you an advantage? It might be an excellent 3-year contract on a prime downtown property because its owner had to sell quickly. It could be that you get discounted hair products from the manufacturer because you worked there for 15 years or negotiated a deal.
• Partner network. These are people in your network who can help you. People reading your business model canvas like to see that you are not a lone wolf, starting from scratch. They want to see you have support. They want to see that they are not the only ones who are signing up to help your business succeed. The partner network is the place to brag about who you know. These can be team members, suppliers, marketing avenues, etc. Anyone who is on board to contribute to the business.

This section explores the value you offer.

• Value proposition. Your value proposition is the most important component of any business. Why are you valuable? If the business provides no value, then, why? Why should anyone buy into it? Why should anyone support it? Why does anyone need it? This value needs to be directed at who your business serves in the marketplace. The proposition is not why you are valuable to the readers and the investors. The value needs to be directed at who your business targets. Google helps people find things they wish to know. Apple makes elegant, simple products designed to work out of the box. Your salon cuts and styles people’s hair.

This section is all about your customers: whether, where, and how you talk to them and they buy from you.

• Customer segments. These are the people to purchase your product. It is helpful to think of your first customer. In the end, you may want everyone to be a customer, but, right now, who will be the first person to buy your product? Customer segmentation can be categorized by demographic, geography, social class, financial class, personalities, etc.
• Channels. How do you meet your customers? Do you go to them? Do they come to you? Channels could be Twitch.tv for a media platform. It could be a writing contest for a Hack-A-Thon. It could be the business location for a coffee shop. It could be a website for a microservice. It could be engineers’ Twitter accounts for any software company. The channel is a pathway of communication that links a community to the business.
• Customer relationships. What kind of relationship do you want to have with your customer? What is the relationship’s nature? Transactional, personal, automated, self-service, community oriented. A vending machine is self-service. Major cloud providers are mostly self-service. They lack in support so much that other companies can be built entirely around providing customer service for their platform. Other cloud providers are popping up, too, whose business’ value proposition is that they have phone-call customer service—a unique value for certain categories of customers.

The finances section really wants to know your income statement. What are your costs and how do you bring in money?

• Cost structure. What are your company’s costs? Income statements do a good job of putting expenses into operating expenses and capital expenses , and that can serve as a good model for this part of the canvas. Operating expenses are the day-to-day costs of doing business. At the salon, it would be largely labor costs for hiring stylists to cut hair. Capital expenditures would be costs associated with stocking shelves with hair products, rent costs, and electricity costs.
• Revenue streams. Finally, how does your company make money? The salon makes money by cutting and styling hair. They maintain a register to sell hair products. Maybe they create distinctions in their stylist offerings and do normal cuts, styled cuts, perms, colorings, and events like weddings or model shoots.

Spend some time on the canvas: make it flow, edit each section, and present your company with a complete story.

Additional resources

For more on strategic business planning and aligning technology to your business, browse our BMC Business of IT Blog or check out these articles:

• What Is “IT-Business Alignment”?
• Introduction to Business Process Management (BPM)
• Why Business Value is Key to IT Success
• What is Technology Business Management? TBM Explained

How to evolve IT to drive digital business success

When IT and the business are on the same page, digital transformation flows more easily. In this e-book, you’ll learn how IT can meet business needs more effectively while maintaining priorities for cost and security.

These postings are my own and do not necessarily represent BMC's position, strategies, or opinion.

See an error or have a suggestion? Please let us know by emailing [email protected] .

Business, Faster than Humanly Possible

BMC works with 86% of the Forbes Global 50 and customers and partners around the world to create their future. With our history of innovation, industry-leading automation, operations, and service management solutions, combined with unmatched flexibility, we help organizations free up time and space to become an Autonomous Digital Enterprise that conquers the opportunities ahead. Learn more about BMC ›

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About the author.

Jonathan Johnson

Jonathan Johnson is a tech writer who integrates life and technology. Supports increasing people's degrees of freedom.

What is a Business Model Canvas? Definition, Examples, Channels and Key Resources

By Paul VanZandt

Published on: July 26, 2023

Table of Contents

What is a Business Model Canvas?

9 business model canvas examples, business model canvas explained, business model canvas channels, key resources of business model canvas.

Using a Business Model Canvas has become one of the premium alternatives to dragging one out on paper. These boards make creating and interpreting business plans or go-to-market strategies a collaborative endeavor and something anyone can create.

This article will define what a business model canvas is and discuss its various advantages, and how to use them, and walk you through our very own business model canvas. If you’re interested in learning more about our other template definitions, you can look at our guides on Kanban , customer journey maps , and SWOTs .

A business model canvas is defined as an organizational tool that helps visualize the development of a potential business model. It describes the components required to successfully take a business to market.

The end goal of using a business model canvas is to gain a better understanding of a target customer base, how to drive a profit, and how to deliver a unique value proposition. These are some of the key components to using a business model canvas and must be defined in order to achieve a successful go-to-market strategy.

Business model canvases are an effective alternative to the traditional method of documenting a business plan, which is usually presented in long multi-page documents.

These templates make the core elements of a business plan more palatable and easy to understand while providing quick visualizations of these pieces of information. When used through an online whiteboard like IdeaScale Whiteboard , it also enables collaboration on these items, inherently making the results more accurate and informed.

The Business Model Canvas consists of nine building blocks, each representing a critical aspect of a business:

• Customer Segments: Identifying the specific groups of customers or market segments a business aims to serve.
• Value Proposition: Describing the unique value or benefits that the business offers to its target customers.
• Channels: Explaining the methods and channels used to reach and interact with customers to deliver the value proposition.
• Customer Relationships: Outlining the type of relationships and interactions the business establishes and maintains with its customers.
• Revenue Streams: Identifying the sources of revenue and how the business plans to generate income from its customers.
• Key Resources: Listing the essential assets, skills, and resources required to operate the business.
• Key Activities: Identifying the critical tasks and actions the business must perform to deliver its value proposition and generate revenue.
• Key Partnerships: Describing any external entities or organizations that the business collaborates with to strengthen its business model.
• Cost Structure: Detailing the costs and expenses incurred in operating the business.

Once you completely understand why to use a business model canvas, it’s time to dive into the methodology behind each step. In this section, we will explain how to properly plan for success on a business model canvas .

1. Key Partners

Questions to ask: “What are your key partners to getting a competitive advantage?”

This question prods at the possible strategic partnerships to align your business with in order to gain an advantage over the competition. This could be certain people, other companies, or any type of collaborative partnership.

It’s important to consider partnerships when developing a business plan because they will eventually not only come in handy but be necessary for the growth and publicity of the business. They can also serve as an early advantage and can push a small business forward at exponential levels.

2. Key Resources

Questions to ask: What resources are needed to make your idea work? If you don’t already have these resources, what steps can be taken to obtain them?

Resources are one of the biggest drivers of change within a business, and it’s important to recognize which resources you have and which resources you need. By thinking about the resources you need to create a business, you tangentially focus on the steps that need to be taken in order to get it off the ground. The resources play directly into that and will affect how you are able to strategically create your plan.

3. Key Activities

Questions to ask: What activities will your business enable for customers?

This is effectively where you detail the product/service that is being provided. When thinking about what activities your business enables or improves, you are inherently thinking about the customer’s journey and what they will experience as a user.

The product/service that users interact with will be the driving force for the entire business, so it’s important to have a solid understanding of what this will be and how exactly they will use it. While thinking about the product/service is important, you should also think about the activities that are made possible as an extension of your business. These could be tangential actions or actions done in collaboration with other businesses. All of these scenarios are examples of how your business enables and improves other activities.

4. Key Propositions

Questions to ask: What is your unique value proposition? What do you bring to your customer’s lives that weren’t present before? How do you make their life/job easier?

The value proposition should be one of the most fleshed-out details of the entire business model because it is the core reason for creating the business. Without a value proposition, there is no meaning behind the business and customers will not feel like they can identify and find loyalty with your brand.

The value proposition should be something that is both in demand and unique. It doesn’t have to be an entirely unique idea, but it does have to have some kind of defining feature to make it stand out. This gives customers a reason to use your product/service over another. Because of the importance and centrality of the entire business model, the unique value proposition should be one of the most descriptive and prioritized sections of the template.

5. Customer Relationships

Questions to ask: How will you manage interactions with your current and potential customers? How will you get your value proposition across to them?

Building and maintaining customer relationships is key to a successful business plan, and thinking about these interactions in advance is greatly helpful in communicating your team goals and expectations. It can be easy to assume customer interactions will happen naturally, but especially when starting a business there has to be a strong push to facilitate these interactions.

It’s equally important to think about how you will allow your value proposition to shine through in these instances. This unique element to your business is ideally what will attract new customers and provide demand to those who are currently using your product/service. It’s important to think about ways to provide this information when planning your interactions so that your customers understand your special features.

6. Channels

Questions to ask: How are you going to reach your customers? What channels of communication will you utilize?

For this point, think about the various ways you will plan to reach your customers. This could be through direct outreach, word of mouth, blog posting, advertising, or any other medium. These outlets will generate different unique interactions with different customer bases and should be considered to optimize your outreach.

7. Customer Segments

Questions to ask: Who is your business targeting? Describe your target audience in a few words.

This section is meant to highlight the specific persona that your business is targeting. Think about the profile that defines your target audience, and write these details in a couple of notes.

This is arguably one of the most important sections in the business model canvas because this principal user will define your entire strategy and method of outreach. They are the end goal of the business plan and many of your features will eventually be catered to their needs. It can be smart to pair this part of the template with a Persona Map in order to gain the deepest understanding of your principal user that you possibly can.

8. Cost Structure

Questions to ask: What are you planning to spend on marketing and product development? Are you planning to charge for your product/service?

The final two points are meant to be logistic markers for how you plan to operate the financials of your business plan. Firstly, you must think about the marketing, development, and advertising costs of creating your business. These can be fixed or dynamic depending on how you want to set up your business. Next, think about the pricing structure of your product/service. Will it be a SaaS service? Will people pay for it or will it be free? These are important things to consider when thinking about your business’s cost structure.

9. Revenue Streams

Questions to ask: Where will the money come from? How will these revenue streams drive profits?

Revenue streams are effectively how your business makes a profit and the exact location of where this money comes from. Mainly, it should be coming from a point detailed in the cost structure (how you charge for your product/service). Think about the specific cost structure and how that will end up driving a profit for your business.

Learn more: What is Lean Canvas?

Here are five explanations of how the Business Model Canvas can be applied to various types of businesses:

1. E-commerce Business

• Customer Segments: Online shoppers, B2B buyers, wholesale customers.
• Value Proposition: Wide product selection, convenience, fast shipping, competitive pricing.
• Channels: Utilizing online platforms including the website, mobile application, social media, and email marketing.
• Customer Relationships: Self-service, automated support, personalized recommendations.
• Key Activities: Inventory management, online marketing, website maintenance.
• Key Resources: E-commerce platform, warehouse, delivery partners.
• Key Partners: Suppliers, payment processors, and delivery companies.
• Revenue Streams: Product sales, subscription fees, advertising.

2. Software as a Service (SaaS) Company

• Customer Segments: Small businesses, enterprises, educational institutions.
• Value Proposition: Scalable cloud-based software, cost-effective solutions, and regular updates.
• Channels: Website, free trials, sales team, online communities.
• Customer Relationships: Online support, account managers, knowledge base.
• Key Activities: Software development, customer onboarding, support and updates.
• Key Resources: Development team, servers, customer data.
• Key Partners: Cloud service providers, integration partners, and resellers.
• Revenue Streams: Subscription fees, premium features, consulting services.

3. Restaurant Business

• Customer Segments: Locals, tourists, event planners, food delivery services.
• Value Proposition: Delicious cuisine, welcoming ambiance, special events.
• Channels: Physical location, online reservations, food delivery apps.
• Customer Relationships: In-person service, reservation systems, loyalty programs.
• Key Activities: Food preparation, staff training, marketing, event hosting.
• Key Resources: Kitchen equipment, skilled chefs, dining space.
• Key Partners: Local suppliers, food delivery platforms, and event organizers.
• Revenue Streams: Food and beverage sales, event hosting fees, catering services.

4. Subscription Box Service

• Customer Segments: Subscription box enthusiasts, gift buyers, and niche hobbyists.
• Value Proposition: Curated selection, surprise factor, convenience.
• Channels: Website, social media, influencer partnerships.
• Customer Relationships: Subscription management, customization options, feedback loops.
• Key Activities: Product curation, packaging, logistics, and customer support.
• Key Resources: Product suppliers, subscription management software, warehouse.
• Key Partners: Product suppliers, shipping companies, influencers.
• Revenue Streams: Subscription fees, one-time purchases, affiliate marketing.

5. Freemium Mobile App

• Customer Segments: Casual users, power users, and businesses.
• Value Proposition: Free basic functionality, premium features, and convenience.
• Channels: App stores, social media, referral programs.
• Customer Relationships: In-app support, user communities, push notifications.
• Key Activities: App development, updates, user data analysis.
• Key Resources: Development team, user data, servers.
• Key Partners: App stores, advertisers, third-party integrations.
• Revenue Streams: In-app purchases, advertising, premium subscriptions.

These are just a few examples of how the Business Model Canvas can be used to describe different types of businesses. The canvas can be customized and adapted to fit the specific needs and characteristics of any business model.

Learn more: 4 Key Business Model Canvas Advantages

In the Business Model Canvas, the “Channels” component refers to the various ways a business reaches and interacts with its customers in order to deliver its value proposition. It encompasses the distribution and communication methods used to make products or services accessible to the target market. Channels can be both physical and digital, and they play a crucial role in shaping the overall business model. Here are some common examples of channels:

• Direct Sales: The business sells its products or services directly to customers through its own sales team or physical stores. For example, a luxury jewelry brand may operate high-end boutiques to sell its products directly to customers.
• Online Sales: Products or services are sold through an e-commerce website or mobile app. For instance, Amazon and eBay primarily operate through online sales channels.
• Retail Stores: Businesses may use physical retail stores, such as supermarkets, malls, or specialty shops, to sell their products directly to customers.
• Wholesale: Businesses may sell their products in bulk to other businesses (wholesalers or distributors), who then resell them to retailers or end consumers.
• Franchise: Franchise businesses utilize a network of franchisees who operate their own outlets, using the parent company’s brand and business model. Examples include fast-food chains like McDonald’s and Subway.
• Marketplaces: These are platforms that connect buyers and sellers. Examples include Amazon Marketplace, eBay, and Etsy, where individual sellers list and sell products to a broader audience.

• App Stores: Mobile app stores like the Apple App Store and Google Play Store provide a platform for businesses to distribute and sell mobile applications directly to users.
• Agent/Broker: Intermediaries, such as real estate agents or insurance brokers, help connect buyers with sellers and facilitate transactions.
• Social Media: Social media platforms like Facebook and Instagram can serve as channels for businesses to reach customers, advertise products, and interact with their audience.
• Subscription Services: Businesses may use subscription models, such as streaming services like Netflix, to provide content or access to their products or services on a regular basis.
• Content Marketing: Businesses create valuable content to attract and engage potential customers. This can include blogs, videos, and podcasts distributed through websites or social media.
• Events and Trade Shows: Participating in industry-specific events and trade shows can be an effective channel to showcase products, generate leads, and network with potential customers.
• Telecommunications: Businesses can use phone and email channels to communicate with customers, provide customer support, and even take orders.
• Third-Party Platforms: Businesses may leverage third-party platforms and marketplaces, such as Airbnb or Uber, to reach a wider audience without having to create their own platform from scratch.
• Brick-and-Click: A combination of physical and digital channels, where customers can shop both in physical stores and online, with features like in-store pickup and online ordering.

The choice of channels depends on the nature of the business, the target audience, and the specific industry. Effective channel selection is essential for reaching and engaging with customers to deliver the value proposition and generate revenue. Businesses may use multiple channels in a multi-channel strategy to optimize their market reach and customer experience.

Learn more: What is Mind Map?

In the Business Model Canvas, “Key Resources” refers to the essential assets, capabilities, and infrastructure that a business needs to create, deliver, and capture value. These resources are fundamental to the business model and help define the core competencies and advantages of the company. The key resources vary depending on the type of business and industry, but here are some common examples:

1. Physical Assets:

• Manufacturing facilities
• Equipment and machinery
• Inventory and stock
• Real estate and facilities

2. Intellectual Property:

• Trademarks, patents, and copyrights
• Proprietary technology or software
• Trade secrets and know-how

3. Human Resources:

• Skilled employees and management
• Expertise and specialized knowledge
• Training and development programs

4. Financial Resources:

• Capital and funding
• Lines of credit or loans
• Cash reserves

5. Networks and Partnerships:

• Strategic alliances and partnerships
• Supplier relationships
• Distribution networks

6. Brand and Reputation:

• Brand recognition and reputation
• Customer loyalty
• Positive reviews and testimonials

7. Customer Data:

• Customer databases and profiles
• Market research and customer insights
• Feedback and analytics

8. Technological Infrastructure:

• Data centers and server infrastructure
• Software and IT systems
• Communication networks

9. Distribution and Logistics:

• Supply chain and logistics networks
• Transportation and delivery resources
• Warehousing and storage facilities

10. Unique Processes:

• Proprietary production processes
• Innovative research and development methods
• Efficient operational procedures

11. Reputation and Trust:

• Strong relationships with stakeholders
• Regulatory approvals and certifications
• A track record of reliability and quality

12. Content and Intellectual Capital:

• A library of content (e.g., books, music, videos)
• Expertise in a particular domain
• Educational materials or courses

13. Legal and Regulatory Permissions:

• Licenses and permits to operate
• Compliance with industry regulations
• Exclusive rights to operate in a certain region

14. Geographical Presence:

• Strategic locations or access to specific markets
• Regional or global presence
• Local knowledge and connections

15. Physical Locations:

• Retail stores, offices, or service centers
• Pop-up shops or event spaces
• Showrooms or experience centers

Selecting and managing key resources effectively is critical for the success of a business. These resources support the business model’s value proposition, help it achieve a competitive advantage, and enable the efficient operation of the business. The specific combination of key resources can vary widely depending on the business’s industry, strategy, and objectives.

Learn more: Lean Canvas vs. Business Model Canvas

Using a business model canvas is one of the best ways to create a comprehensive business plan, and as we’ve shown, is only made better by using an online whiteboard. If you want to see more IdeaScale Whiteboard content make sure to check out our guest-written blog posts on Lander and TryMyUI blogs.

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The 9 Building Blocks of the Business Model Canvas

The Business Model Canvas consists of 9 essential building blocks. But what are the 9 fields of the Business Model Canvas and what does each one mean? This article will give a rough overview of each of the 9 fields. For a more in-depth description of each, just click on the related links below

Customer Segments:

In the “Customer segments” field, enter who your customers are . Try to answer here for whom you create added value with your product. Who will use this product? Who is the target group? Is it about a niche or mass market? Is segmentation required to effectively target different customer groups? Further information and more in-depth explanations can be found in the main article: Customer segments

Value proposition:

The central field of the Business Model Canvas is the value proposition. Here you should enter a prioritized list of suitable value propositions for each customer segment. Do not think about functions and features of your product! Instead, start from the problem and then find things (services or products) that would benefit the customer and solve or alleviate his problem.

Go to the main article: Value proposition

Revenue streams:

Every company needs income to be viable. Therefore, it is important to think about suitable revenue streams in time. Usually, paying customers are the core of a business model. Then you have to ask yourself, how much are your customers willing to pay? More specifically, what value is each customer segment willing to pay for? How often are they willing to pay? What pricing models do you want to offer your customers? What payment methods do you plan to support?

For a more detailed description of revenue streams, go to the main article: Revenue streams

The “Channels” field summarizes both the communication channels and the delivery channels (“Distribution”). That is, here you enter the channels through which you communicate with customers and through which the product is to be sold. the product is to be sold. The combination of these two channels is often criticized because they are very different elements of a business model. Many therefore consider these two points separately. But basically, try to answer the following questions here: Which channels do your customer segments want to be reached through? Which channels work best? How do you make your product known? In the end, this field should contain a list of communication and sales channels linked to the customer segments or personas.

Go to the main article: Channels

Customer relations:

In the Customer Relations field, you enter how you want to acquire new customers and how you want to retain them. The customer relationships should be tailored to each customer segment and will be built through the different channels. One of the most important questions you should ask yourself is whether the chosen type of customer relationship fits your business model. This is because it has a major impact on the overall customer experience.

Basically, there are many ways to attract, nurture and retain customers. Some of them are:

• Providing high-quality products and services to ensure customer satisfaction.
• Offering attractive discounts and special offers to entice customers
• Maintaining personal relationships with customers through regular contact and individual attention
• Offering free customer service and support to ensure customers always get help when they need it
• Creating a welcoming and pleasant atmosphere in stores or online to encourage customers to linger
• Offering customer loyalty programs and rewards to reward customers for remaining loyal customers.

Go to the main article: Customer relations

Key Activities:

The next step is to define the most important activities. What things do you need to do, or even be good at, to best deliver on your value proposition? In the end, this field should contain an overview of all key activities, linked to the respective value propositions and key resources. and the key resources, of all key activities.

Go to main article: Key activities

Key partners:

Not every activity necessarily has to be performed by you or your company. On the contrary, it often makes more sense financially or strategically if certain activities are done by someone else. In the “Key Partners” field, you can list which key partners you would like to work with and what core competencies they bring to the table. Examples of partners are: Suppliers, research partners, distributors, sales partners, freelancers,..etc.

Go to the main article: Key partners

Key resources:

Key resources describe the most important assets of your company that are necessary for the business model to function. What people, materials, intellectual resources, and budget does the company have or need? Key resources can be material, financial, intellectual or human.

Go to the main article: Key resources

Cost structure:

In the Cost Structure field, you should list the most important costs incurred in operating this business model. These include some of the more obvious costs such as manufacturing costs, rent, salaries, but also areas such as marketing activities. These costs are relatively easy to calculate once key resources, key activities and key partnerships have been identified.

Go to the main article: Cost structure

What is Business Model Canvas?

How to make a business model canvas in 9 steps.

Business Model Canvas (BMC) is a strategic management tool to quickly and easily define and communicate a business model, product or service. BMC offers a template on one page that helps you work through the fundamental elements of a business or product, structuring your ideas in a coherent way.

Business Model Canvas explained

A BMC has 9 elements: key partners, key activities, key resources, value propositions, customer relationships, channels, customer segment, cost structure, and revenue stream.

Why use a Business Model Canvas?

BMC is all about defining your business model or defining a product or service that your organisation offers. You can use BMC as a step-by-step guide to developing a complete business model, product or service. A BMC can also serve as important groundwork for your strategic plan in OGSM , since it helps you think about a range of important factors for your Strategies.

How do I make a Business Model Canvas?

The Business Model Canvas template consists of 9 different components that you will have to think about and define as concretely as possible. Below, we briefly explain each of the components:

1. Key partners:  These are your relationships and strategic alliances with other businesses and suppliers. These relationships can help you with resource acquisition, reduction of risk, and optimization of economies. Partnerships can help you innovate and stand out in the market, outperform the competition, and/or increase sales.

2. Key activities: These are the most important activities that your company needs to execute to make your business plan work. The key activities of a company can be managerial or operational. You’ll want to briefly describe the activities that are core to your company’s functioning, but don’t go into everything in exhaustive detail.

3. Key resources:  These are the resources you need to create value for your customers. They include all assets that your company needs to sustain and support the business. This component includes human, financial, material and intellectual resources.

4. Value propositions: This is the added value that your service or product offers. It should define the main reason why customers should choose you over a competitor. The value proposition must address a problem, need or desire of a customer.

5. Customer relationships: To ensure the survival and success of your business, you must identify the type of relationship you want to create with your customer segments. This element should cover three critical aspects of the customer relationship:

• How your business will get new customers;
• How your business will convince existing customers to keep purchasing its products or using its services;
• How your business will grow its revenue from its current customers. 

6. Channels:  Your company can deliver its value proposition to its targeted customers through different channels. Effective channels will distribute a company’s value proposition in ways that are fast, efficient and cost-effective. You could reach clients through your own channels (store front), partner channels (major distributors) or a combination of both.

7. Customer segments: Different customers have different needs and requirements. It is very important to recognise them, so your company can target new customers effectively and successfully leverage the customer relationships as described under component 5.

8. Cost structure: Each company has costs linked to the key activities, key partners and the key resources. For each cost, you should determine whether it is fixed or variable, and direct or indirect.

• Fixed costs: These don’t change, even if the production increases, e.g. rent paid for office space.
• Variable costs: They increase proportionally with the volume of production, e.g. material or labour costs.
• Direct costs: They are essential for the creation of the product or service.
• Indirect costs:  They do not have a direct link with your value proposition

9. Revenue stream:  This describes the way your company generates revenue from each customer segment. Some possible revenue streams are usage fees, product sales, subscription fees, licencing, advertising, lease, and brokerage. 

Now that you know all the BMC components, you can make a table with two columns and nine rows. In the left column, enter all nine components from top to bottom. Then, in the right column, enter the required information for each component.

BMC as preparation for OGSM or OKR

We highly recommend utilizing the Business Model Canvas as a valuable tool for your strategic preparation. The Business Model Canvas provides a structured framework to visualize and assess your organization’s key components, relationships, and value propositions. It enables you to gain a comprehensive understanding of your business model and identify areas for improvement or innovation.

The Business Model Canvas is a tool to map the essentials of your company. This is a great foundation for a strategic plan in OGSM or OKR , which can help you to take your business to a higher level. Do you want to learn how to fill out an OGSM or strategic plan? Click here for a step-by-step guide.

Other tools to help you prepare for OGSM

Before crafting a strategic plan, it is essential to thoroughly analyze and evaluate your organization’s current situation, including the challenges it faces and the opportunities available. Business models serve as valuable tools to provide a concise overview of your organization’s status, enabling you to effectively determine your strategic direction.

• SWOT Analysis : Conduct a comprehensive analysis of your organization’s strengths, weaknesses, opportunities, and threats. This assessment will help identify internal capabilities and external factors that may impact your strategic planning.
• PESTEL Analysis : Evaluate the political, economic, sociocultural, technological, environmental, and legal factors affecting your industry and organization. This analysis provides a broader understanding of the external environment and its potential impact on your strategic decisions.
• Competitive Analysis: Assess your competitors’ strengths, weaknesses, market positioning, and offerings. Understanding the competitive landscape will help you identify areas of differentiation and develop effective strategies to gain a competitive advantage.
• Market Research: Gather relevant data and insights about your target market, including customer preferences, trends, and needs. This information will inform your strategic objectives and guide your decision-making process.
• Financial Analysis: Review your organization’s financial performance, including revenue, costs, profitability, and cash flow. Analyzing financial data will provide insights into the financial feasibility of your strategic initiatives and help set realistic goals.
• The BCG (Boston Consulting Group) matrix is a useful tool for portfolio analysis and can be used as a complementary tool when preparing your OGSM (Objectives, Goals, Strategies, and Measures). The BCG matrix categorizes your organization’s products or services into four quadrants based on their market growth rate and relative market share.

Download your business model canvas template

Describing your organization using a Business Model Canvas (BMC) provides a concise starting point for your OGSM (Objectives, Goals, Strategies, and Measures) framework. With the BMC, you can summarize your organization’s starting position on a single canvas. Download our strategic template package here to begin describing your organization using the BMC. 

Frequently asked questions about Business Model Canvas

A Business Model Canvas (BMC) is a template to quickly and easily communicate a business model, product or service. A BMC is made in 9 steps, resulting in a simple overview of a business model (not a business plan!) on one page. 

A Business Model Canvas is a template for a business model. It outlines what products or services you offer, who your clients are, what your revenue streams are, what your sales channels are, and so on. It is a snapshot of your current company or a business case for a new company.

A strategic plan, for example in OGSM or OKR format, contains quantitative goals, strategies, KPIs and actions to execute the plan. A strategic plan is a living document with an owner, and it is continuously adjusted based on data and learning.

Making a BMC can help you communicate your business model easily. It is also useful preparation for your strategic planning process. By walking through the 9 steps of the Business Model Canvas, you get important input for your Strategies and Action Measures (OGSM) or your Key Results (OKR).

For more detail, see above. The steps are:

• Key partners
• Key activities
• Key resources
• Value propositions
• Customer relationships
• Customer segments
• Cost structure
• Revenue stream

Get some paper or open your document editor and divide the page into two columns, a narrow one and a wide one. In the narrow left column, write each of the 9 steps above. In the right column, add the relevant information for each item.

• For more detail on the contents of each step of the BMC, Wikipedia explains all the elements.
• Business design company BMI made a ready-made Business Model Canvas template.
• ING Bank has some more info (in Dutch) on each of the core elements of the Business Model Canvas.
• Watch this useful BMC introduction video on YouTube by The Business Channel.

While both OGSM and Business Model Canvas (BMC) are canvas models used to summarize a business challenge, they serve different purposes. OGSM is a Change Canvas that outlines your desired destination and the strategies to achieve it. It is action-oriented. On the other hand, BMC is a Descriptive Canvas that provides an overview of your business model.

OGSM and BMC complement each other in strategic planning. You can use a BMC to prepare for your OGSM by establishing a foundation and ensuring alignment within your team regarding the fundamental aspects of your organization. It can also be helpful in quickly onboarding new team members. From there, you can develop your Change plan using OGSM to define your objectives, goals, strategies, and measures.

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Business Model Canvas: 9 Components to Map Startup Success

• Posted: September 25, 2023
• Updated: October 9, 2023

IN THIS ARTICLE

The last chapter explored the essential steps of creating a web startup, using steps from “ The Startup Owner’s Manual ” by Steve Blank and Bob Dorf. Now, let’s dive into a crucial tool pivotal in your startup journey: the Business Model Canvas.

As your startup progresses through the customer development process, you’ll rely on the Business Model Canvas as your trusty scorecard. It’s your guide, helping you track and refine your business hypotheses for each critical component.

In this article, we aim to explain the Business Model Canvas. We’ll break it down into nine key components, giving you a clear understanding of how this canvas can be your compass on the path to startup success. 

Read more: Building a Company: 4-Step Customer Development Guide

What is a business model canvas?

A business model is like a roadmap that shows how a company creates, delivers, and makes money from its products or services. But sometimes, it’s tough for everyone in a company to understand this roadmap clearly.

That’s where the Business Model Canvas comes in. It’s a handy tool developed by Alexander Osterwalder that helps you figure out how your company will make money. Think of it as a strategic tool for startups. It enables you to plan, adapt, and change your business idea.

Unlike a typical company chart that shows how things work inside, the Business Model Canvas is more like a treasure map. It helps you explore the unknowns that many startups face. There are nine boxes on the canvas, each representing a crucial part of your business idea. (We will explain each component later on in this article).

• Value Propositions
• Customer Segments
• Customer Relationships
• Revenue Streams
• Key Resources
• Key Activities
• Key Partners
• Cost Structure

As your startup goes through the customer development process, the Business Model Canvas becomes your scorecard. You put your ideas about each part of your business model on it. 

Then, as you learn more from your customers, you update those ideas. It’s like starting with a map of where you think the treasure is, and then, as you explore, you adjust your course based on what you find.

Read more: Customer Development Process: 4-Step Framework for Startups

Benefits of using a business model canvas

By leveraging the Business Model Canvas, you can unlock numerous benefits that pave the way for a more structured, adaptable, and successful startup journey. Here are some benefits that you can gain when using this strategic tool:

Focuses on key strategic elements

The Business Model Canvas is like a blueprint for your business. It breaks down the essential parts of your business into clear blocks. These blocks help you see how everything fits together.

Using the Business Model Canvas, you can organize your business thoughts neatly. It ensures that you don’t miss anything important. Plus, it shows how different parts of your business connect.

Simply put, it’s a tool that helps you create a clear plan for your business. It makes you think deeply about each part, ensuring your strategy is well-defined.

Promotes iterative development

The Business Model Canvas is like a flexible blueprint for your startup. It lets you begin with your ideas, even if they are only assumptions. You can improve your plan as you learn more and get feedback. It’s all about making your business better bit by bit.

This canvas not only simplifies and streamlines but also accelerates the development of your business strategies. Think of it like a rough sketch that you refine over time as your business vision evolves. The canvas encourages a flexible mindset where you plan, check, and make changes as needed.

Imagine the Business Model Canvas as a set of educated guesses. You need to check for these guesses by talking to real customers. Why? Because as your business grows and gets more customers, your plan will need to change. So, the canvas is like a fluid tool that moves and adapts to your business journey.

Reduces the risk of failure

By mapping your ideas on the canvas early on, you can quickly identify any potential risks and assumptions that may arise. It’s similar to spotting potholes on the road before driving into them.

The Business Model Canvas serves as a helpful guide for taking your idea to the market. It connects your value, target audience, and revenue generation strategy. This information is crucial for developing your marketing, positioning, and sales plans. Additionally, it’s faster and more efficient than creating a lengthy business plan, providing you with a competitive advantage.

It’s customer-centric

The canvas highlights a crucial factor for startup success: knowing what your customers want and what issues they face. This understanding is essential because it guides your decisions and actions. 

When you know your customers’ needs and problems, you can effectively tailor your products or services to meet those demands. It increases your chances of success and helps you create a more meaningful and valuable solution for your target audience. So, remember that understanding your customers is a fundamental step toward a successful startup.

The 9 critical components of a business model canvas

Now that we’ve grasped the essence of the Business Model Canvas, let’s delve deeper into its nine critical components in more detail. These components are the building blocks of your business strategy, each playing a unique and essential role in shaping your startup’s success.

1. Value proposition

The value proposition is the core of your startup. It’s what makes your business stand out and provides solutions to your customers’ problems. It answers the question, “Who are you creating your startup for?” Simply, it’s about solving your customers’ problems and meeting their needs.

Customers aren’t interested in your fancy technology or all your cool features. What matters to them is how you can make their lives easier or better. In this part of the Business Model Canvas, you should define how your product or service benefits your customers. Think of it as a list of how your startup will solve their problems and fulfill their needs. That’s what the value proposition is all about.

2. Customer segments

Who are your customers, and why do they buy from you? In this part of the Business Model Canvas, you group your customers based on similarities like age, gender, interests, and spending habits. 

Identifying these customer groups is crucial. You must understand their needs, behaviors, and unique traits to create customer personas. Startups often have multiple customer segments, each requiring a tailored approach. Always remember that your company’s purpose is to cater to the needs of its customers, not the other way around.

3. Distribution channels

Distribution channels are the paths your product takes to reach your customers. Think of them as the routes to deliver what you’re selling. These channels are part of your marketing plan. Picking the right ones ensures your product gets to the right people.

Today, there are various methods to deliver your product to reach customers. Here are a few: Search Engine Marketing (SEM), Search Engine Optimization (SEO), content marketing, traditional ads, and working with blogs that match your target audience.

Read more: Unlocking Growth: 19 Traction Channels for Business Success

4. Customer relationships

The customer relationships part of the Business Model Canvas is about how you connect with your customers, make them stay, and buy more from you. Imagine it as a two-sided funnel.

• Getting Customers In: This is about how you attract and reach out to potential customers. It’s the part where you get their attention and interest them in what you offer.
• Keeping Them as Customers: After they’ve made a purchase, how do you ensure their satisfaction and motivate them to return for more? This is the stage where you establish and nurture trust and loyalty.
• Growing Over Time: This means finding ways to sell more to your existing customers. It could be through upselling (offering them more expensive products), cross-selling (selling related products), or simply encouraging them to buy from you regularly.

5. Revenue streams

The revenue streams component is about how your business earns money by selling your product or service to customers. It’s about figuring out what customers are willing to pay for and how to get them to pay. Knowing your revenue streams is crucial for your business to survive and grow.

It’s also essential to set the right price for your offering. You need to consider how much customers are willing to spend compared to the problem your product or service solves. You can use various pricing models, such as direct sales, subscription, or freemium (giving basic services for free and charging for premium features).

6. Key resources

The resources component of the Business Model Canvas deals with what your startup needs to get things done. It’s about the essential assets your business relies on to offer its products or services and run smoothly. These assets could be financial, physical (machines, vehicles), technological (software), intellectual (like patents), and your team. 

7. Key partners

The key partners component is about whom you need to work with from external companies or suppliers to make your business work. These partners help you do the essential tasks and provide what you need to make your customers happy.

It’s important to consider what your partners will contribute and when they will do it. Your business may require assistance from others, and understanding their role is crucial.

Many startups think they must partner with other companies immediately because big companies do it. However, partnering in your first year differs from when your startup has grown into a mature company. So, think carefully about when and who to partner with.

8. Key activities

The key activities in your business or product are your actions to make your customers happy. This part of the Business Model Canvas is all about the essential tasks your startup must do to provide value to customers. It includes everyday jobs and big strategic moves that help your business grow. To make your business work, focus on these actions. 

9. Cost structure

In the Business Model Canvas, all the components come together to form the cost structure. This part represents the money you need to run your business.

Your cost structure includes two main types of expenses:

• Fixed Costs: These expenses stay the same no matter how much you produce or sell. Examples include rent and salaries.
• Variable Costs: These expenses change based on how much you produce or sell. They can include production costs and marketing expenses.

Understanding your cost structure is crucial for effective financial management and ensuring the profitability of your business. Here are key aspects to consider:

• The cost of essential activities within your business.
• Expenses related to your critical resources and partnerships.
• The expenses tied to delivering value to your customers or users.
• Additional costs, such as legal fees and insurance.
• Your personal cost — ponder the value of your time. What would it cost if you needed to hire someone to do your job?

When running your business, it’s crucial to consider the opportunity cost. Consider the potential earnings you might have had if you were doing something else instead. By understanding all these costs, you can make informed financial decisions for your startup.

The Business Model Canvas is an invaluable tool for startups on their journey to success. It provides a clear and concise roadmap, allowing companies to visualize how they create, deliver, and monetize their products or services. Its nine essential components serve as a strategic companion, helping entrepreneurs adapt and refine their business ideas as they navigate the often uncharted waters of the market.

As we conclude our startup guide, remember that the journey doesn’t end here. The Business Model Canvas is not just a one-time map; it’s a dynamic tool that evolves with your startup’s growth. Continuously update your canvas based on the insights gained from your customers, much like adjusting your course while on a treasure hunt. 

With dedication, adaptability, and a well-mapped strategy, your startup is poised for success. Embrace the adventure, stay agile, and keep refining your business model to unlock the treasures of entrepreneurship. 

Blank, Steve, and Bob Dorf. The Startup Owner’s Manual: The Step-By-Step Guide for Building a Great Company . 2020.

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What is Business Model Canvas?

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9 Building Blocks of the Business Model Canvas

The 9 building blocks for any business model are as follows:, 1. customer segments, 2. value propositions, 3. channels, 4. customer relationships, 5. revenue streams, 6. key resources, 7. key activities, 8. key partnerships, 9. cost structure.

I am going to discuss each section of the business model to help you create more value not only for your business but for your customers.

The first building block of a business model is  customer segments.  This defines the different groups of people or organizations that a business plans to reach. Without profitable customers, how can any business succeed? When looking at customer segments, it is important to group people into multiple segments to better satisfy their needs. The groups could be small or large depending on their common needs, behaviors, location, or attributes. With these groups, you can better understand how to  communicate  properly with them and find out what works best for any demographic. Once you have a clear idea of who you are providing a service for, you can make the steps towards creating value for them.

The second building block is based on how your company bundles products and services to meet each customer segment’s needs. A  Value Proposition  creates a unique value for customers through a mix of elements that could be qualitative or quantitative. This could include price, speed, design, or customer experience.  What value do we deliver to the customer? What makes a person choose AT&T over Verizon Wireless or Sprint? Perhaps they decide to choose Virgin Mobile. Now, think about how each company offers value to its customer segments. Verizon might offer value to customers that are looking for the best cell service at an affordable price. They could also offer a great bundled deal with DISH network for a user that doesn’t want to pay two different bills. How about the customer that lives in the city with great coverage and is looking for the best price? That could be exactly what Virgin Mobile offers with a low cost and no contract involved. It is due to the value proposition that a person might want to choose one service over another. Don’t just try to offer what everyone else is with lower prices, think outside the box. It is often due to innovation  and  disruption that new businesses succeed. Think about how you can fill the gaps in customer needs and problems that other companies in your industry are not fulfilling.

The  channels  building block is how your company will communicate with each customer segment, delivering them your value proposition. These channels can include social media, websites, newspaper advertisements, and word of mouth to name a few. Evaluate how you communicate which each customer segment and how you can either improve or change that communication. Also, consider which methods of communication are the most cost-efficient. It is this sort of brainstorming that will improve how you reach each customer and build a relationship with them. To help with your brainstorming session, here are 5 channel phases to build upon:

1. Awareness

How do we raise company awareness and build upon our brand?

2. Evaluation

How do we reach customers to have them evaluate our value proposition?

3. Purchase

Through which channels can we direct customers to purchasing our products and services?

4. Delivery

How do we deliver the value proposition to the customers?

5. After Sales

How do we provide customer support after purchase?

This may seem like a standard set of phases for you.  Well, that is the point! These phases are in place to help build your thinking outwards towards all the possibilities to best serve your customer segments.

4. Customer Relations

I truly believe that this part of the business model is the most important. If you build personalization into your brand and company, then the sky is the limit! Although this service can be personal or automated, it is crucial to understand which method will best serve your customer’s needs. There are three driving motives for building relationships with your customers.

• New Lead Generation
• Customer Retention

With these motives, rank which goals are more important to your company than the others. From there, decide which issues you might come across with these goals and how to best communicate to your customer segments in each goal.

This building block measures the earnings a company generates from each customer segment. When targeting each customer segment, think about what each group is willing to pay. When you realize that different groups of customers are willing to pay at different levels, you can come up with different revenue streams to apply to each of these groups. A business model includes only two types of revenue streams:

• Transaction Revenues  – This results from customers who make one payment for a product or service.
• Recurring Revenues – These ongoing payments can include a prolonged value proposition or post-purchase customer service.

When deciding which type of revenue stream fits well in the communication with a customer segment, ask yourself: How are they currently paying? How would they prefer to pay? Does a certain method of revenue contribution to overall earnings?

What are the key resources that can set your business apart from the rest? What resources are key to offering your value proposition?  Key Resources  are the important assets that are available to you and are required to make your business plan a success. These resources allow you to create your unique value proposition, maintain important relationships with your customers, reach new markets, and create revenue. These resources can range from physical, financial, intellectual, or human assets.

The  key activities  building block describes the important process that a business must take part in for a business model to work. Much like key resources, these activities are required to maintain customer relationships, reach new markets, create value propositions, and earn revenues. Key activities can be grouped into three categories: 1. Production These key activities are the focus of manufacturing firms and relates to the designing, creating, and delivery of products. 2. Problem Solving These activities include knowledge management and training. Problem-solving is key to coming up with new solutions to customer problems.  3. Platform/Network  His category includes platform management, service positioning, and platform promotion. This is built around a company that relies on networks, software, and brands that can function as a platform.

The building block of key partnerships revolves around the network you build. This can include suppliers, partners, or even other businesses in your industry to create an alliance with. There are 4 main categories of partnerships:  1. Strategic Alliances with Non-competitors   2. Strategic Partnerships with Competitors   3. Joint Ventures to create new Businesses   4. Buyer-Supplier Relationships  With these 4 categories of partnerships, we find 3 main motives:  1. Optimization and Economies of Scale  This motive is based on reducing costs and can involve outsourcing or a sharing infrastructure. This optimizes the allocation of resources and activities so your company doesn’t rely on owning all the resources or performing every activity on its own.  2. Reduction of Risk and Uncertainty  This motive is brought on by competitors joining in strategic alliances in one area while remaining competitive in other areas.  3. Acquisition of Resources and Activities  It is rare for any business to have access to all the necessary resources and activities to create the most value to their customers. It is important to realize which assets are more cost-effective to outsource and to rely on other businesses to bring resources that you could not come up with on your own.

The cost structure building block describes all costs involved in operating a business model. When your business defines how to create value, maintain customer relationships, and generate income, it will see costs incurred on each of these levels. The cost structure of a business can be placed into one of two categories:

1. Cost-driven

This cost structure focuses on minimizing costs wherever possible. This process can include high automation, extensive outsourcing, low price Value Propositions, and the leanest possible cost structure.

2. Value-driven

With the value-driven cost structure, a business focuses on how the create the best value for each customer segment. This can include a highly-personalized service and exclusive services.

That concludes the 9 Building Blocks that go into a Business Model! These building blocks are put together to create a handy tool for your business known as the  Business Model Canvas. This model is meant to be a hands-on tool for your whole business team to add and take away items when needed. To print out a poster-sized canvas, please visit  www.businessmodelgeneration.com  I will leave you with three last instructions to help build your business model:

1. Print it out on a poster!

2. place the poster on the wall, 3. sketch out your business model.

**Affiliate Disclaimer** We may earn commissions on links – which help support our writing and does not cost you any extra when clicking through one of our links.

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