Introducing the Business Model Canvas

Introducing The Business Model Canvas – Part 1

Do you want to create your own business? Then try the business model canvas.

Quite simply, The Business Model Canvas gives you the structure of a business plan, ensuring you cover all the ground you need to when developing your idea.

The canvas allows you to identify problems or issues before they happen, ensuring your idea becomes more foolproof.

It covers:

  1. Customer Segments: Who are the customers? What do they think? See? Feel? Do?
  2. Value Propositions: What’s compelling about the proposition? Why do customers buy and/or use?
  3. Channels: How are these propositions promoted, sold and delivered? Why? Is it working?
  4. Customer Relationships: How do you interact with the customer through their ‘journey’?
  5. Revenue Streams: How does the business earn revenue from the value propositions?
  6. Key Activities: What uniquely strategic things does the business do to deliver its proposition?
  7. Key Resources: What unique strategic assets must the business have to compete?
  8. Key Partnerships: What can the company not do so it can focus on its Key Activities?
  9. Cost Structure: What are the businesses major cost drivers? How are they linked to revenue?

This canvas is popular with entrepreneurs and university students who are looking to develop the ideas they lay the foundations down for during their studies.

Intrigued? Well let’s delve a little further into the points above and uncover some more information.

1: Customer segments

For purposes of using the canvas you should make sure you can answer these questions:

Segment Dimensions

Do you have a single or multi-sided market? If you have a multi-sided market you’ll have at least as many segments as you have sides. An example of such a market is a media property who have readers on one side and advertisers on the other.

Segment Composition

If the segment dimensions are the ‘macro’ analysis of your customer base, then looking within each segment at individual customer types as ‘Personas’ is the ‘micro’. You should be able to visualize these Personas and understand what they think, see, feel, and do in your area of interest. List both buyers and users of your product.

Problems, Needs, Habits & Current Alternatives

What job are you doing for the customer? What need are you fulfilling? (if any). Make sure that you can identify an existing need/problem and identify specific alternatives that your customer uses today.

2: Value propositions

I.e. an innovation, service, or feature intended to make a company or product attractive to customers.

Which of the problems or needs that you identified in your personas are fulfilling? What’s unique about your value propositions? Why does your customer prefer this in comparison to what they already do/use? What do you do that the competitors don’t?

Introducing the Business Model Canvas

This part of the process is one of the most valuable because it helps you find the correct road and then walk down it. I.e. many entrepreneurs (who don’t use the canvas model) choose the wrong pathway because they choose the wrong options to begin with.

There’s no point creating a new product or service if you are a) marketing it to the wrong people or b) you’re answering a question which has already been answered.

Doing the latter will also mean you can become a small fish in a big pond. The more unique the product, the better.

3: Channels

Your ‘Channels’ are the entities you use to communicate your proposition to your segments, as well as entities through which you sell product (and later service) your customers.

Introducing the Business Model Canvas

For example, if you are selling a new set of tools for tradesmen and there’s a website which all tradesmen use to purchase equipment, that site is a sales channel.

If you use Google adwords (for getting attention) and third party companies who service your tools if faulty or broken – these are also channels.

In summary, the more channels you have, the more secure your idea will seem.

4: Customer relationships

How does your customer interact with you through the sales and product lifecycle? Do they have someone they can see personally? Or is the interaction over the web?

Introducing the Business Model Canvas

Answering these questions will not only let you prioritise your customers needs, it will also allow you some time to test the best options.

You may have thought your business was better as an online service only, but there may be other ways to sell what you’re offering.

– Can the Value Proposition be delivered to the Customer this way? (i.e. all the way through from promotion, to sale, to post-sale service?)

– Can you make the numbers work?

– Is there a premium support product you need to create/test?

5: Revenue streams

At this point, you should start to map customer segments and value propositions to the revenue streams section of your business model canvass. (I.e. Look at where you’re driving revenue and whether it aligns with the rest of your focal points.)

Who are you going to earn money from? Are there several ways of earning money? Do you have everything in place in order to make it a simple transaction (i.e. online payments).

Introducing the Business Model Canvas 4

Part 2 of the business model canvas description is available here.

Related Posts