product sample business model

50+ business model examples

Discover innovative business models, see visualizations of their different revenue streams, and copy ideas for your startup.

• Who is this guide for?

How to choose the right business model

Business model inspiration, companies to learn from, who is this guide for.

When in need of a business model for your next startup or corporate venture, there are more than a couple of options to explore. To make your decision-making a little easier, we’ve analyzed 50 innovative revenue models and partnership ideas. 

Browse these business model examples to spot the ideas that are fit for your company’s needs, and let these use cases inspire you to start building your own business plan.

At Board of Innovation, we specialize in innovation and business design. If you feel you need help moving forward, you can dive deeper into how we do business model innovation or get in touch .

In this deck, you will find a comprehensive guide through business models from different companies and industries.

This guide will help you understand how each business model works, the products or services they offer, and what makes it unique. These key insights will help you in the selection process of a business model that works best for you.

Have you ever wondered how some companies are profitable?

In this deck, we deep dive into business models used by companies in multiple industries. Using our Business Model Kit , we offer a visual overview of how each business profits from the model that drives it. .

Free (or nearly free) for the user:

• Early exit strategy
• Pay-what-you-want (PWYW)
• Tip jar/donation
• Freemium model
• Barter or swapping for services
• Barter or swapping for products

Third party options:

• Advertisement (ad-based) model
• Affiliate/referral fee
• Get-one-give-one model (G1G1)
• Franchise model

Mixed business model:

• Razor and blade model
• Crowdfunding
• Open source model
• No frills model (discount or budget model)

Broker/matchmaking:

• Commission-based model:
• Auction model

Paid (direct sales business model):

• Subscription model
• Premium model
• Pay-per-use model
• Add-ons/In-app purchases
• License fees
• Single purchase model
• Pay-as-you-go model (PAYG)

Grab is an on-demand ride service that has since expanded to everyday services like deliveries, financial services and more – making it a superapp. It charges a service fee of 20% ~ 30% for every transaction that goes through its platform.

Hubs charges clients for each industrial manufacturing job they begin through the platform. Prices are determined by a machine learning algorithm.

Patients Like Me offers a free health community service to its users. They make money by selling the data, generated by the community, to pharmaceutical companies.

WHOOP offers a wearable fitness gadget that gives personalized recommendations and feedback. WHOOP charges a monthly subscription fee to access the data on the platform, while the first device is free.

Digit is a financial service application that monitors financial behavior and automates its users’ savings. Digit receives a fixed monthly fee of $5 from its users. On top of that, it can leverage the funds it has under management for greater returns

Kiva is the first online non-profit lending platform for underserved populations.As a non-profit, Kiva doesn’t profit from loans received — lenders donate to Kiva to cover operating costs. The remainder of costs are covered through grants, supporters, and field partners.

Appear Here is the Airbnb of retail spaces — an online marketplace to list, find, and book short-term retail spaces. After the landlord sets a daily, weekly and monthly price, Appear Here takes commission between 12% - 15% on a completed transaction, while the space owners pay no listing fee.

Kaggle makes money in two ways: With Kaggle competition, they receive a “listening fee” for each competition posted on the platform. Also, they provide a service for matching companies to the top 0.5% of their community, which they call Kaggle Connect.

23andMe makes money with personal genetic tests, providing reports on lineage discovery & +240 health conditions. It’s believed that their DNA research studies & surveys will soon be an additional way of making money, with a mainly B2B focus instead of B2C.

Friendsurance works as a broker between Policy Holders and existing Insurance Partners. They’re letting customers share risks with friends, allowing them to lower prices due to reduced fraud & process costs, better risk pools, etc.

AliveCor makes money by selling ECG devices ($199) that fit on existing smartphones and via their AliveInsights Service – a professional analysis service that makes it easy to get expert insight on your ECG readings.

Glow sells “data insights” regarding conceiving to Research Institutions & gives exposure to trustworthy Infertility Treatment Clinics. The data is generated by users who use the Glow free fertility-tracking app.

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What is a business model? (Plus, how to define yours)

Last updated: March 2024

Business models distill the potential of a business down to its essence. Companies across every industry and at all stages of maturity need business models. Some rely on lengthy processes to build complicated models, while others move quickly to articulate the basics and take action. Either way, having the discipline to work through this planning tool forces internal alignment.

You must build something that real people with real needs will find value in and pay for — otherwise you do not have a lasting business. Brian de Haaff Aha! co-founder and CEO

For established enterprises, a business model is often a living document that is reviewed and adapted over the years. For companies launching products and services or entering new markets, a business model helps ensure that decisions are tied back to the overall business strategy . And for early-stage startups, a simple one-page business model enables founders to explore the mechanics of a business and how you anticipate it will be successful.

Defining and documenting a business model is an essential exercise. Whether you are starting a new venture, expanding into a new market, or shifting your go-to-market strategy , you can use a business model to capture fundamental assumptions about the opportunity ahead and tactics for addressing challenges.

Forward-thinking companies integrate their business model into all aspects of the organization — from recruiting talent to motivating employees. That is why many choose tools that make it possible to quickly build and share a business model. In Aha! software, for example, there are multiple ways to build a model and connect it to everyday work. One of the quickest ways is by using our whiteboard template — featured below.

Get this business model whiteboard template — with a free trial .

Start using this template now

You can also try a similar template that is built into the product strategy section of Aha! Roadmaps . Or you can download free Excel and PowerPoint business model templates in this guide .

This article covers the basics of business models, from core concepts to best practices. Jump ahead to any section:

Definition of a business model

Business model components

Business model vs. business plan.

Different types of business models

Pros and cons of different models

Analyzing competitor business models

Business model templates

How to build a business model

What is the definition of a business model?

A business model defines how a company will create, deliver, and capture value.

A business model answers questions that are crucial for strategic decision-making and business operations. Creating a business model for your startup or product means identifying the problem you are going to solve, the market that you will serve, the level of investment required, what products you will offer, and how you will generate revenue. Pricing and costs are the two levers that affect profitability within a given business model.

A business model is part of your overall business strategy. Some business models extend beyond economic context and include value exchange in social or cultural terms — such as the intangible impact the company will have on a community or industry. The process of constructing and changing a business model is often referred to as “business model innovation.”

15 elements of a brilliant business strategy

This is why innovation programs fail

There are three main areas of focus in a business model: value proposition, value delivery, and value capture. The proposition outlines who your customers are and what you will offer. The delivery details how you will organize the business to deliver on the proposition. And the capture is a hypothesis for how the proposition and delivery will align to return value back to the business.

The components of a business model include everything the organization needs to document and internalize so that the team can implement all three value focuses. This includes the market in which you operate, organizational strengths and challenges , essential elements of your product or products, and how you will generate revenue.

Below are some components to include when you create a business model:

Vision and mission : Overview of what you want to achieve and how you will do it.

Objectives: High-level goals that will support your vision and mission, along with how you will measure success.

Customer targets and challenges: Description of target customers (written as archetypes or personas ) and their pain points.

Solution: How your offering will solve customer pain points.

Differentiators: Characteristics that differentiate your product or service.

Pricing: What your solution will cost and how it will be sold.

Positioning and messaging: How you will communicate the value of your offering to customers.

Go-to-market: Proposed approach for launching new offerings and services.

Investment: Resources required to introduce your offering.

Growth opportunity: Ways that you will grow the business over time.

Positioning vs. messaging

• What is value-based product development?
• What is a go-to-market roadmap?

What is a business roadmap?

Business models and business plans are both elements of your overall business strategy. But there are key differences between a business model and a business plan.

A business model is seen as foundational and will not usually be reworked in reaction to shorter-term shifts — whereas a business plan is more likely to be updated based on changes in the economy or market.

Related: Business plan templates

What is the benefit of building a business model?

Innovation is about more than the products or technologies that you build. The way that you operate your business is a critical factor in how you stand apart in a crowded marketplace. The benefit of building a business model is that you can use the exercise to expose and exploit what makes your company unique — why choosing your offering is better for customers than any alternatives and how you will grow the business over time.

Many people associate business models with lengthy documents that describe a company’s problem, opportunity, and solution in the context of a two-to-five-year forecast. But business models do not need to be a long treatise.

A one-pager is just as effective for distilling and communicating the most important elements of your business strategy. The concise format is useful for sharing with broader teams so that everyone understands the high-level approach. Done right, a business model can become a touchstone for the team by outlining core differentiators to promote and defend in the market.

Related: A more comprehensive business model builder

What are the different types of business models?

There are many different types of business models. Below are some of the most common business models with example companies for reference (take note of the companies that appear in several categories):

Did you keep track of the companies that appeared in several of the business model examples? Good. You now have a grasp of how complex enterprises with vast portfolios of products and services often employ many business models within the same organization.

Consider a company like Apple, which manufactures and sells hardware products as well as offering cloud-storage, streaming subscriptions, and a marketplace for other applications. Amazon, whose offerings range from retail (with the acquisition of Whole Foods) to marketplace (Amazon.com) to subscription services (Amazon Prime and Amazon Music) to affiliate, also features in different categories. Each division or vertical will have a distinct business model that reflects the nuances of how it operates while also supporting the corporate business model.

Related: The product manager vs. the portfolio product manager

Pros and cons of different business models

Some types of business models work better for certain industries than others. For example, software-as-a-service (SaaS) companies often rely on freemium business models. This makes it easy for potential users to experience the value of the product and incentivizes paid conversions via access to additional features.

Many social media platforms make money through advertising. By providing full access to the platform for free, these companies attract more users. In turn, this creates a more valuable audience for advertisers and increases revenue for the business.

How do you analyze a competitor’s business model?

Business analysts and investors will often evaluate a company’s business model as part of due diligence for funding or market research . You can apply the same tactics to analyze a competitor’s business model — with a few caveats.

Public companies are subject to reporting requirements. This means that the business must regularly disclose financial and performance data to the public — these disclosures occur quarterly and annually. The data includes everything from gross revenue, operating costs and losses, cash flow and reserves, and leadership discussions of business results. Designed to protect and inform investors, these reports can provide you with the information you need to understand the basics of the company’s business model and how well it is performing against the model.

Private companies are not required to reveal business data publicly. Investors or partners may be privy to certain aspects of the company’s performance, but it can be difficult to understand exactly what is happening from the outside. Some analysts or business websites will attempt to “size” a business or market by looking at a variety of factors — including the number of employees, volume of search terms related to the core offering, estimated customer base, pricing structure, partnerships, advertising spend, and media coverage.

Once you have identified relevant alternatives to your offering and gathered all of the information that you can find, a good way to analyze a competitor’s business model is to conduct a competitive analysis.

You do not want to spend too much time thinking about other companies when you could be focused on your own. A simple SWOT analysis is a helpful way to map out strengths, weaknesses, opportunities, and threats that were revealed during your research.

Competitor analysis templates

• How to price your product
• How to position your product

Below are three types of business model layouts available in Aha! software that you can use to succinctly assess what is possible and what challenges could arise for your business.

Whiteboard business model template

Articulate the foundation of your product or service in a whiteboard-style format. The focus is on capturing key elements like why the solution is worth buying (messaging), pain points of the buyers (customer challenges), and ways you will grow the business (growth opportunities).

Business model canvas

This business model canvas included in Aha! Roadmaps uses drag-and-drop components within a flexible layout. You can rename or hide components as needed. And you can create as many strategic models in your workspace as you would like.

How to craft a product strategy in Aha! Roadmaps

How to use the strategic model template in Aha! Roadmaps

Free Excel and PowerPoint business model templates

• Lean canvas

Similar to the business model canvas, the lean canvas in Aha! Roadmaps takes a problem-focused approach to create an actionable business plan. It is most commonly used by startups and entrepreneurs to document business assumptions. The focus is on quickly creating a concise, single-page business model. It documents nine elements, including customer segments, channels used to reach customers, and the ways you plan to make money.

How to build a business model in 10 steps

Crafting a business model is part of establishing a meaningful business strategy. But a business model is essentially a hypothesis — you need to test yours to prove that it will actually provide value. Many startup founders especially underestimate the costs and timeline for reaching profitability.

1. Identify your target market

Who will benefit from your offering? What characteristics do prospective customers share?

2. Define the problem you will solve

What is the problem that you are solving? What are the pain points of your potential customers?

3. Detail your unique selling proposition (USP)

What will you build and how will you support it?

4. Create a pricing strategy

How much will you charge for your offering? What factors will go into choosing your price point?

5. Develop a marketing approach

How will you market your product and reach target customers? What channels will you choose for go-to-market?

6. Establish operational practices

How will you streamline processes and procedures to reduce overhead and fixed costs?

7. Capture path to profitability

How will your business generate revenue? What level of investment will be required and what fixed costs exist?

8. Anticipate challenges

Who are your competitors? What opportunities and threats exist for your business?

9. Validate your business model

Was your hypothesis correct? Does your business model solve a problem the way you thought it would?

10. Update to reflect learnings

What can you do differently in the future to ensure greater success?

Your business model will ultimately guide your organization and influence your product roadmap. Give it the deep thought it deserves — questioning your core assumptions about how you will generate value and how your team will work towards achieving shared goals.

• What is a business model?
• What is customer experience?
• What is the Complete Product Experience (CPE)?
• What is a customer journey map?
• What is product-led growth?
• What are the types of business transformation?
• What is enterprise transformation?
• What is digital transformation?
• What is the role of product management in enterprise transformation?
• What is a Minimum Viable Product (MVP)?
• What is a Minimum Lovable Product (MLP)?
• What is product vision?
• How to set product strategy
• What is product-market fit?
• What is product differentiation?
• What are product goals and initiatives?
• How to set product goals
• How to set product initiatives
• What is product value?
• Introduction to marketing strategy
• Introduction to marketing templates
• What is a marketing strategy?
• How to set marketing goals
• Marketing vs. advertising
• What is a creative brief?
• How to define buyer personas
• Understanding the buyer's journey
• What is competitive differentiation?
• 10Ps marketing matrix
• 2x2 prioritization matrix
• Business model
• Customer journey map
• Decision log
• Decision tree
• Fit gap analysis
• Gap analysis
• Marketing strategy
• Opportunity canvas
• Porter's 5 forces
• Pricing and packaging research
• Pricing plan chart
• Pricing strategies (Kotler)
• Product positioning
• Product vision
• Segment profile
• SMART goals
• Strategic roadmap
• Strategy mountain
• SWOT analysis
• Value proposition
• VMOST analysis
• Working backwards
• Collections: Business model
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• Collections: Objectives and key results (OKR)
• Collections: Product positioning
• Collections: Market positioning
• Collections: Marketing strategy
• Collections: Marketing messaging
• What is product discovery?
• How to do market research
• How to define customer personas
• How to research competitors
• How to gather customer feedback
• Asking the right questions to drive innovation
• Approaches table
• Competitive analysis
• Customer empathy map
• Customer interview
• Customer research plan
• PESTLE analysis
• Problem framing
• Product comparison chart
• Pros and cons
• Target audience
• Collections: Customer research
• Collections: Competitor analysis
• Collections: Marketing competitor analysis
• How to brainstorm product ideas
• Brainstorming techniques for product builders
• Why product teams need an internal knowledge hub
• Why product teams need virtual whiteboarding software
• What is idea management?
• 4 steps for product ideation
• How to estimate the value of new product ideas
• How to prioritize product ideas
• What is idea management software?
• Introduction to marketing idea management
• How to gather marketing feedback from teammates
• Brainstorming new marketing ideas
• How to estimate the value of new marketing ideas
• Brainstorming meeting
• Brainstorming session
• Concept map
• Data flow diagram
• Fishbone diagram
• Ideas portal guide
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• Proof of concept
• Sticky note pack
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• Roadmapping: Your starter guide
• Business roadmap
• Features roadmap
• Innovation roadmap
• Marketing roadmap
• Product roadmap
• Product portfolio roadmap
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• How to choose a product roadmap tool
• What to include on your product roadmap
• How to visualize data on your product roadmap
• What milestones should be included on a roadmap?
• How often should roadmap planning happen?
• How to build a roadmap for a new product
• How to build an annual product roadmap
• How to build a brilliant roadmap
• How to customize the right roadmap for your audience
• How to build an agile roadmap
• Product roadmap examples
• How to report on progress against your roadmap
• How to communicate your product roadmap to customers
• What is a content marketing roadmap?
• What is a digital marketing roadmap?
• What is an integrated marketing roadmap?
• What is a portfolio marketing roadmap?
• How to choose a marketing roadmap tool
• Epics roadmap
• Now, Next, Later roadmap
• Portfolio roadmap
• Release roadmap
• Collections: Product roadmap
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• What is product planning?
• How to diagram product use cases
• How product managers use Gantt charts
• How to use a digital whiteboard for product planning
• Introduction to release management
• How to plan product releases across teams
• What is a product backlog?
• Product backlog vs. release backlog vs. sprint backlog
• How to refine the product backlog
• Capacity planning for product managers
• What is requirements management?
• What is a market requirements document (MRD)?
• How to manage your product requirements document (PRD)
• What is a product feature?
• What is user story mapping?
• How to prioritize product features
• Common product prioritization frameworks
• JTBD prioritization framework
• Introduction to marketing plans
• What is a marketing plan?
• How to create a marketing plan
• What is a digital marketing plan?
• What is a content marketing plan?
• Why is content marketing important?
• What is a social media plan?
• How to create a marketing budget
• 2023 monthly calendar
• 2024 monthly calendar
• Feature requirement
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• Product requirements document
• SAFe® Program board
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• Stakeholder map
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• Collections: Product development process
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• Collections: User story mapping
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• Product design basics
• What is user experience design?
• What is the role of a UX designer?
• What is the role of a UX manager?
• How to use a wireframe in product management
• Wireframe vs. mockup vs. prototype
• Analytics dashboard wireframe
• Product homepage wireframe
• Signup wireframe
• Collections: Creative brief
• Common product development methodologies
• Common agile development methodologies
• What is agile product management?
• What is agile software development?
• What is agile project management?
• What is the role of a software engineer?
• What is waterfall product management?
• What is agile transformation?
• Agile vs. lean
• Agile vs. waterfall
• What is an agile roadmap?
• What is an agile retrospective?
• Best practices of agile development teams
• What is a burndown chart?
• What is issue tracking?
• What is unit testing?
• Introduction to agile metrics
• Agile glossary
• What is kanban?
• How development teams implement kanban
• How is kanban used by product managers?
• How to set up a kanban board
• Kanban vs. scrum
• What is scrum?
• What are scrum roles?
• What is a scrum master?
• What is the role of a product manager in scrum?
• What is a sprint?
• What is a sprint planning meeting?
• What is a daily standup?
• What is a sprint review?
• Product release vs. sprint in scrum
• Themes, epics, stories, and tasks
• How to implement scrum
• How to choose a scrum certification
• What is the Scaled Agile Framework®?
• What is the role of a product manager in SAFe®?
• SAFe® PI planning
• SAFe® PI retrospective
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• UML class diagram
• Collections: Sprint retrospective
• How to test your product before launch
• What is a go-to-market strategy?
• How to write excellent release notes
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• Knowledge base article
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• Product updates
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• Collections: Product launch checklist
• Collections: Marketing launch checklist
• How to make data-driven product decisions
• How to measure product value
• What is product analytics?
• What are product metrics?
• What is a product?
• What is a product portfolio?
• What is product development?
• What is product management?
• What is the role of a product manager?
• What is portfolio product management?
• What is product operations?
• What are the stages of product development?
• What is the product lifecycle?
• What is a product management maturity model?
• What is product development software?
• How to create internal product documentation
• What to include in an internal product documentation hub
• Internal vs. external product documentation
• How to build a product knowledge base
• Introduction to marketing methods
• What is agile marketing?
• What is digital marketing?
• What is product marketing?
• What is social media marketing?
• What is B2B marketing?
• Collections: Product management
• How to structure your product team meeting
• 15 tips for running effective product team meetings
• Daily standup meeting
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• What are the types of product managers?
• 10 skills to succeed as a product manager
• Common product management job titles
• What does a product manager do each day?
• What is the role of a product operations manager?
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• Introduction to marketing
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• Collections: Product manager resume
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What Is a Business Model?

Understanding business models, evaluating successful business models, how to create a business model.

• Business Model FAQs

The Bottom Line

Learn to understand a company's profit-making plan

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

The term business model refers to a company's plan for making a profit . It identifies the products or services the business plans to sell, its identified target market , and any anticipated expenses . Business models are important for both new and established businesses. They help new, developing companies attract investment, recruit talent, and motivate management and staff.

Established businesses should regularly update their business model or they'll fail to anticipate trends and challenges ahead. Business models also help investors evaluate companies that interest them and employees understand the future of a company they may aspire to join.

Key Takeaways

• A business model is a company's core strategy for profitably doing business.
• Models generally include information like products or services the business plans to sell, target markets, and any anticipated expenses.
• There are dozens of types of business models including retailers, manufacturers, fee-for-service, or freemium providers.
• The two levers of a business model are pricing and costs.
• When evaluating a business model as an investor, consider whether the product being offered matches a true need in the market.

Investopedia / Laura Porter

A business model is a high-level plan for profitably operating a business in a specific marketplace. A primary component of the business model is the value proposition . This is a description of the goods or services that a company offers and why they are desirable to customers or clients, ideally stated in a way that differentiates the product or service from its competitors.

A new enterprise's business model should also cover projected startup costs and financing sources, the target customer base for the business, marketing strategy , a review of the competition, and projections of revenues and expenses. The plan may also define opportunities in which the business can partner with other established companies. For example, the business model for an advertising business may identify benefits from an arrangement for referrals to and from a printing company.

Successful businesses have business models that allow them to fulfill client needs at a competitive price and a sustainable cost. Over time, many businesses revise their business models from time to time to reflect changing business environments and market demands .

When evaluating a company as a possible investment, the investor should find out exactly how it makes its money. This means looking through the company's business model. Admittedly, the business model may not tell you everything about a company's prospects. But the investor who understands the business model can make better sense of the financial data.

A common mistake many companies make when they create their business models is to underestimate the costs of funding the business until it becomes profitable. Counting costs to the introduction of a product is not enough. A company has to keep the business running until its revenues exceed its expenses.

One way analysts and investors evaluate the success of a business model is by looking at the company's gross profit . Gross profit is a company's total revenue minus the cost of goods sold (COGS). Comparing a company's gross profit to that of its main competitor or its industry sheds light on the efficiency and effectiveness of its business model. Gross profit alone can be misleading, however. Analysts also want to see cash flow or net income . That is gross profit minus operating expenses and is an indication of just how much real profit the business is generating.

The two primary levers of a company's business model are pricing and costs. A company can raise prices, and it can find inventory at reduced costs. Both actions increase gross profit. Many analysts consider gross profit to be more important in evaluating a business plan. A good gross profit suggests a sound business plan. If expenses are out of control, the management team could be at fault, and the problems are correctable. As this suggests, many analysts believe that companies that run on the best business models can run themselves.

When evaluating a company as a possible investment, find out exactly how it makes its money (not just what it sells but how it sells it). That's the company's business model.

Types of Business Models

There are as many types of business models as there are types of business. For instance, direct sales, franchising , advertising-based, and brick-and-mortar stores are all examples of traditional business models. There are hybrid models as well, such as businesses that combine internet retail with brick-and-mortar stores or with sporting organizations like the NBA .

Below are some common types of business models; note that the examples given may fall into multiple categories.

One of the more common business models most people interact with regularly is the retailer model. A retailer is the last entity along a supply chain. They often buy finished goods from manufacturers or distributors and interface directly with customers.

Example: Costco Wholesale

Manufacturer

A manufacturer is responsible for sourcing raw materials and producing finished products by leveraging internal labor, machinery, and equipment. A manufacturer may make custom goods or highly replicated, mass produced products. A manufacturer can also sell goods to distributors, retailers, or directly to customers.

Example: Ford Motor Company

Fee-for-Service

Instead of selling products, fee-for-service business models are centered around labor and providing services. A fee-for-service business model may charge by an hourly rate or a fixed cost for a specific agreement. Fee-for-service companies are often specialized, offering insight that may not be common knowledge or may require specific training.

Example: DLA Piper LLP

Subscription

Subscription-based business models strive to attract clients in the hopes of luring them into long-time, loyal patrons. This is done by offering a product that requires ongoing payment, usually in return for a fixed duration of benefit. Though largely offered by digital companies for access to software, subscription business models are also popular for physical goods such as monthly reoccurring agriculture/produce subscription box deliveries.

Example: Spotify

Freemium business models attract customers by introducing them to basic, limited-scope products. Then, with the client using their service, the company attempts to convert them to a more premium, advance product that requires payment. Although a customer may theoretically stay on freemium forever, a company tries to show the benefit of what becoming an upgraded member can hold.

Example: LinkedIn/LinkedIn Premium

Some companies can reside within multiple business model types at the same time for the same product. For example, Spotify (a subscription-based model) also offers a free version and a premium version.

If a company is concerned about the cost of attracting a single customer, it may attempt to bundle products to sell multiple goods to a single client. Bundling capitalizes on existing customers by attempting to sell them different products. This can be incentivized by offering pricing discounts for buying multiple products.

Example: AT&T

Marketplace

Marketplaces are somewhat straight-forward: in exchange for hosting a platform for business to be conducted, the marketplace receives compensation. Although transactions could occur without a marketplace, this business model attempts to make transacting easier, safer, and faster.

Example: eBay

Affiliate business models are based on marketing and the broad reach of a specific entity or person's platform. Companies pay an entity to promote a good, and that entity often receives compensation in exchange for their promotion. That compensation may be a fixed payment, a percentage of sales derived from their promotion, or both.

Example: social media influencers such as Lele Pons, Zach King, or Chiara Ferragni.

Razor Blade

Aptly named after the product that invented the model, this business model aims to sell a durable product below cost to then generate high-margin sales of a disposable component of that product. Also referred to as the "razor and blade model", razor blade companies may give away expensive blade handles with the premise that consumers need to continually buy razor blades in the long run.

Example: HP (printers and ink)

"Tying" is an illegal razor blade model strategy that requires the purchase of an unrelated good prior to being able to buy a different (and often required) good. For example, imagine Gillette released a line of lotion and required all customers to buy three bottles before they were allowed to purchase disposable razor blades.

Reverse Razor Blade

Instead of relying on high-margin companion products, a reverse razor blade business model tries to sell a high-margin product upfront. Then, to use the product, low or free companion products are provided. This model aims to promote that upfront sale, as further use of the product is not highly profitable.

Example: Apple (iPhones + applications)

The franchise business model leverages existing business plans to expand and reproduce a company at a different location. Often food, hardware, or fitness companies, franchisers work with incoming franchisees to finance the business, promote the new location, and oversee operations. In return, the franchisor receives a percentage of earnings from the franchisee.

Example: Domino's Pizza

Pay-As-You-Go

Instead of charging a fixed fee, some companies may implement a pay-as-you-go business model where the amount charged depends on how much of the product or service was used. The company may charge a fixed fee for offering the service in addition to an amount that changes each month based on what was consumed.

Example: Utility companies

A brokerage business model connects buyers and sellers without directly selling a good themselves. Brokerage companies often receive a percentage of the amount paid when a deal is finalized. Most common in real estate, brokers are also prominent in construction/development or freight.

Example: ReMax

There is no "one size fits all" when making a business model. Different professionals may suggest taking different steps when creating a business and planning your business model. Here are some broad steps one can take to create their plan:

• Identify your audience. Most business model plans will start with either defining the problem or identifying your audience and target market . A strong business model will understand who you are trying to target so you can craft your product, messaging, and approach to connecting with that audience.
• Define the problem. In addition to understanding your audience, you must know what problem you are trying to solve. A hardware company sells products for home repairs. A restaurant feeds the community. Without a problem or a need, your business may struggle to find its footing if there isn't a demand for your services or products.
• Understand your offerings. With your audience and problem in mind, consider what you are able to offer. What products are you interested in selling, and how does your expertise match that product? In this stage of the business model, the product is tweaked to adapt to what the market needs and what you're able to provide.
• Document your needs. With your product selected, consider the hurdles your company will face. This includes product-specific challenges as well as operational difficulties. Make sure to document each of these needs to assess whether you are ready to launch in the future.
• Find key partners. Most businesses will leverage other partners in driving company success. For example, a wedding planner may forge relationships with venues, caterers, florists, and tailors to enhance their offering. For manufacturers, consider who will provide your materials and how critical your relationship with that provider will be.
• Set monetization solutions. Until now, we haven't talked about how your company will make money. A business model isn't complete until it identifies how it will make money. This includes selecting the strategy or strategies above in determining your business model type. This might have been a type you had in mind but after reviewing your clients needs, a different type might now make more sense.
• Test your model. When your full plan is in place, perform test surveys or soft launches. Ask how people would feel paying your prices for your services. Offer discounts to new customers in exchange for reviews and feedback. You can always adjust your business model, but you should always consider leveraging direct feedback from the market when doing so.

Instead of reinventing the wheel, consider what competing companies are doing and how you can position yourself in the market. You may be able to easily spot gaps in the business model of others.

Criticism of Business Models

Joan Magretta, the former editor of the Harvard Business Review, suggests there are two critical factors in sizing up business models. When business models don't work, she states, it's because the story doesn't make sense and/or the numbers just don't add up to profits. The airline industry is a good place to look to find a business model that stopped making sense. It includes companies that have suffered heavy losses and even bankruptcy .

For years, major carriers such as American Airlines, Delta, and Continental built their businesses around a hub-and-spoke structure , in which all flights were routed through a handful of major airports. By ensuring that most seats were filled most of the time, the business model produced big profits.

However, a competing business model arose that made the strength of the major carriers a burden. Carriers like Southwest and JetBlue shuttled planes between smaller airports at a lower cost. They avoided some of the operational inefficiencies of the hub-and-spoke model while forcing labor costs down. That allowed them to cut prices, increasing demand for short flights between cities.

As these newer competitors drew more customers away, the old carriers were left to support their large, extended networks with fewer passengers. The problem became even worse when traffic fell sharply following the September 11 terrorist attacks in 2001 . To fill seats, these airlines had to offer more discounts at even deeper levels. The hub-and-spoke business model no longer made sense.

Example of Business Models

Consider the vast portfolio of Microsoft. Over the past several decades, the company has expanded its product line across digital services, software, gaming, and more. Various business models, all within Microsoft, include but are not limited to:

• Productivity and Business Processes: Microsoft offers subscriptions to Office products and LinkedIn. These subscriptions may be based off product usage (i.e. the amount of data being uploaded to SharePoint).
• Intelligent Cloud: Microsoft offers server products and cloud services for a subscription. This also provide services and consulting.
• More Personal Computing: Microsoft sells physically manufactured products such as Surface, PC components, and Xbox hardware. Residual Xbox sales include content, services, subscriptions, royalties, and advertising revenue.

A business model is a strategic plan of how a company will make money. The model describes the way a business will take its product, offer it to the market, and drive sales. A business model determines what products make sense for a company to sell, how it wants to promote its products, what type of people it should try to cater to, and what revenue streams it may expect.

What Is an Example of a Business Model?

Best Buy, Target, and Walmart are some of the largest examples of retail companies. These companies acquire goods from manufacturers or distributors to sell directly to the public. Retailers interface with their clients and sell goods, though retails may or may not make the actual goods they sell.

What Are the Main Types of Business Models?

Retailers and manufacturers are among the primary types of business models. Manufacturers product their own goods and may or may not sell them directly to the public. Meanwhile, retails buy goods to later resell to the public.

How Do I Build a Business Model?

There are many steps to building a business model, and there is no single consistent process among business experts. In general, a business model should identify your customers, understand the problem you are trying to solve, select a business model type to determine how your clients will buy your product, and determine the ways your company will make money. It is also important to periodically review your business model; once you've launched, feel free to evaluate your plan and adjust your target audience, product line, or pricing as needed.

A company isn't just an entity that sells goods. It's an ecosystem that must have a plan in plan on who to sell to, what to sell, what to charge, and what value it is creating. A business model describes what an organization does to systematically create long-term value for its customers. After building a business model, a company should have stronger direction on how it wants to operate and what its financial future appears to be.

Harvard Business Review. " Why Business Models Matter ."

Bureau of Transportation Statistics. " Airline Travel Since 9/11 ."

Microsoft. " Annual Report 2023 ."

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Guide to business model innovation: Strategies and examples

In an ever-changing world, business model innovation is something every product manager and entrepreneur should focus on.

Business models that were solid a few months back might be irrelevant today, especially if we look at ever-increasing technological advances. If I had a penny for every business model that has had to pivot due to the advent of ChatGPT, I could retire today.

In this guide, I’ll show you how you can demystify business model innovation by simply asking the right questions.

What is a business model?

Let’s start with a high-level overview of what a business model actually is. You’ve probably already seen Strategyzer’s famous business model canvas at least once:

This business model canvas is one of the most common approaches to describing a business model. It includes answers to nine key questions:

• Customer segments — For whom are you creating value?
• Value proposition — What value do you deliver to customers?
• Channels — How are you reaching your customers?
• Customer relationship — What type of relationship do you establish with your customers?
• Key partners — Who are your key partners and suppliers?
• Key activities — What do you need to do to deliver the value proposition for your customers?
• Key resources — What key resources do your value proposition and distribution channels require?
• Revenue streams — How much value do you capture from your value delivery activities?
• Cost structure — How much does maintaining the business model cost you?

If you can get a good answer to all these questions, the overall strategy for your business is solid and self-supporting.

However, the business innovation canvas is just a template. Depending on the maturity of your company, you might need something more lightweight or more robust.

Ultimately, what you need is clarity regarding three critical areas of business operation:

• Value creation — What value do you offer to the market?
• Value delivery — How do you ensure the market discovers your value proposition?
• Value capture — How do you benefit from delivering that value?

In this article, I’ll focus on the more lightweight approach to business model innovation. It’ll make it more applicable for product managers, who often work only on a product-oriented part of the business model.

What is business model innovation?

Building a business model is similar to everything we do in a product and agile environment. Any guesses?

Yes! We do it iteratively!

In the past, we often worked thoroughly to establish a very detailed business model, probably got a company loan for that, and then spent years executing that model. In the modern world, this approach doesn’t work. Things just change too fast.

Today, business models are not planned; they are discovered. The best approach is to adjust, inspect, and adapt your business model iteratively:

That’s what business model innovation is. It’s a never-ending, iterative process of discovering the best business model given current micro and macro circumstances.

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Strategies to innovate on your business model

Now let’s try to put the theory into practice. Although there is no “right” approach to iterating on one business model, the lightweight process I prefer involves repeatedly asking three high-level questions:

• Can we improve the value we deliver to the market ?
• Can we improve the way we reach our customers ?
• Can we improve the way we capture the value along the way ?

Innovating on the value proposition

This part is the most well-known to product managers. To some extent, PMs are hired to focus chiefly on this area of the business model.

Start by visualizing your current value creation process. I like to use a double-layered value proposition model for that (my own framework).

A core value proposition includes:

• Customer profile — Who is your target persona? What gains do they want? What pains do they experience?
• Value canvas — How do you deliver value for your customer? Which pains do you relieve, and which gains do you create?

A category value proposition includes:

• Market standards and benchmarks — You should meet these to be relevant
• General performance expectations of the market — No matter how great the value proposition of your app is, people won’t use it if it takes 20 seconds to load
• Category rules — What are the must-haves for a given type of product? For example, good luck building an email app without a labeling option

Once you have visualized your business model, start challenging it. Use quantitative data, qualitative knowledge, and market expertise to determine how to deliver more value to the market.

The most common approaches to delivering more value include:

• Pivoting customer segments — Maybe the persona you target isn’t the right fit after all?
• Expanding customer segments — Even if your target segment is properly defined, at some point, the market gets saturated. Maybe it’s time to expand?
• Focusing on different pain points — Are the pain points you target most relevant for your customers?
• Expanding offering — Can you deliver more valuable services to your customers?
• Shrinking offering — Cutting out the noise and doubling down on your best solutions might also be a sound decision.
• Innovating on current offering — Maybe iterating on the current offering is the most optimal way?

What you should focus on depends heavily on the data you have and the context you operate in. But if I were to give a universal tip, focus on properly balancing small bets (improving the current business model) and big bets (pivoting the business model) for the most optimal outcomes.

Innovating on value distribution

Innovating on value distribution is all about searching for the most optimal channel for acquiring users and maximizing that channel’s potential.

Let’s assume you acquire users through LinkedIn ads (performance marketing). You should revisit this strategy regularly and ask yourself two questions.

• Embracing tactics to minimize CAC.
• Hiring performance marketing professionals / external agencies to help you boost your reach.
• Experimenting with new platforms.
• Trying programmatic advertising.
• Experiment with setting up a blog
• Use the data you have to automatically generate new pages at a sale
• Build virality mechanics into the app

My main tip here is the same as in the previous chapter: in an ideal scenario, you would continuously improve on both your current growth channel (small bets) while also exploring other growth channels (big bets) — especially if you haven’t reached product-channel fit yet.

Innovating on value capture

Capturing value might sound fancy, but let’s be honest — in most cases, it’s all about generating revenue.

You should regularly revisit how your product and business generate money from its operation. While the exact questions you should be asking yourself depend on your particular model, the four questions I believe every PM should ask themselves regularly are:

• Do we have the most optimal revenue model?
• Is the way we charge the best way?
• Do we charge at an optimal price point?
• Can we boost our revenue with better bundling and packaging?

1. Do we have the most optimal revenue model?

It’s a big question. If you are a subscription product , should you be a subscription product? Maybe you should try ad-based revenue, or combine both?

2. Is the way we charge the best way?

The way you charge is more important than how much you actually charge. Ideally, you should charge per value received (i.e., the number of transactions). Or, if this is impossible, per some proxy metrics (e.g., the number of seats), or a flat monthly fee. Is it the best way?

3. Do we charge at an optimal price point?

Different segments have different willingness to pay and price sensitivity . Finding the best price points to charge requires a lot of quantitative research, but it’s worth it.

In the end, increasing the price by 10 percent might be the fastest way to grow revenue or the fastest way to lose all your customers.

4. Can we boost our revenue with better bundling and packaging?

If you have a more mature product with various types of plans, consider bundling/unbundling them and experimenting with different plan settings.

Maybe there’s a gap between your tier 1 and tier 2 offering, leaving a lot of money on the table. Or, perhaps you should add to your most premium offering  a standalone, pay-per-use feature.

Sometimes, moving a feature from one plan to another can knock your revenue through the roof.

Business model innovation examples

Now that we’ve thoroughly explored the concept of business model innovation, let’s dive into some real-world examples. These cases highlight the impact that innovative business models can have on a company’s success or failure.

Netflix: Streaming revolution

One of the most well-known examples of successful business model innovation is Netflix. The company started as a DVD rental service by mail, but it quickly identified the potential of streaming technology.

By shifting its focus to on-demand streaming, Netflix transformed the way we consume entertainment and effectively disrupted the traditional cable TV industry. This strategic shift allowed the company to grow exponentially and become a global entertainment powerhouse.

Uber: Ride-sharing disruption

By leveraging then-nascent mobile app technology, Uber created a platform that connects drivers with passengers looking for a ride. This peer-to-peer model revolutionized the transportation industry, challenging traditional taxi services and expanding to other services like food delivery.

Although Uber faced regulatory hurdles and controversies along the way, it remains a prime example of how business model innovation can create a new market.

Blockbuster: A cautionary tale

On the flip side, Blockbuster’s failure to innovate its business model serves as a cautionary tale. As a movie and video game rental chain, Blockbuster was once the go-to place for home entertainment. However, the company failed to adapt to the digital age and recognize the potential of streaming services, ultimately leading to its decline.

Had Blockbuster been more agile and open to business model innovation, it might have remained a significant player in the entertainment industry.

LEGO: Reinventing the brick

LEGO, the iconic toy company, faced near bankruptcy in the early 2000s due to a lack of focus and an overly complex product portfolio. To turn things around, LEGO embraced business model innovation by refocusing on its core product — the beloved plastic brick — and expanding into new markets.

By capitalizing on brand partnerships, digital gaming, and even theme parks, LEGO successfully transformed its business model and remains a beloved brand worldwide.

Zipcar: Car-sharing pioneer

Zipcar was an early pioneer of the car-sharing model. By allowing members to rent cars by the hour or day, Zipcar offered a convenient and cost-effective alternative to traditional car ownership.

Although the company faced challenges and was eventually acquired by Avis Budget Group, its innovative business model inspired a wave of car-sharing services that continue to reshape urban transportation.

Business model innovation sounds like a big, daunting endeavor. In reality, though, it can be as complex or as straightforward as you want it to be.

I believe in simplicity. The more robust the innovation process is, the more neglected and deprioritized it often gets.

When it comes to business model innovation, I encourage you to think about it simply as an iterative process of asking the right questions. Start with the three main questions:

• Can we improve the value we deliver to the market?
• Can we improve the way we reach our customers?
• Can we improve the way we capture the value along the way?

Then, step by step, go a bit deeper and ask more detailed questions.

On the one hand, you must innovate your business model in a conscious, iterative manner to stay competitive. But on the other hand, you don’t have to do it all at once. In fact, you shouldn’t.

Revisit the main questions and focus on the part of your business model that requires the most attention in your current context. Trying to innovate on a business model as a whole is a fool’s game.

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8 Types of Business Models & the Value They Deliver

• 26 May 2016

You want to start a company but aren’t sure about a viable business model. How might you create something that people are willing to pay for and could earn you a profit?

Before diving into potential strategies, it’s important to understand what a business is and does. At its heart, a business generates value for its customers. A business model is a specific method used to create and deliver this value.

What Is Value in Business?

A successful business creates something of value . The world is filled with opportunities to fulfill people’s wants and needs, and your job as an entrepreneur is to find a way to capitalize on these opportunities.

A viable business model is one that allows a business to charge a price for the value it’s creating, such that the business brings in enough money to make it worthwhile and continue operating over time. Whatever the business is offering must also satisfy the customer’s needs and quality expectations.

It’s important to note that value is subjective. What’s valuable to one person may not be to another. Moreover, the concept of value excludes any moral judgments about the intrinsic worth of an offering. For example, while most would agree that human life is more valuable than sports, some professional athletes make far more money than the average brain surgeon.

Nonetheless, the concept of value provides a useful bedrock on which to begin building your business model. In particular, consider what forms of value people are willing to pay for. Here are eight potential business models and the forms of value they deliver—as well as the pros and cons of each—to help you get started.

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8 Types of Business Models to Explore

A product is a tangible item of value. To run a successful product-focused business, try to produce the item for as low a cost as possible while maintaining a reasonable level of quality. Once the item is produced, your objective should be to sell as many units as you can for as high a price as people are willing to pay to maximize profit.

Products are all around us. From laptops to books to HBS Online courses (products don’t have to be physical), products are a classic form of value with high upside if you can get them right.

• Pros: Many products can be easily duplicated. Thus, firms can achieve economies of scale after bearing some upfront costs of production.
• Cons: Physical products need to be stored as inventory, which can increase costs. They can also be damaged or lost more easily than, say, a service.

Related: How to Create an Effective Value Proposition

A service involves offering assistance to someone else for a fee. To make money from your service, provide a skill to others that they either can’t or don’t want to do themselves. If possible, repeatedly provide this benefit to them at a high quality.

Like products, services are in abundance, especially in the knowledge economy. From hairdressers to construction workers to consultants to teachers, people with lucrative skills can earn good money for their time.

• Pros: If you have a skill in high demand or a skill that very few others have, you can charge a fair price for your time and stand out in your field.
• Cons: If you don’t charge enough for your services, or many people have your skill, your business may not be as lucrative.

3. Shared Assets

A shared asset is a resource that many people can use. Such resources allow the owner to create or purchase the item once and then charge customers for its use. To run a profitable business around shared assets, you need to balance the tradeoff of serving as many customers as you can without affecting the overall quality of the experience.

For instance, think of a fitness center. A gym typically buys treadmills, ellipticals, free weights, bikes, and other equipment and charges customers monthly membership fees for access to these shared assets. The key is to charge customers enough to maintain and, if needed, replace their assets over time. Finding the right range of customers is the key to making a shared asset model work.

• Pros: This model provides people access to a lot of assets they wouldn’t otherwise have access to. In addition, many people are willing to pay a lot for access to trendy social spaces.
• Cons: Because they don’t own the assets, customers have little incentive to treat your resources well. Make sure you have enough in your budget for quick fixes, if necessary.

4. Subscription

A subscription is a type of program in which a user pays a recurring fee for access to certain specified benefits. These benefits often include the recurring provision of products or services. Unlike a shared asset, however, your experience with the product or service isn’t affected by others.

To have a successful subscription-based offering, build a subscriber base by providing reliable value over time while attracting new customers.

The number of subscription services has exploded in recent years. From magazines to streaming services to grocery and wine delivery subscriptions, businesses are turning to the subscription-based model, often with great success.

• Pros: This model provides certainty in the form of predictable revenue streams, making financial forecasting a bit easier. It also benefits from a loyal customer base and customer inertia (for instance, customers may forget to cancel their subscription).
• Cons: To run this model, your business operations must be strong. If you can’t deliver value consistently over time, you may want to consider a different business model.

5. Lease/Rental

A lease involves obtaining an asset and renting it out for an agreed-upon amount of time in exchange for a fee. You can lease virtually anything, but it’s in your best interest to rent assets that are durable enough to be returned in good condition. This ensures you can lease the good multiple times and, perhaps, eventually sell it.

To profit from leases, the key is to ensure that the revenue you get from leasing the asset before it loses value is greater than the purchase price. This requires you to price the rental of the item strategically and potentially not lease to those who may not return it in good condition. This is why many rentals of high-value items require references, credit checks, or other background information that can predict how someone may return the leased item.

• Pros: You don’t have to have a novel idea to make money using a lease business model. You can purchase assets and rent them to others who wouldn’t buy them for full value and earn a premium.
• Cons: You need to protect yourself from unexpected damage to your assets. One way to do so is through insurance.

6. Insurance

Insurance entails the transfer of risk from a customer to a seller of an insurance policy. In exchange for the insurance company (the seller of the policy) taking on the risk of a specified event occurring, they receive periodic payments ("premiums" in insurance lingo) from the policyholder. If the specified event doesn’t happen, the insurance company keeps the money, but if it does, the company has to pay the policyholder.

In a sense, insurance is the sale of safety—it provides value by protecting people from unlikely, but catastrophic, risks. Policyholders can take insurance out on almost anything: life, health, house, car, boat, and more. To run a successful insurance company, you have to accurately estimate the likelihood of bad events occurring and charge higher premiums than the claims you pay out to your customers.

• Pros: If you calculate risk accurately, you’re guaranteed to make money using the insurance business model.
• Cons: It can be difficult to accurately calculate the likelihood of specific events occurring. Insurance only works because it spreads risk over large numbers of policyholders. Insurance companies can fail if a large portion of policyholders is impacted by a widespread, negative event they didn’t see coming (for example, the Global financial crisis in 2007 and 2008).

Related: 5 Steps to Validate Your Business Idea

7. Reselling

Reselling is the purchasing of an asset from one seller and the subsequent sale of that asset to an end buyer at a premium price. Reselling is the process through which most major retailers purchase the products they then sell to buyers. For example, think of farmers supplying fruits and vegetables to a grocery store or manufacturers selling goods to a hardware store.

Companies make money through resale by purchasing large quantities of items (usually at a bulk discount) from wholesalers and selling single items for a higher price to individuals. This price raise is called a markup.

• Pros: Markups can often be high for retail sales, enabling you to earn a profit on the items you resell. For example, a bottle of water might cost 10 cents to produce, whereas a customer may be willing to pay $1.50 or more for the same bottle.
• Cons: You need to be able to gain access to quality products at low costs for the reselling business model to work. You’ll also need the physical space to store inventory to manage sales cycles.

8. Agency/Promotion

Agents create value by marketing an asset, which they don’t own, to an interested buyer. They then earn a fee or a commission for bringing the buyer and seller together. Thus, instead of using their own assets to create value, they team up with others to help promote them to the world.

Running a successful agency requires good connections, excellent negotiation skills , and a willingness to work with a diverse set of individuals. One example is a sports agent who promotes players to teams and negotiates on their behalf to get the best deal. In return, they typically receive compensation equal to a certain percentage of the contract.

• Pros: You can highly profit from expertise and connections in your industry, be it publishing, acting, advertising, or something else.
• Cons: You only get paid if you seal the deal, so you have to be able to live with some uncertainty.

Setting Your Business Up for Success

These eight types of business models each have pros and cons and deliver value in their own ways. If you’re looking to start a business and need a place to start, one of these could be the best fit for your venture and entrepreneurial skill set .

Interested in honing your entrepreneurial skills? Explore our four-week online course Entrepreneurship Essentials and our other entrepreneurship and innovation courses to learn the language of the business world.

This post was updated on February 19, 2021, and is a compilation of two posts, previously published on May 26, 2016, and June 2, 2016.

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

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

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

What is a Business Model Canvas?

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

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

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

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

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

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

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

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

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

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

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

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

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

2. A business model canvas will be more agile.

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

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

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

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

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

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

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

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

The alexa example.

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

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

1) Selling Echo devices.

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

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

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

Another Hypothetical Example of the Business Model Canvas: Channels

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

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

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

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

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

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

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

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

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Business Model Examples

At its core, business models are the strategic blueprint for how a company creates, delivers, and captures value. It’s more than just a mere plan or theory; it’s the very foundation upon which your business stands. 

Various business models are not just about having a product or service but also about how you bring it to market, sustain it, and ensure it stands out in a competitive landscape. Different business models offer varied pathways to profitability and growth. Each basic business model comes with its own set of advantages, challenges, and suitability factors depending on your business’s nature and goals.

Business Model Definition

What’s a business model? A business mode l is a conceptual structure or a company model that supports the viability of a business. It outlines how a company intends to generate revenue, detailing its products or services, the target market, and any expected costs. It’s a comprehensive representation of how a company operates, competes, and achieves its objectives. From the intricate architecture of standard business models to innovative new-age strategies, multiple business model types serve as the blueprint for how a business plans to thrive.

Business Modeling and Its Multifaceted Nature

Business models come in various forms, each tailored to the specific needs and goals of a business. They can range from common business models and traditional types of business models, like retail or manufacturing, to modern approaches like subscription services or freemium models. This versatility allows businesses to adapt and evolve in a constantly changing market.

Why the Right Business Model Type Matters

Choosing the right business model is akin to setting the course for your business’s growth. Successful business models dictate how you operate, compete, and evolve in your industry. 

A well-thought-out business model aligns with your company’s core values and targets, ensuring a coherent strategy from inception to execution. It’s not just about what you sell; it’s about how you sell it and why your customers should care.

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Different Types of Business Models

In the realm of business, diversity in operational strategies is key to meeting the ever-evolving market demands. Let’s explore distinct and simple business models, shedding light on their mechanisms, benefits, and challenges. We’ll delve into two basic business models – the Franchise Model and the Retail Model – and two modern business models that work – the Subscription Model and the Freemium Model.

1. Franchise Model: In a franchise business model, a business owner (franchisor) licenses its operations – along with its products, branding, and knowledge – to a franchisee. This business modelling is prevalent in various industries, from fast food to retail.

• Advantage: This type of business model allows for rapid expansion with reduced financial risk and capital investment for the franchisor. Franchisees benefit from operating under an established brand with a proven business strategy.
• Challenge: Franchisees have less control over the business, and franchisors must ensure quality and consistency across locations.

2. Retail Model: The retail business model, one of the standard company business models, involves selling goods or services directly to consumers through various channels – physical stores, online platforms, or both.

• Advantage: This example of a business model allows for direct interaction with customers and can build brand loyalty and provide real-time feedback on products or services .
• Challenge: High overhead costs as a small business model for physical stores and intense competition, especially with the rise of e-commerce.

3. Subscription Model: This modern business model sample involves offering products or services on a subscription basis, where customers pay a recurring fee to access them.

• Advantage: This ensures a steady revenue stream and customer retention. Businesses can gather extensive data on customer preferences, enhancing personalized marketing efforts.
• Challenge: This business model example requires continually providing value to prevent customer churn. Innovation and updates are crucial to keep the offerings relevant.

4. Freemium Model: The freemium business model offers basic services for free while charging for advanced or premium features. This commercial business model is common in software and digital services.

• Advantage: This company business model can attract a large user base quickly. Free users can be converted into paying customers through targeted marketing.
• Challenge: Balancing the free and premium features is crucial to avoid devaluing the paid offerings in this sample business model. Conversion rates from free to paid users can be low.

Choosing the Right One Among Viable Business Models

Selecting the optimal business model for your venture is a significant decision that hinges on several key factors: understanding your business type, assessing the industry landscape, scrutinizing market conditions, and aligning with your overarching goals. 

Whether you’re exploring standard business models or contemplating business models for small business, your choice should mirror your company’s value proposition and target market . As your business evolves, so should your model, adapting to changes such as market shifts, technological advancements, and customer behavior trends. 

This adaptability is necessary, specifically for startups and small businesses aiming to scale. Regularly revisiting and refining your business model ensures it remains relevant and effective, embodying a balance between stability and agility. 

Despite a long list of business models, how you describe your business model and its continuous development not only guides your current strategy but also paves the way for future growth and success.

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Key Takeaways

To wrap up our exploration of the myriad of business model examples, we can conclude that selecting the right business model is a strategic imperative that can define the trajectory of your business, be it a startup, a small business , or a corporate entity.

We encourage you to not just settle on a standard business model but to actively explore and innovate within different frameworks. The business landscape is continuously evolving, and so should your approach to how you structure and grow your enterprise. 

Whether it’s adapting existing models or creating a unique hybrid, the innovation potential is boundless. Remember, the types of business model you will choose and refine will shape your company’s future, so approach them with creativity, insight, and strategic foresight.

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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.

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FAQs About the Business Model Canvas

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

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

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How to Design a Winning Business Model

• Ramon Casadesus-Masanell
• Joan E. Ricart

Smart companies’ business models generate cycles that, over time, make them operate more effectively.

Reprint: R1101G

Most executives believe that competing through business models is critical for success, but few have come to grips with how best to do so. One common mistake, the authors’ studies show, is enterprises’ unwavering focus on creating innovative models and evaluating their efficacy in standalone fashion—just as engineers test new technologies or products. However, the success or failure of a company’s business model depends largely on how it interacts with those of the other players in the industry. (Almost any business model will perform brilliantly if a company is lucky enough to be the only one in a market.) Because companies build them without thinking about the competition, companies routinely deploy doomed business models.

Moreover, many companies ignore the dynamic elements of business models and fail to realize that they can design business models to generate winner-take-all effects similar to the network externalities that high-tech companies such as Microsoft, eBay, and Facebook often create. A good business model creates virtuous cycles that, over time, result in competitive advantage.

Smart companies know how to strengthen their virtuous cycles, undermine those of rivals, and even use them to turn competitors’ strengths into weaknesses.

The Idea in Brief

There has never been as much interest in business models as there is today; seven out of 10 companies are trying to create innovative business models, and 98% are modifying existing ones, according to a recent survey.

However, most companies still create and evaluate business models in isolation, without considering the implications of how they will interact with rivals’ business models. This narrow view dooms many to failure.

Moreover, companies often don’t realize that business models can be designed so that they generate virtuous cycles—similar to the powerful effects high-tech firms such as Facebook, eBay, and Microsoft enjoy. These cycles, when aligned with company goals, reinforce competitive advantage.

By making the right choices, companies can strengthen their business models’ virtuous cycles, weaken those of rivals, and even use the cycles to turn competitors into complementary players.

This is neither strategy nor tactics; it’s using business models to gain competitive advantage. Indeed, companies fare poorly partly because they don’t recognize the differences between strategy, tactics, and business models.

Strategy has been the primary building block of competitiveness over the past three decades, but in the future, the quest for sustainable advantage may well begin with the business model. While the convergence of information and communication technologies in the 1990s resulted in a short-lived fascination with business models, forces such as deregulation, technological change, globalization, and sustainability have rekindled interest in the concept today. Since 2006, the IBM Institute for Business Value’s biannual Global CEO Study has reported that senior executives across industries regard developing innovative business models as a major priority. A 2009 follow-up study reveals that seven out of 10 companies are engaging in business-model innovation, and an incredible 98% are modifying their business models to some extent. Business model innovation is undoubtedly here to stay.

• RC Ramon Casadesus-Masanell is a professor at Harvard Business School and the author, with Joan E. Ricart, of “How to Design a Winning Business Model” (HBR January–February 2011).
• JR Joan E. Ricart ( [email protected] ) is the Carl Schroder Professor of Strategic Management and Economics at IESE Business School in Barcelona.

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• 10 Best Business Model Canvas Examples

10 Best Business Model Canvas Examples For Your Inspiration

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Have you ever listed out all important aspects to consider while launching a product or strategy? You must find that this process quite challenging since one paper is not enough to show all this information as well as the connection between them.

Luckily, there is still an effective way for you to focus on your product’s most strategically important elements, which is Business Model Canvas . Many famous brands around the world have made use of it successfully.

In this post, we will bring about all things you need to know about Business Model Canvas as well as 10 Best Business Model Canvas Examples For Your Inspiration .

Let’s dive in with us!

What is a business model canvas?

Before digging into the best examples of Business Model Canvas around the world, let’s find out how the Business Model Canvas was designed.

Generally speaking, the Business Model Canvas is a summary that tells how the key drivers of a business fit together. It means showing the strategic details necessary to help a business get success within the market.

One important thing is that this summary’s length is within one sheet of paper. Imagine when you include all this down in a document, and it turns into many pages to capture all information. This will make you hard to remember as well as waste time opening pages over pages.

When it comes to the Business Model Canvas, you have a smart and clear way to read and describe any company with any scale ranging from the largest business to just a small one with some staff members.

While the categories or buckets included in a canvas can be adjusted according to your wishes, there are nine elements or building blocks that make up the canvas.

Each building block represents each key drivers and segments of a business. To fill in these blocks, you need to answer the following questions:

• Customer segments : Who do you target as customers?
• Value proposition : What are your strengths to make customers buy from your business?
• Channels : Which channels do you use to deliver your products or services to the market?
• Customer relationships : What are your strategies to get, keep, and build up the relationships with your customers?
• Revenue streams : How will you make money?
• Key resources : What are the special strategic resources that you own as well as a need?
• Key activities : What will your business do to deliver your value proposition?
• Key Partnerships : What are the non-key activities that you do to help your company focus more on your key activities?
• Cost structures : What are the biggest costs that your business earns?

There is one thing to note before finding out what these elements detailedly are. That is the connection between the left side and right side of the Business Model Canvas. If you notice, all elements on the left-hand side of the canvas show the business’s costs, while those on the right-hand side represent revenue generated for the business.Along with a business model canvas, it is advisable to have a well-crafted presentation in the form of a pitch deck . These can be created effortlessly using an AI presentation maker .

Now, it’s time to discover the definitions as well as meanings of 9 elements:

Customer segments

The first building block you should look at is Customer Segments . Here is where you will add in all the different customer groups that you will target. Besides naming these customer groups, you can also build one or more personas for each segment your company serves.

If you are confused about the information you should include when it comes to a persona, it is just a detailed description of each customer group you list. They can include what motivates your customers to buy products, what problems they are suffering that you can help, and perhaps the essence of who they are.

Many businesses make a mistake when assuming that customers exist for themselves to serve. In fact, businesses exist to serve their customers instead.

Depending on your business’ goals, you can have one customer segment or more. Many companies target only one customer group, but many serve two or even multiple. For example, the giant SEO company serves two customer segments, which are those performing searches and those working as advertisers.

In case you want to break down the advertiser customer group into many personas, there will be various kinds of advertisers that you can examine.

Value proposition

The second building block refers to Value Proposition . It means the values that your company or your service can bring to each customer segment. Before filling in this building block, question yourself what problems you can solve for each customer segment are as well as what needs you can satisfy. In other words, the value proposition means the reasons why customer segments buy from you but not from others.

If you still find it difficult to define, here are some of the most common value propositions:

• The performance quality
• The ability to customize depending on customers’ wishes
• The designing
• The pricing plans
• The cost reduction
• The risk reduction
• Convenience

Next, let’s come to the way your products or services are given to your customers. It is Channels . It is about how you sell your products and how your customers want to be approached. Consider the way your company is reaching them at the moment before adding in the Channels building block.

There are two types of channels that you might concern which are having your own channels and having partner channels with someone else.

When it comes to the first type, having your own channels means a combination of all shops you belong to, all sales staff you are employing, or all your websites .

In terms of having partner channels with someone else, you have a wide range of choices, from using Google Adsense to sell your services to using a wholesaler or even partnering with affiliates to advertise your products. You can promote your product with a blog post, social media mentions, a viral video campaign, or a live stream (here is an example of simple streaming software , you could start with).

Customer relationships

The following building block is about Customer relationships . Here you will enter the way you get, keep, and grow your customer base.

• How you get your customers refers to the ways audiences find out about you and decide to buy things from you. It may be via advertising on Google or posts on social media.
• How you keep your customers looks at the customer service that you offer or discount programs appreciate and help your customers who buy from you.
• How you grow your customers means the way you start to make your customers continue buying and spending money on your company. A very common way is sending a newsletter every month to customers so that they can be informed about the latest campaign and consider buying more.

In order to enter details in this building block, you should understand your customer journey clearly. Question yourself on how your customers find out about you, how they decide to buy your products, how they purchase them, and how they manage after purchasing.

Revenue streams

Revenue streams building block refers to the sources where the money comes from. Here you will need to enter where your revenue is generated. Perhaps, this building block is the most confusing on the right side.

It is because you will need to find out the strategy as well as the campaign you will start to generate the most value from your customer base.

It looks at multiple aspects. You might consider a monthly subscription fee or a one-time fee for your customers. You might also think about giving away products for free so that your customers will decide to upgrade to the paid premium product.

Take Advertising on Google as an example. In order to be displayed in front of users and customers, advertisers need to pay Google money and send it their buying intent together with ads information. As an audience, only when you search for something with purchasing intent will you see ads. On the other hand, you probably will not see anything related to advertising if you search for something without purchasing intent.

If you are starting a subscription-based business , you will have the benefit of recurring revenue streams pouring in regularly. However, it can be more of an uphill struggle to convert customers than if you are charging them a one-time fee, because more of a commitment is required on their part. It’s a case of determining which approach fits best with your goals and product category.

As you can see, we have gone through all building blocks on the right side which are related to customers. Now, it’s time to work on the building areas to the left of the Value proposition which shows the costs to the business.

Key resources

The first building block to concern when it comes to the left hand is Key Resources . That means the main strategic assets that are needed to enable your business model to work.

There are four categories of resources, they include:

• Physical resources : They can be cars, machines, buildings, or distribution networks.
• Human resources : They are your staff members who make your business work in real life. Human resources take an indispensable part in every business. When it comes to creative and knowledge-intensive industries, they seem to be the most important resource of a company.
• Intellectual resources : They are specialist knowledge, documentation, patents and copyrights, partnerships, customer information, or brands.
• Financial resources : They are lines of credit, cash balances, and so on.

Key activities

The next building block is Key activities which refer to the most important strategic things you Must do to make your business model work. Remember that the Key activities block should be completely relevant to the value proposition block.

Check to see whether your Key activities are relatable to your value proposition or not. If they aren’t, then something must be changed. There will be one or more activities you regard as the most important but generate no values or revenue.

There are three main types when it comes to key activities. They are:

• Production : The first one looks at the delivery process of your products. Businesses tend to do this with a high number and high quality at the same time.
• Problem solving : Do you work with consultancies and other service organizations to bring about the best solutions to solve the problems of each customer segment.
• Platform or Network : They can be networks or software platforms as long as they can work as a platform.

Many businesses go in the wrong direction while listing all the activities that are done by their businesses. Prevent yourself from that by only entering activities that are main to delivering your value proposition.

Key Partnerships

Key partners building block is quite similar to the previous one. You also list the activities which you view as important. However, they are not done on your own but by working with suppliers and partners to make the business model work.

Take Spotify as an example. The company let updating its platform be the key activity. Nonetheless, Spotify cannot produce the music it provides. Therefore, the company needs to list its deals with record labels and publishing houses in the Key partners building block.

If you are wondering why your business should create a partnership, it is because of economies of scale. What’s more, that can help prevent yourself from risk and uncertainty which leads to crisis. Finally, it brings about the acquisition of resources or activities.

Cost structures

The last building block is Cost Structure in which you map key activities to costs.

One thing to keep in mind is making sure all the costs you list are related to your value proposition.

Additionally, Cost structure should be the last building block you fill in. Therefore, after defining your Key Resources, Key Activities, and Key Partnerships, it is necessary to find out the most important costs as well as the most expensive ones.

Why might you want to create a business model canvas?

You might wonder why creating a business model canvas is crucial and how you will benefit from this canvas when starting your own business. There are various answers to your questions but here are the three most noteworthy:

Roadmapping rapidly

A canvas can be handled in a short time, even with the sticky-notes. You do not need to make every effort to put down everything about your product plan, you can simply list out the features, the necessary content.

However, it will be useless if you just stop at these highlights. The next step is to convert the canvas into your roadmap with your product’s details.

Time saving

Before the business model canvas appeared, people who wanted to get their product to market were familiar with the old structure of citing a business model. On the other hand, the issue with this traditional method was that it was hardly accurate by the time the writer completed the draft.

It is also accessible to explain this situation as this model consisted of important elements such as detailed cost estimates, revenue projections going years into the future, and permanent plans for growing the staff, which are all changeable in just a short period of time.

When it comes to products, these plans are considered MRD (Market Requirements Document). This particular paper is lengthy, intricate, and can barely be true as soon as it’s finished.

Luckily, a canvas is here to help you overcome these obstacles. You can quickly combine a canvas that is capable of showing your strategy and your brand’s current status. And in case there are changes, you will need less effort and time to edit.

Easy to swivel

It is so evident that the market is at no time stable. There are always new things adopted and some old ones have to be eliminated, which require you to be ready for any changes , to swivel due to reality.

Therefore, a canvas should be your priority. It is so sharp and top-level that you can easily adjust if needed rather than MRD or traditional business plans . With the length of just one page, a business model canvas plays a vital role in your brand guiding strategy.

Moreover, you can instantaneously and rapidly update your approach or any features due to your market observation.

10 examples of business model canvas in different industries

Example #1: a lemonade stand.

A lemonade stand can be a great example of your initial approach to a business model canvas. It is likely the most understandable model for one’s first experience with starting a business.

In this model canvas, you can clarify your customer segments, possibly your neighbors, walkers, family, and friends. However, they are not limited to your customers; they can be your partners, suppliers, resources as well.

Therefore, you need to write down the proper ways of reaching customers in the Channels building block. And Facebook groups, booths, or stands are considered the most suitable choice for a lemonade stand. Turning to revenue streams, it is quite simple with a lemonade stand because they mostly come from a finite price for a drink.

Example #2: Skype

As can be seen, Skype provides users with 2 value propositions: free Internet & Video calling and cheap calls to phones. These propositions correspondingly help Skype attract 2 customer segments: free users and users who want to call phones.

In Skype’s model business, there is a majority of users who make free calls via the Internet, and just 10% of users choosing the prepaid service. We can explain this business model by looking at key partnerships, key activities, and key resource building blocks.

Key partnerships, key activities, and key resources are the three elements that allow Skype to offer low-priced and free calls. Unlike other traditional telecoms providers, Skype does not have to build and manage a huge and complicated infrastructure to work effectively, Skype just relies on backend software and the servers hosting user accounts, which is called the freemium business model.

Example #3: Gillette

In Gillette’s case, their business model follows the business model pattern called “Bait & Hook”, the pattern that is followed by many SaaS (Software as a Service) companies.

Gillette gives their customers a cheap or even free of charge original offer, a razor handle. This offer is the bait that enables customers to experience and get acquainted with Gillette’s products and makes them more likely to buy related products, the blades.

In the above diagram, the size of the arrow is in direct proportion with the revenues generated. All Gillette’s revenues are from just one customer segment, which mainly depends on Frequent Blade Replacements.

Pay attention to the left corner of Gellettes Business Model Canvas, it will demonstrate the consistent relation between all major costs and the value proposition. For instance, Gillette strengthens its brand by spending money on marketing and assures the brand’s uniqueness in the blade and handles technology with R&D costs.

Example #4: Google

When it comes to business model canvas, we will not want to miss the outstanding example of Google.

Google’s business model is many-sided, which means their customer segments are not exclusive. Google has separate groups of customers, but these groups are related to each other.

In Google’s model, it is a platform whose customers are search users and advertisers. If there are no search users, there will not be advertisers and vice versa, search users will not be able to freely take advantage of this platform without advertisers.

As we can see, Google displays ads in search results or on web pages which costs advertisers an amount of money. With this money, content creators are paid and search users can browse free of charge.

Google’s kind of business model creates a network, which means the ads it displays to web users are directly proportional to advertisers and so as the content owners.

In terms of key resources, Google.com, Adsense (for content owners), and Adwords (for advertisers) build up Google’s search platform. Hence, managing the existing platform and its framework must be Google’s key strategic activities.

It is clear that one of their key partners is content owners, without whom there would not be search users or advertisers. Another partner of Google is OEMs (Original Equipment Manufacturers).

OEMs (Original Equipment Manufacturers) provide Google with mobile handsets that allow this huge platform to operate its system at no charge. And to give back, when users of these handsets surf the Internet for information or entertainment or whatever, they choose Google’s platform by default. This process will consequently lead more web users to the ecosystem, meaning that more revenue will be raised.

Example #5: Airbnb

Another example is Airbnb, a widely-known online marketplace that lets people rent out their properties or spare rooms to guests and then Airbnb takes 3% commission of every booking from hosts, and between 6% and 12% from guests. And now, it is time to figure out its business model canvas.

It is clear that Airbnb has 2 separate customer segments: guests and hosts, but they can be divided into other small categories with particular characteristics. Airbnb’s value propositions also follow the same pattern: they give their customers more affordable choices than traditional hotels and provide customers with deluxe or fancy services.

About Airbnb’s revenue, as mentioned above, their main revenue is from the fees that they charge both guests and hosts.

Example #6: Uber

Our next business model canvas is Uber, the world’s largest taxi company, which owns no vehicles. Uber is an excellent illustration of a business model canvas as it is an outstanding business with such representative innovation in technology.

As can be seen, Uber’s customer segments include 2 big categories: drivers and riders. In drivers, Uber targets 2 particular groups: unemployed drivers and drivers looking for part-time jobs, which consequently lead to their corresponding methods of approaching customers. It means, for example, to attract unemployed drivers who are likely to live in areas with high unemployment rates, Uber has to use Word of mouth as a channel.

Example #7: LinkedIn

LinkedIn is the online platform that enables you to find the right job or internship, connect and strengthen professional relationships, and also learn the skills you need to succeed in your career. It means LinkedIn provides users with diverse services as shown in the Value propositions building block.

Therefore, in their business model canvas, LinkedIn pointed out 3 big customer segments: recruiters, professionals seeking to network, and marketers.

Turning to LinkedIn’s revenue streams, LinkedIn’s revenues mostly come down to these 3 sources: freemium business model, hiring solutions, and marketing solutions. And as a result, they have to consider developing the platform as the most important activity.

Example #8: Amazon

Amazon’s business model canvas is an example that we should not miss in the e-commerce field. Amazon’s model’s most remarkable element is its key activities, which help Amazon stand out among many competitors.

As we know, time and money are important to every buyer and so is Amazon.

Hence, Amazon’s key activities are quick fulfillment processes, in-time delivery, and shipping systems allowing for Amazon Prime to deliver orders within 1-2 days, and Offshore R&D Center to streamline and improve the efficiency of fulfillment centers and other projects (e.g. Amazon Grab & Go stores) to lower costs.

About Amazon’s customers, there are two main groups that use Amazon’s products and services: business clients and retail clients, which means they have to develop strong and complicated ways of serving their customers.

Example #9: Netflix

Many companies compete against Netflix, such as Amazon Prime Video, Apple TV+, Disney+, HBO, Hulu, Vevo, and Youtube. However, Netflix is still doing well and developing its business worldwide with such a unique and effective business model canvas.

Netflix uses 6 key resources: brand, apps, platform, employees, filmmakers, and prizes, to attract its customers. Recently, Netflix’s content production activity shows its strengths as Netflix series are welcomed by large audiences and are gradually dominating the film market.

Example #10: Tesla

Tesla is a business model that chooses technology as a benefit. As shown in the business model canvas, one of Tesla’s customer segments is the green buyer which directly leads to the corresponding key activities. They have to concentrate on research and development, design, electric power technologies, car manufacturing, and also charge point infrastructure to provide customers with synchronous solutions and services.

If you are about to start a business, make sure that you will not forget about the business model canvas. The business model canvas, which consists of 9 elements will help you determine what is crucial for your business regardless of whether your business is big or small.

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