business plan in canvas

Business Model Canvas: Explained with Examples

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

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

What is a Business Model Canvas

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

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

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

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

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

What Are the Benefits of Using a Business Model Canvas

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

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

How to Make a Business Model Canvas

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

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

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

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

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

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

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

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

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

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

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

Customer Segments

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

• Value Proposition

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

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

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

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

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

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

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

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

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

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

There are several types of customer relationships

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

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

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

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

There are two types of channels

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

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

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

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

There are several ways you can generate revenue from

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

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

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

There are 3 categories of key activities;

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

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

There are several types of key resources and they are

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

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

Types of partnerships are

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

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

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

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

Value Propositions

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

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

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

What to Avoid When Creating a Business Model Canvas

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

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

What Are Your Thoughts on the Business Model Canvas?

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

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

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

FAQs About the Business Model Canvas

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

More Related Articles

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

The Business Model Canvas

The Business Model Canvas is a strategic management and entrepreneurial tool. It allows you to describe, design, challenge, invent, and pivot your business model. This method from the bestselling management book Business Model Generation is applied in leading organizations and start-ups worldwide.

The Business Model Canvas enables you to:

• Visualize and communicate a simple story of your existing business model.
• Use the canvas to design new business models, whether you are a start-up or an existing businessManage a portfolio of business models
• You can use the canvas to easily juggle between "Explore" and "Exploit" business models.

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The 9-Step Business Model Canvas Explained (2023 Update)

Written by Raquel Alberdi

Business | entrepreneurship, 16 comments(s).

Blog » The 9-Step Business Model Canvas Explained (2023 Update)

“A major mistake made by many start-ups around the world is focusing on the technology, the software, the product, and the design, but neglecting to ever figure out the business . And by “business” we simply mean how the company makes money by acquiring and serving its customers”.

-Reid Hoffman

After meeting with hundreds of entrepreneurs and business owners over the years I believe the LinkedIn co-founder and Blitzscaling author Reid Hoffman’s got it spot on.

People tend to focus on specific parts of their business, such as which software packages are being used, which is the cheapest supplier, how to optimize internal processes…?

They get so bogged down in the details of the day-to-day running that they lose the overall vision of their business.

Without this vision they are unable to scale, they make marginal profits, miss opportunities, struggle to innovate, and end up running “just another” business.

Another handy metaphor in understanding this common mistake is the soldier in the trenches .

Every meter of ground gained comes at a heavy cost, mistakes are made, and progress is hard-fought and slow…a day-to-day experience for 99% of entrepreneurs and businessmen.

But when you do have that 360 vision you see the entire battlefield. Decisions are much clearer, fewer mistakes are made, and progress is fast and methodical.

Fortunately, a business model framework exists that gives you both vision and clarity .

The Business Model Canvas provides entrepreneurs, business owners, and strategists with a tool to analyze, structure, and evolve a business while always keeping the bigger picture front of mind.

So let’s take a closer look at how it works.

Table of Content

What is the Business Model Canvas?

Created by Swiss entrepreneur and Strategyzer co-founder, Alexander Osterwalder, the Business Model Canvas is a visual representation of the 9 key building blocks that form the foundations of every successful business. It’s a blueprint to help entrepreneurs invent, design, and build models with a more systematic approach.

Why is it so popular within the business community?

Its simplicity. The business model canvas allows us to carry out a high-level analysis without drilling down and getting lost in the details. You just draw out the 9 building blocks on a blank canvas, fill them in as each concept relates to your business, and hang it somewhere everybody can see.

It’s a visual overview of your entire business on a single canvas.

While the Business Model Canvas is an extremely fluid concept and hyper-specific to individual companies, each canvas is still broken down into these 9 key building blocks:

Customer Segments

Value propositions, customer relationships, revenue streams, key resources, key activities, key partners.

When laid out on the canvas the model will look something like this:

While you’ve probably come across each of the 9 building blocks before, the attractiveness of the Business Model Canvas is that it confines them to a single page , not a traditional 42-page document.

This makes it a lot easier to digest, as well as assess existing business models or map out new ideas.

How do I fill out the Business Model Canvas?

To start your Business Model Canvas you will need to breakdown and analyze each of the 9 building blocks.

A good way to approach this is to gather the heads from marketing, sales, operations, finance, and manufacturing (if product-based) and pencil-in a morning where you can all meet together.

Then, after drawing a mock canvas onto a whiteboard, proceed to dissect and discuss each of the 9 building blocks as they relate to your business. You can use sticky notes to better organize your thoughts around the canvas.

If you are an entrepreneur or new business owner working alone and don’t have a team to bounce your ideas off, not to worry. You can still carry out your analysis before sharing it with a like-minded entrepreneurial community or forum, like those found on ThePowerMBA , to get useful, insightful feedback.

Whichever way you decide to approach it, I recommend you complete each block in the following order:

• Cost structure

For continuity, I’m going to use the fashion retail giant Zara when analyzing each of the 9 key building blocks.

If you’d like to skip to another case study similar to your own business, navigate to the table of contents at the top of the page and select one of the other business model canvas examples.

The first block of the Business Canvas Model is about understanding who is the most important customer(s) you’re delivering value to. Or, in other words, who are they? What do they do? And why would they buy your product or service?

Not a single company exists without its clients, making customer segments the best block to start with while drawing out your business model canvas.

A great exercise to define your customer segments is to brainstorm and create your company’s buyer persona (s) .

Buyer personas are fictional depictions of an ideal or hypothetical client. Typically when brainstorming a buyer persona you’d want to define certain characteristics (age, demographic, gender, income, industry, pain points, goals, etc.)

However, remember at this stage we want a snapshot of our customer segment. There’s no need to jump into great detail just yet.

In the case of Zara, there are three distinct customer segments to whom they offer different products.

The products created for each of these customer segments (clothing, shoes, and accessories) are not trans-consumable. That is to say, a woman’s dress is highly unlikely to be worn by a 7-year-old child.

Once we know exactly who it is we are targeting, it’s time to look at what we as a company have to offer.

The second phase is about figuring out your company’s value propositions , and importantly, your UVP (unique value proposition). The “what” that makes customers turn to you, over your competitors? Which of their problems are you best at solving?

Each value proposition consists of a bundle of products or services that fulfill the needs of a buyer persona from your customer segment. It’s the intersection between what your company offers, and the reason or impulse customers have for purchasing.

Some popular questions to ask while determining your UVP are:

• Which specific customer pain point are you trying to solve?
• What job are you helping customers get done?
• How does your UVP eliminate customer pain points?
• What products or services do you provide that answer this specific pain point?

So let’s try and apply this to Zara. Why do people choose to purchase from them, over their competitors?

Zara’s principal value propositions are fairly clear. They offer various ranges of stylish men’s, women’s, and children’s clothing and accessories at an affordable price.

But there’s more to it than that.

If we dive a little deeper we see Zara’s value propositions are more complex, which are behind the success of the brand:

Fast fashion

Zara adds new clothes and designs to its collections every 2-3 weeks, both in its stores and online. It keeps the brand updated, fresh, and modern while maintaining its all-important medium price point

Great eCommerce experience

Once you enter Zara’s online store you’re presented with a clean, easy-to-navigate, and high-end feel. The customer segments are visible on the left navigation bar with a search tab to further aid customers with their online experience.

Localized stores

You can find a store in nearly all major retail locations (shopping malls, retail outlets, airports, etc.) meaning accessibility is not an issue for the majority of consumers.

Flagship stores

Zara demonstrates its aesthetic evolution to customers through its flagship stores. The recent opening of their Hudson Yards , New York City flagship is a great example of this. Customers shop around its vivid, minimalist layout offering them an experience aligned with the brand’s deeper, eco-friendly values.

Zara Hudson Yards, New York

The next step is to ask yourself how you are reaching your customers, and through which channels ?

This includes both the channels that customers want to communicate with you as well as how they’ll receive your products or services.

Is it going to be a physical channel? (store, field sales representatives, etc.) Or is it a digital channel? (mobile, web, cloud, etc.).

Zara has 3 primary channels in which they communicate and deliver products to its customers:

• Direct sales through their stores
• Online (both app and website)
• Social media

Customers can go to a traditional “bricks and mortar” store to browse, model, and purchase different items of clothing at one of their retail stores.

Alternatively, they can shop online or through their mobile application and have the product delivered straight to their door or nearest store. The choice is completely up to them!

So that covers Zara’s commercial channels, but what about how they communicate with customers?

While they do communicate through their mobile app, their predominant channel is social media.

What’s more, they’re really, really good at it.

For example, did you know that Zara invests less than 0.3% of its sales revenue into advertising?

This is only possible due to an A-rated social media presence . Customer queries are not only dealt with quickly, but recommended re-works are sent back to HQ, forwarded onto in-house designers who then apply the feedback to future collections.

This customer-first approach through fluid communication channels has saved them thousands of dollars in marketing, strengthened their brand, and created a loyal customer base.

You should only step away from this building block once you’ve decided how each of your customer segments want to be reached.

Once you have acquired customers, you will need to think about how you can build , nurture, and grow those relationships.

Now, this can be automated and transactional like large eCommerce brands Amazon or Alibaba. Or, it could be at the complete opposite end of the scale and require a more personal relationship you’d typically have with a bank or your local bike shop.

Zara’s relationship with its customers is threefold, and lies somewhere in the middle of transactional and personal:

• Salesperson at store
• Brand through social media
• Sentimental attachment to a product

Yes, you have the initial transactional touchpoint at the store or online, something relatively impersonal and for many the only interaction they’ll have with the brand.

However, customers (especially in the fashion industry) are encouraged to continue to interact with a brand through social media platforms.

As we mentioned before when discussing channels, Zara has a very effective communication system in place. Not only can people instantly get in touch with the brand, but also engage with new posts, images, and collections uploaded to social media.

This personal approach to customer relationship building can, in some cases, lead to the natural growth of brand ambassadors and communities .

An attachment can also develop between customers and particular garments or accessories from one of their collections. The sentimental attachment to these products also creates another potential form of brand loyalty.

Now that you’ve described how you are going to create real value for your customers, it’s time to look at how you plan to capture that value.

What are your revenue streams? Is it going to be a transactional, direct sales strategy ? Are you going to consider a freemium mode l, where you give a portion of your product or service away for free with the idea of converting later on down the line?

If you’re a SaaS company such as SalesForce or Strava , then it’s likely that a licensing or subscription revenue model will be more appropriate.

At Zara, it’s extremely simple. They make their money by selling clothes and accessories either at a store or online.

As you can see, we’ve filled in the entire right-hand side of our business model canvas. We touched upon:

Customer segments

• Value propositions
• Revenue streams
• Distribution channels

Now it’s time to move over to the left side of the business canvas model and look at what we need, internally , to deliver our value propositions.

To start with, let’s take a look at key resources.

The key resources are all things you need to have, or the assets required to create that value for customers.

This could be anything from intellectual property (patents, trademarks, copyrights, etc.) to physical holdings (factories, offices, delivery vans, etc.) right down to finances (the initial cash flow perhaps needed to start your brand).

Another key resource every company needs to consider is its human capital . Are you going to need highly specialized software engineers? Or field-based sales teams?

They are relatively capital-heavy resources that need to be factored into your business model.

In the case of Zara, they are going to need a number of key resources if they hope to deliver their propositions:

• Stock management
• A large, interconnected network of physical stores
• A strong brand
• Logistics and supply chain infrastructure

Stock is vital for both online and offline customers.

If they are unable to supply their range of products and meet customer demands, satisfaction levels fall and they have a serious problem on their hands.

A large distribution network of brick and mortar stores combined with a strong brand name help mitigate these factors, as well as reinforce any ongoing marketing activities and communication efforts.

Finally, an efficient logistics process within Zara is critical, especially when you consider the complexities involved with such a large-scale operation.

They will require the necessary technology to analyze data on inventory, storage, materials, production, and packaging, with the staff to execute each of these stages and manage the delivery of the final products.

The next step is to define the key activities – the areas you need to be good at to create value for your customers.

To mix it up a little let’s take a look at a slightly different business in Uber .

Their key activities can be broken down into:

• Web and mobile app development
• Driver recruitment
• Marketing: customer acquisition
• Customer service activities : drivers’ ratings, incidents, etc.

They need a fast, clean UX for their customers using the app, drivers to carry out their service, and the ability to both market the product and deal with any customer queries.

Zara’s key activities will differ to those of Uber. Some of the things they need to consider would be:

• Manufacturing
• Retail process (point of sale and 3rd party management)
• Distribution channel / logistics

Design is a key activity as Zara’s value proposition is to provide stylish garments at an affordable price. Their collections need to be constantly updated to follow the latest fashion trends at the time.

To produce their collections Zara will also require manufacturing capabilities. Now Zara doesn’t own their own factories (we will get to that in the Key Partners section) but they still need to be involved in the garment manufacturing process.

Everything from fabric selection to pattern making, to detailing and dyeing affects the outcome of the final product which of course they have to then go on and sell.

The effective management of the retail and distribution channels (online, offline, shipping, and communication with providers) is also key. A breakdown in either of these activities, such as a poor relationship with an important provider will have serious consequences for the business.

Most modern business models now require brands to build out and work with various key partners to fully leverage their business model.

This includes partnerships such as joint ventures and non-equity strategic alliances as well as typical relationships with buyers, suppliers, and producers.

A great example of a strategic partnership would be between ThePowerMBA and Forbes . In exchange for exposure of our brand to the magazine’s global audience, we provide expertise and content on high-level business education programs.

As we touched upon when discussing key activities , Zara requires strategic partnerships with many different providers if they are to design and produce their collections.

Another key partner is their major holding company, Inditex .

Inditex has several subsidiaries including Massimo Dutti , Pull & Bear , and Oysho . Being a subsidiary of Inditex means they share a consolidated balance sheet, stakeholders, management and control, and various legal responsibilities.

While as a subsidiary Zara is afforded certain freedoms when it comes to design, delivery, and the general running of the company, the overall strategy will need to be aligned with Inditex and its other subsidiaries.

The final step of the Business Model Canvas is to ask yourself, how much is it going to cost to run this model?

This includes some of the more obvious needs such as manufacturing costs, physical space, rent, payroll, but also areas such as marketing activities.

If you are unsure of exactly what to include in your cost structure take a look at a Profit and Loss statement ( P&L ) from a competitor or company in a similar industry to yours. You’ll find many items overlap such as research and development ( R&D ), cost of goods sold, admin expenses, operating costs, etc.

Once that’s done you should prioritize your key activities and resources and find out if they are fixed or variable costs .

As Zara is such a large, corporate business they are going to have both fixed costs (rent, payroll, point of sales personnel) and variables, such as costs associated with the fluctuating sale of goods, purchase of materials and, manufacturing costs.

Once you’ve completed these 9 steps, your Business Canvas Model should look something like this:

Business Model Canvas Examples

Hopefully, you were able to get a good feel for the effectiveness of the business model canvas with our run-through of Zara.

However, if you found it difficult to follow due to the stark difference between your industries, I’m going to quickly go through 3 more companies to demonstrate the tool’s flexibility:

• Netflix (Media service/production)
• Vintae (Vineyard)

Even if these business model canvas examples don’t align exactly with your industry, I honestly believe that studying different models gives you a competitive advantage in your professional career regardless.

If you’re currently employed by a company, you’ll better understand how your specific role helps the company achieve some of its “long-term” goals.

Alternatively, if you are a business owner yourself (or perhaps thinking of starting your own business) you’ll have a better understanding of your business and where potential opportunities lay.

I’m sure you’re familiar with our next business model canvas example candidate, Netflix .

The global media company offers an online streaming service of various movies, documentaries, and TV programs produced in-house or licensed 3rd-party content. Their success sparked a revolution in the online media world with the likes of Amazon, Apple, Disney, HBO, and Hulu all rushing to launch their own online video streaming platforms.

Netflix started life as an online DVD rental company, basically a web version of the more popular (at least at that time) “bricks and mortar” Blockbuster.

Co-founder Reed Hastings predicted as far back as 1999 that the future of media was in online streaming, saying “postage rates were going to keep going up and the internet was going to get twice as fast at half the price every 18 months.”

It wouldn’t be until 2007 that Hasting’s prediction would become true when Netflix, as we now know it, was born.

So let’s take a current look at their business model canvas:

As you probably know, there are very few people out there who haven’t subscribed, watched, or at least heard of Netflix. There is content for everybody: wildlife documentaries, sci-fi movies, rom coms, action-thrillers, you name it – it’s there.

That’s why their customer segment can be classified as a “ mass market ” as the base is just so diverse.

All people require is a computer, TV, internet, and/or smartphone and they’re good to go. For most developed markets, that covers just about everybody.

Value Proposition

Whether on the train to work, sitting in the car (if you’re not driving!), or relaxing at home in front of the TV, you can consume their online, on-demand video streaming service.

They also have a huge library of content for consumers to choose from, ensuring that people keep coming back, as well as increasing their mass-market appeal.

They also produce high-quality, original content to differentiate themselves from their competitors.

Most people access Netflix either through their website or mobile/TV App . Another popular channel that you may have picked up on is their affiliate partners .

You’ve perhaps signed up for a mobile, TV, and internet package where the provider offers Netflix as an extra to sweeten the deal, so to speak.

That would be an example of an affiliate partnership between Netflix and mobile service providers.

I doubt many consumers have had direct contact with Netflix unless it’s to resolve a subscription issue or general query. It’s very much a self-automated service – you download the app, select the program you wish to watch, and hit play.

Very simple, very effective.

Again, this doesn’t need much embellishment. Netflix generates money from the different tiers and packages put together in their subscription services.

This varies depending on the region to account for local markets, but on the whole, it’s sold at a low price point.

Originally, Netflix’s Key Resources would have been their unrivaled DVD collection combined with a cost-effective mail-order system.

Nowadays it’s undoubtedly the rights to stream online video content. Netflix has brokered deals with some of the biggest production studios worldwide.

Combined with their huge library of in-house productions , it’s more than enough to encourage customers to renew their subscriptions.

To help sustain interest in their product, Netflix understands they need to serve-up relevant content for each sub-sector of their mass audience. Therefore their machine learning algorithm selects content for consumers based on streaming habits (what they watched, at what time, etc,.) to personalize the customer experience.

This explains why over 80% of all content streamed on Netflix was cherry-picked by this algorithm, making it a Key Resource for their business model.

Also, Netflix accounts for a whopping 12.6% of global bandwidth usage . The literal capacity to stream their services must be met meaning bandwidth must also be included here.

Content procurement is arguably their biggest Key Activity. They need to find people to produce and deliver their original content, including actors, studios, writers, etc. as well as secure the licensing and streaming rights from 3rd party producers such as Sony, Warner Bros, and Disney.

Finally, they need a fast, easy-to-use application to host their online streaming service. This needs to be available for both TV and mobile devices if they are to deliver their “on-demand” value proposition.

K ey Partners

Seeing as Netflix’s entire business model is largely based around streaming 3rd party content, key partnerships need to be built with production studios . No content, no Netflix!

Also, as we touched upon earlier Netflix is one of the largest consumers of bandwidth worldwide. If the speed and delivery of their streaming service are to be continued then deals will also need to be made with internet service providers (ISPs).

Netflix’s biggest expenditures come from both their in-house content procurement and 3rd party licensing agreements . The high-quality standard of video streamed on Netflix is only possible due to the speed and performance of its online platform and application , which has additional costs of staff, software, etc.

To show you just how flexible the business model canvas can be, I wanted to throw in a slightly leftfield example. Vintae is a Spanish wine producer who, after a detailed analysis of the business model canvas, was able to innovate and disrupt one of the world’s most competitive industries.

As some of you may know, the wine industry is extremely competitive. It’s also steeped in history and tradition , making it very challenging for newcomers to grab market share, let alone think about year-on-year growth and revenue.

However, CEO “Richi” Arambarri looked at the traditional “ bodega ” business model and saw a chink in its armor.

A “small” innovation in the business canvas model helped them to become one of the region’s most important winery groups, with over 10 installations and a presence across all regional denominations (Rioja, Priorat, Rias Baixas, etc.) with year on year growth of 30% – practically unheard of in such a competitive industry.

So how did Vintae analyze the business model canvas to find a niche in their market?

To answer that question, we must first look at the traditional winery business model .

As you can see, the wine industry has historically been patrimonial. Vineyards and estates are passed down through generations with the winery responsible for all phases of production, clarification, and distribution.

The traditional winery business canvas model suggests you must be the owner of the winery/vineyard where the wine is “manufactured”, meaning physical assets are a key resource of the business model.

So, if you wanted to start producing a Rioja, for example, you’d have to set up your vineyard in the region.

This is monumentally expensive as you need to:

• Purchase the land
• Plant a vineyard
• Absorb set-up and installation costs
• Deal with maintenance costs

It’s here where Vintae saw their opportunity.

What if we move vineyard ownership across the business model canvas from key resources to key partners ?

By leasing the equipment and space of large wineries (of which there was plenty), they could still produce their wine but reduce the cost and exposure associated with land purchase, crushing equipment, huge storage tanks, vineyard maintenance, and their bottling line.

This enabled them to focus on their sales, marketing, and distribution channels to create a better brand experience for their customers.

Also, it afforded them more flexibility when creating new wines as they were no longer confined to the limitations of grapes grown on their vineyard.

The lightness of this new business model eliminates maintenance overheads, channels energy into personalizing the customer experience, and allows for unprecedented levels of growth in one of the world’s most competitive industries.

Business Model Canvas Software

Although I did mention starting with a large whiteboard, sticky notes, and a pack of colorful sharpies there are several options in which you can digitize the business canvas model production process.

While I still believe the aforementioned process is extremely valuable (it gets your entire team’s input in a single hour-long session) you may decide it more viable for each member of management to pool their ideas digitally before sharing with the rest of the group.

If that’s the case, then take a look at some of the following software tools for creating your business model canvas.

Strategyzer

Created by the founders of the business model canvas Alex Osterwalder and Yves Pigneur , Strategyzer offers a range of business model canvas templates for you to get started with.

If you opt for the paid model (there is a 30-day free trial period) they offer a series of various classes that teach you how to build and test different value propositions and business models.

A real-time built-in cost estimator analyzes the financial viability of some of your business ideas, identifying alternative areas you may wish to explore with your model.

All-in-all, it’s a great resource to play around with and test some of your business ideas, with the option to dive into further detail if you see fit.

Canvanizer is a free, easy-to-use web tool that allows you to share links between team members who are brainstorming ideas for a business model canvas, but working remotely.

Like Strategyzer, there are several business model canvas templates provided to help you get started with your analysis. The strength of this platform is its accessibility. Much like a Google Doc., several people can brainstorm on the same canvas simultaneously with changes being synchronized automatically.

Business Model Canvas Tool

A ThePowerMBA alumni, impressed by the simplicity and effectiveness of the tool, went ahead and created the free application Business Model Canvas Tool .

It’s an incredibly intuitive, and easy-to-use tool that allows you to create templates simply by clicking the + button in each building block.

Each business model canvas created can be downloaded and shared as a pdf. with the rest of the team.

Would You Like to Learn More about Business Models?

If, after going through our 9-step guide on how to use the Business Model Canvas you’d like to learn more about different business model analysis tools , take a look at our alternative MBA business program .

As you’ll see, the course gives students a 360-degree view of business and management practices – such as engines of growth, segmentation and targeting, and value propositions.

I highly recommend you go check it out.

Regardless, I’d love to hear what you thought about this guide. Was it helpful? Would you like to see additional business cases analyzed from your industry?

Let us know in the comments below.

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16 Comments

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Well explained with practical business case

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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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How to Create a Business Model Canvas (With Template)

May 19, 2021 - 10 min read

Do you want to create a simple business plan? Something comprehensive, flexible, and easy to scribble on a napkin? You can do that with a business model canvas.

Every business has ever-changing, diverse interests. Illustrating all of this on a single sheet of paper may sound challenging — but by using a business model canvas template, your team can focus on the key elements of your business to ensure nothing slips through the cracks.

Business model canvas explained

"Lengthy business plans often increase the risk of failure," wrote Alex Osterwalder in his 2008 book “Business Model Generation.”

The business model canvas offers a way to avoid this, providing a simplified version of a business plan. A business model canvas is a simple, visual framework that helps teams outline the most fundamental elements of a business.

As a handy business tool, teams can use a business model canvas to map the nine core areas of a business, such as customer needs, value proposition, and platforms for customer acquisition.

This article will explain the business model canvas, its benefits, and how it can help your team develop a successful high-level business strategy and actionable roadmap .

How can a business model canvas help your business?

Many teams are so overwhelmed with operational issues that they don’t have time to focus on the core business strategy .

Utilizing the business model canvas helps create a unified framework that depicts this strategy alongside an action plan that teams can follow.

But how do you know if you need a business model canvas? If you are starting a business or even toying with an idea, a BMC can create a powerful visual representation of your concept. A business model canvas can also be a handy reference for your team as they move towards successful business outcomes. Here are five more ways in which a business model canvas can help your company.

It’s simple and easy to follow

Whether you have a business idea or are managing a large enterprise, having an easy-to-follow business plan can be immensely helpful. As a precise one-page document, teams can modify specific business model canvas elements as they go along without completely redoing a 50- or 100-page document.

Focused on being actionable 

Every business plan needs to be actionable. Using a business model canvas helps you accurately define your organization’s core value proposition and keep it aligned to your business strategy.

Your focus could be to achieve profitability in the first year or gain a large market share. Stay competitive by defining actionable steps for your team within the business model canvas.

Flexible and scalable as the business evolves 

No business stays the same forever but evolves as it interacts with diverse market dynamics, competitors, product innovations, and changing consumer needs.

To take your idea to market, you need a tool that connects the dots between what your customers want, your business's unique offering, and the desired profitability streams.

By creating a business model canvas template, you instantly get an edge over other market players engrossed in lengthy business plan documents.

Puts the customer first

Ignoring customers sets businesses up for failure . Companies flounder if they direct their energies solely towards making a great product or service. With a business model canvas template, your focus stays on the ultimate end-users of your product. 

Having a business blueprint will force team members to think about what customers want, the primary issues they need help with, and how your product or service can do that. 

Helps get team and executive buy-in

23% of businesses fail without the right team on their side. Every company needs team members with a diverse mix of skills, experiences, and talents.

Companies require a solid business blueprint for hiring team members or bringing in investors. Having a business model canvas can help get everyone on board with your organization’s core vision. Potential employees and investors can visualize how the different organizational parts interact and see how they can become an integral part of the company.

Promotes focus on the unique value proposition of your business

19% of companies fail due to being outperformed by their competitors. If there's no difference between your product and one from another firm, why should customers come to your company? Every business needs a clear value proposition that helps them stand out — that's where a business model canvas template comes in.

When you look at the nine core elements of a business model canvas (explained below), you'll quickly notice some factors are controllable to a certain extent, while others are more fractious.

Your company's core value proposition sits right in the middle. It acts as the central pillar around which all other elements exist, defining the fundamental nature of the business.

What goes into each segment?

To fill out a business model canvas, you should know what goes into each of the nine fundamental segments.

Have a business model canvas template ready before you and your team start brainstorming on each of these elements (you'll find one below) and then add the research and data into the relevant sections. 

Customer segments In this fundamental business area, teams identify the core individuals they will help with their product or service. To do this, they create two to three buyer personas — potential customers that a business seeks to serve.

A buyer persona is a simple but detailed description of a prospective business customer. It assists with capturing the customer’s real-life problems and motivations, helping the business deliver what they want.

Value proposition The value proposition is the ultimate value that a customer will get from your product or service. It seeks to answer the question, “Why will a customer buy?” Here are a few popular value propositions for any organization:

• Customization ability
• Unique product design
• Innovation in product or service
• Exceptional service or product status
• Affordable pricing and clear pricing model definition

Channels In a business model canvas, channels are the platforms through which a company sells its product or service to end-users. To identify the best channel for your business, look at how you plan to connect with your customers.

A few possible channels can be:

• A self-owned retail store
• Direct sales staff
• Affiliate marketing platforms
• Google Adsense

A business can either own its channels or partner with other companies that have their own channels.

Customer relationships Customer relationships in a business model canvas define how the company will obtain, retain, and increase new customers. Let's take a look at how customer relationships are built:

• Identify how to obtain customers and from which platforms (e.g., Google, Facebook ads)
• Gain clarity on how to retain existing customers using different techniques (e.g., exceptional customer service)
• Discover how to increase the customer base of the business (e.g., sending text or email notifications to prompt website visits)

Revenue streams Revenue streams help the business owner decide how to generate revenue and achieve their predefined organizational goals . Key decisions with revenue streams include:

• Choosing from a one-time payment model or monthly subscriptions
• Keeping a free plus paid model or a wholly paid product or service with a free trial
• How payment from customers will be received — website payments, PayPal, or in-store

Key resources Key resources in your business model canvas represent the assets that are vital to your company’s operation. Business assets can include anything from the below categories:

• Physical assets , including machines, buildings, IT hardware, and vehicles
• Intellectual assets , including patents, copyrights, partnerships, brands, and employee skills
• Human assets , including talented employees in knowledge industries such as IT, law, and content marketing
• Financial assets , like cash balances in the bank or lines of credit

Key activities Want to make your business canvas model work? Make sure to list the key activities that will help expand the business's core value proposition. Key activities can come from any of the below categories:

• Production: How you will deliver your end product to the customers. You may need to order more stock or upgrade materials
• Platform: For example, the software used to sell your product, which may require upgrades or maintenance
• Problem-solving: For example, designing innovative solutions for issues that your customers face

Key partners Every business has some non-core activities that should preferably be outsourced. Key partners are the companies or individuals that complete these non-core activities.

Take a company like Facebook, for example — its key activity is to upgrade and maintain its platform. It doesn't create its own ads, so it also needs to strike deals with companies that wish to advertise on its platform. 

Similarly, it doesn’t create its content — the users do. The primary reasons for choosing key partners can be:

• Achieving economies of scale
• Mitigating risk and unpredictability in business
• Acquiring resources and advertisements for its business (e.g., ads for Facebook)

Cost structure Once the key activities are outlined on the business model canvas, it's time to assign cost structures. Be clear and precise with the estimated business costs of the planned activities to ensure you reach your profitability goal.

Business model canvas example and template

• Customer segments: Facebook's customers can be divided into two distinct categories — advertisers and platform users
• Value proposition: The primary reasons platform users come to Facebook. Users feel connected to friends and families, while companies get more leads through advertising on the platform
• Channels: The website where all data is stored
• Customer relationships: Facebook incentivizes users to stay on the platform through notifications and new features, leading more companies to advertise on it
• Revenue streams: Facebook earns money through advertising, while companies gain new customers from Facebook ads
• Key resources: Facebook's key resources are its platforms — Facebook.com, the Messenger application, and Facebook Ads Manager for advertisers
• Key activities: Maintaining the website and its infrastructure are two of Facebook’s key strategic activities
• Key partnerships: Facebook's key partners are its users and advertisers
• Cost structures: Major costs incurred by Facebook include managing the software, backend engineering operations, product development, regular operations, and staff salaries

How to create a business model canvas (with template)

Ready to create your business model canvas? Before you begin, take some time to brainstorm answers to these questions related to the nine core fundamental areas of the canvas. Here's a simple business model canvas template exercise that can help your team get started.

• Customer segments: Can you identify your potential customers?
• Channels: Once the product or service is ready, how will customers discover it?
• Key partnerships: Can any non-core business activities be outsourced?
• Customer relationships: How will your business generate leads and retain and increase your customer base?
• Cost structures: Can the business classify its main costs and expenses into fixed and variable? Is there a way to align costs with the core value proposition and planned revenues?
• Revenue streams: Has the business decided on a profit margin? How will it make money?
• Key resources: Which core resources are critical for the business to succeed?
• Value proposition: Why will customers choose your business? Does the company satisfy any particular need with its product or service?
• Key activities: Are there any activities that help your business deliver its unique value proposition to customers?

Do I need a lean model canvas? 

If your business is still an idea or in its infancy, choosing a lean model canvas makes more sense.

Inspired by the business model canvas, the lean model canvas was created by Ash Maurya . It is a one-page business plan template that distills the lean startup methodology into the original business model canvas. 

Lean model canvas assimilates multiple essential data points to develop a simpler, start-up optimized version of a business model canvas. It adds four more building blocks to the business model canvas, namely:

• Problem: Identify the problem faced by the customer and focus on solving it
• Solution: Start with a minimum viable product that helps solve the customer problem effectively
• Unfair advantage: List the barriers to entry in a specific sector and your company’s competitive advantages
• Key metrics: Focus on one goal at one time to ensure you’re doing a good job

Lean model canvas drops four elements from the original business model canvas — key partners, key activities, key resources, and customer relationships. 

While the original illustrates a more comprehensive business approach, the lean model canvas has a sharper customer orientation. Many start-ups prefer the lean model canvas to a traditional business plan for building an actionable roadmap.

The lean model canvas is a great fit for younger companies or those working with a tight time frame or budget to market with a more targeted problem resolution approach.

Why you should use Wrike to build a business model canvas 

The business model canvas’ nine building blocks clearly illustrate the core business areas and their interrelationships. Whether you're trying to figure out the model for a company with three employees or 50,000, a business model canvas can be very useful.

Begin by mapping out the most crucial information about your business, then link the blocks to ensure every value proposition is linked to a revenue stream and a specific customer segment.

Using Wrike to build your business model canvas template, you can iterate faster, communicate with ease, and enable organization-wide success . With a centralized hub, your teams can configure custom dashboards easily and produce better quality work using premade templates . Implement what you've learned about the business model canvas by trying out a free two-week trial of Wrike today.

Yuvika Iyer

Yuvika is a freelance writer who specializes in recruitment and resume writing.

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What Is Business Process Outsourcing? A Guide

As businesses scale and grow, they often have requirements that cannot be addressed internally — whether because of resource or budgetary constraints. Business process outsourcing (BPO) can be a solution that enables organizations to grow and scale effectively. But exactly what is business process outsourcing? What are the risks associated with the practice, and how can corporate leaders use business process as a service (BPaaS) to their advantage?  BPO meaning: What is business process outsourcing? Business process outsourcing describes a practice where specific tasks, functions, or processes within a company are contracted out to third-party organizations and vendors. These outside organizations have expertise in their specified area, which allows them to manage tasks and processes on behalf of other businesses.  For example, a marketing agency, during their resource planning process, may choose to outsource their payroll and accounting functions in order to focus on the core competencies of their organization.  There are three types of business process outsourcing: offshore, nearshore, and onshore outsourcing.  Offshore outsourcing: The function is managed by an operator or vendor in a different country (often far away and in another time zone) Nearshore outsourcing: The function is managed by an operator or vendor in a neighboring/closeby country Onshore outsourcing: The function is managed by an operator or vendor within the same country — but could be in another state or region  Business functions ideal for outsourcing may include admin, customer service, PR, data entry, HR, content moderation, and more.  Business process outsourcing can improve efficiency and present significant cost savings for companies that may not have the resources to hire a team of in-house customer service specialists or payroll professionals, for example.  In fact, Deloitte research indicates that 59% of companies who outsource say they do so with cost savings as a primary motivator. What is business process as service (BPaaS)? Business process as a service enables BPO by managing specific functions through cloud-based delivery systems. The global BPaaS market is extensive and expected to reach a value of $77.8 billion by 2023. Some well-known names in BPaaS include Accenture and IBM.  BPaaS can help manage:  Finance and accounting  IT services  eCommerce Customer service processes BPaaS leverages the capabilities of infrastructure as a service (IaaS), software as a service (SaaS), and platform as a service (PaaS) solutions in order to help companies manage and address their business objectives.  Business process as a service also relies on automation in many cases, reducing the need for manual intervention. Who needs business process as a service (BPaaS)? Business process as a service can be beneficial for organizations across sizes and industries. For example, instead of hiring an outside firm to manage their finance and accounting needs, a company might instead execute this function via a cloud-based platform licensed through a monthly subscription model.  This naturally brings costs down and offers a more flexible and scalable way of managing operations.  Any company looking to manage processes without the costs associated with hiring, training, and managing an internal team or department may find that BPaaS is an effective solution.  What are the benefits of outsourcing business processes? There are many benefits associated with outsourcing business processes. These benefits include cost and time savings, efficiency gains, the ability to focus on core business competencies, and more. Be sure to keep these in mind when contemplating outsourcing professional services key success factors, and which professional services agency is right for you.Cost savingsHigh costs associated with labor, training, management, and infrastructure can be a barrier as an organization scales and grows its operations. Outsourcing non-core processes can enable businesses to meet their objectives and operational needs while minimizing these internal costs and time commitments. Access to expertise and improved efficiencyBPO gives businesses access to vendors that have the necessary expertise, equipment, and personnel needed to execute a project or function on their behalf. This expertise means they are better equipped to provide cutting-edge, compliant, and effective services.  Ability to focus on key business competencies As a company grows and scales, there is often a need for growth or expansion in other areas of the business.  For example, a high-growth eCommerce company may need increased customer support capabilities to provide quality assistance to customer queries and issues. In this instance, outsourcing customer support staff to an agency or outside vendor allows the business to focus on its main competencies while also addressing customer challenges that can impact the bottom line.  As is the case with most things, business process outsourcing can have its set of challenges and risks. Are there risks to business process outsourcing? Risks in business process outsourcing can include lower than expected or inconsistent quality of service, lack of visibility and collaboration with the vendor, and security considerations. Inconsistent delivery We’ve all been there. A service looks good on paper, but the results turn out to be inconsistent or of a lower standard than expected. This is always a risk, especially when outside vendors are involved.  Lack of visibility and collaboration When handing over the keys to a business function, visibility and communication allow those within the organization to accurately track progress, success, and any challenges. Lack of visibility is a huge risk and could mean that a lower standard of service is inadvertently being passed on to customers.  Privacy and security concerns Privacy and security are a top concern in business process outsourcing. In most cases, BPO will involve some degree of handling sensitive or confidential internal data. Engaging a vendor with lax digital security policies may make an organization vulnerable to breaches or attacks.  As Deloitte notes, the tax implications of business process outsourcing should also be a consideration and factored into any business case. How to choose the right BPO vendor Choosing the right vendor can help avoid headaches, losses, and disputes. Here are some tips for choosing the right BPO partner for your business.  Due diligenceDue diligence will involve researching the vendor and their reputation to determine if they have success and experience with your industry, project type, or company size. Understand costsWhile cost-saving is a major factor when establishing a BPO partnership, unexpected fees may make outsourcing pricier than initially thought. Evaluate security infrastructureWhen determining the suitability of a vendor, be sure to assess their ability to manage and protect sensitive information.  Communicate clear objectives and KPIsClearly communicate objectives, expected outcomes, and KPIs and ensure they have the capacity to deliver.  Ensure stabilityOutsourcing a business function can be risky if the third party is in a financially, legally, or otherwise unstable position. Overreliance on unstable vendors can be a unique challenge to overcome.  How to organize your BPO with Wrike Streamline and simplify your business process outsourcing with Wrike. With Wrike, you can:  Create and manage a risk register for your vendor and the outsourced function Invite vendors as external collaborators to share reports and status updates Share and store vendor meeting minutes using our actional meeting notes template Integrate data from 400+ applications like Salesforce, Marketo, and more  Take advantage of the cost savings, time savings, and expertise that BPO and BPaaS can afford your business. Be sure to track and manage progress, communication, and risk using Wrike.  Sign up for a free two-week trial and discover why 2 million+ people trust Wrike to manage and execute their tasks and projects.  

The Ultimate Guide to Business Process Modeling

Struggling to optimize your business processes? Find out process modeling benefits and techniques for executing business process modeling projects successfully.

What Is Business Forecasting? Why It Matters

What is business forecasting? Forecasting helps organizations strategize and, when done right, can give you a competitive advantage. Read on to learn more.

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The Business Model Canvas

What is the business model canvas.

The business model canvas is a tool designers use to map out a business or product’s key actors, activities and resources, the value proposition for target customers, customer relationships, channels involved and financial matters. It gives an overview to help identify requirements to deliver the service and more.

“A business model describes the rationale of how an organization creates, delivers, and captures value.” — Alexander Osterwalder, Co-creator of the Business Model Canvas  

Learn about the business model canvas and how it helps in design.

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The Business Model Canvas – Flexible Chart, Early-Warning System and More 

In service design , two tools are essential to use early in your design process: the business model canvas and the value proposition canvas . You can use the business model canvas to build an overview of changes to be made to an existing business (e.g., a merger) or of a totally new business opportunity or market gap . At the start of your design process, it’s vital to map out the business model of your service to see how it will fit into the marketplace. You’ll also need to ensure what you propose can bring maximum value to both your customers and business, and keep doing so in terms of customer retention, profitability and more.

To gain the most accurate vision of a proposed product or service, it’s essential to understand all the components and dynamics of not only the customer experience but also the service as a whole ecosystem . This ecosystem contains all the channels and touchpoints that must work together to deliver and sustain maximum value to the customer.

This canvas gives you several important advantages, namely these:

It’s collaborative – so you can bring the various partners together on the same page to generate and analyze ideas, and have an early testing ground for concepts before you advance to service staging a prototype.

It’s human-centered – so you can keep close track on how to create and maximize value for customers as well as stakeholders and other partners.

It makes it easier to collect rich data – if you have a clear purpose and strategy in mind. 

A business model canvas typically contains 10 boxes:

Key Partners – The people who will help you fulfill the key activities, using the key resources. 

Key Activities – Those vital actions that go into the everyday business to get things done; these are all the activities needed to realize and maintain the value proposition, and to power everything else involved.

Key Resources – The tools needed to get those things done, stretching across all areas the canvas covers to include, for example, customer retention.

Value Proposition – The item you think will create value for your customer: e.g., a new idea, a price drop. This is a summary of what your business will deliver to customers, and feeds into the value proposition canvas, the tool you’ll use to expand this.

Customer Relationships – Where you envision the relationship each customer segment expects: e.g., customer acquisition, retention and upselling (i.e., How do you get customers? How do you keep customers? How do you continue to create value for them?).

(Note: boxes 5 and 4 are closely linked as everything you do revolves around retaining the customer and considering the customer lifecycle.)

Customer Segments – Your most important customers (e.g., seniors); consider the value of personas here.

Channels – How you deliver the value proposition. Will it be online, through physical means or a combination? Here, you identify which channels are the best (both desirable for customers as well as cost-efficient and cost-effective for the brand).

Cost Structure – Here you find the most essential cost drivers. This allows you to consider the return on investment (ROI).

Revenue Streams – Where you find potential revenue sources (e.g., advertising). 

Sustainability – How sustainable your offering is overall, to the environment, to the social good, etc.

© Strategyzer AG, modified, CC-BY-SA-3.0

How to Build a Business Model Canvas

For the best results, follow these guidelines and aim to fill in all the gaps, looking out for cause-and-effect relationships that run between boxes/throughout:

Complete the top seven boxes (Key Partners to Customer Segments) – using all the information you can gather from your research.

Complete the next boxes:  

Cost Structure – Determine the cost drivers from the Key Partners, Activities and Resources boxes; and

Revenue Streams – Determine these from the Customer Relationships, Customer Segments and Channels boxes.

Once you have established these, you can work to estimate them in monetary terms.

Complete the Sustainability box – according to the insights you’ve found.  

Here’s an example of a business model canvas as a work in progress:

© Interaction Design Foundation, CC BY-NC-SA 3.0

Overall, remember your canvas is a flexible tool. It’s also a living document that you can revisit and use to find the most effective alternatives. With a clear sense of goals, a keen eye for detail and ear for input, and a readiness to refine this canvas, you can use it to fine-tune the best service prototype every time.

Learn More about The Business Model Canvas

Take our Service Design course , featuring a template for service blueprints.

Read this example-rich piece by experienced strategy designer Justin Lokitz for tips on using the business model canvas .

Find some additional tips on how to make the most of your business model canvas here .

Literature on the Business Model Canvas

Here’s the entire UX literature on the Business Model Canvas by the Interaction Design Foundation, collated in one place:

Learn more about the Business Model Canvas

Take a deep dive into Business Model Canvas with our course Service Design: How to Design Integrated Service Experiences .

Services are everywhere! When you get a new passport, order a pizza or make a reservation on AirBnB, you're engaging with services. How those services are designed is crucial to whether they provide a pleasant experience or an exasperating one. The experience of a service is essential to its success or failure no matter if your goal is to gain and retain customers for your app or to design an efficient waiting system for a doctor’s office.

In a service design process, you use an in-depth understanding of the business and its customers to ensure that all the touchpoints of your service are perfect and, just as importantly, that your organization can deliver a great service experience every time . It’s not just about designing the customer interactions; you also need to design the entire ecosystem surrounding those interactions.

In this course, you’ll learn how to go through a robust service design process and which methods to use at each step along the way. You’ll also learn how to create a service design culture in your organization and set up a service design team . We’ll provide you with lots of case studies to learn from as well as interviews with top designers in the field. For each practical method, you’ll get downloadable templates that guide you on how to use the methods in your own work.

This course contains a series of practical exercises that build on one another to create a complete service design project . The exercises are optional, but you’ll get invaluable hands-on experience with the methods you encounter in this course if you complete them, because they will teach you to take your first steps as a service designer. What’s equally important is that you can use your work as a case study for your portfolio to showcase your abilities to future employers! A portfolio is essential if you want to step into or move ahead in a career in service design.

Your primary instructor in the course is Frank Spillers . Frank is CXO of award-winning design agency Experience Dynamics and a service design expert who has consulted with companies all over the world. Much of the written learning material also comes from John Zimmerman and Jodi Forlizzi , both Professors in Human-Computer Interaction at Carnegie Mellon University and highly influential in establishing design research as we know it today.

You’ll earn a verifiable and industry-trusted Course Certificate once you complete the course. You can highlight it on your resume, CV, LinkedIn profile or on your website.

All open-source articles on the Business Model Canvas

Service design - design is not just for products.

The Relationship Between Visual Design and User Experience Design

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Download our free ebook The Basics of User Experience Design to learn about core concepts of UX design.

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Business Model Canvas

Start creating your Canvas Business Model now. A strategic management template used for developing new business models and documenting existing ones.

Download Business Canvas for Free

These are PNG/PDF ready-for-download files. Try to edit your Business Canvas Model: access a bigger screen to access our desktop app!

User-friendly Canvas Editor

Save hours of work with our intuitive Business Model Canvas editor. Specifically designed for entrepreneurs and business professionals, this free Business Model Canvas generator simplifies the strategy-building process. Minimize time spent on formatting and focus more on your innovative ideas, accelerating your journey from concept to reality.

High-quality Image and PowerPoint Export

No more manual transferring of your business strategy into presentations. With just one click, export your Business Model Canvas into a high-quality image. Get your business model ready for pitches, brainstorming sessions, team briefings, and stakeholder meetings in no time.

Free Business Model Canvas Maker

The Business Model Canvas (BMC) is a powerful strategic management and entrepreneurial tool that allows you to visualize, design, and reinvent your business model. Developed by Alexander Osterwalder and Yves Pigneur, it provides a holistic, visual overview of your business on a single page. It's designed to be easily understandable and to facilitate business strategy discussions. The BMC comprises nine essential building blocks:

• Customer Segments: Different groups of people or organizations your business aims to reach and serve.
• Value Propositions: The bundle of products and services that create value for specific Customer Segments.
• Channels: How your business communicates with and reaches its Customer Segments to deliver its Value Proposition.
• Customer Relationships: The types of relationships a company establishes with specific Customer Segments.
• Revenue Streams: The cash a company generates from each Customer Segment.
• Key Resources: The most important assets required to make a business model work.
• Key Activities: The most important things a company must do to make its business model work.
• Key Partnerships: The network of suppliers and partners that make the business model work.
• Cost Structure: All costs incurred to operate a business model.

Using these nine segments, you can outline your business's value proposition, infrastructure, customers, and finances, creating a snapshot of your organization's strategy and operational effectiveness.

Enter the Business Model Canvas generator tool. This online tool streamlines the process of creating your own Business Model Canvas, allowing you to concentrate on brainstorming and strategizing rather than formatting a document. Its intuitive interface lets you easily populate each segment of the canvas, helping you quickly visualize and iterate on your business model.

The Business Model Canvas generator tool not only simplifies the creation of a BMC, but it also supports collaboration. Teams can work together on the same canvas in real-time, leading to efficient brainstorming sessions and ensuring everyone is aligned with the business strategy. Furthermore, it allows for easy exporting of your canvas to high-quality images or PowerPoint presentations, saving you valuable time.

The Business Model Canvas is a dynamic and versatile tool, and the Business Model Canvas generator enhances this by providing a user-friendly, collaborative, and secure platform to craft your business model. Whether you're an entrepreneur in the early stages of a startup or a business professional rethinking your business strategy, the Business Model Canvas generator tool can be a game-changer in your planning process.

Business Model Canvas & Template

The business model canvas is the best tool to help you to organize your business model in an easy-to-read format. This type of diagram can help you figure out what your target audience wants, how you plan on selling your products and/or services, and even forecast how much revenue you expect to generate each month.  

What is a Business Model Canvas?

A business model canvas (BMC) is a business and marketing tool and it serves as a guide for entrepreneurs or business owners to create business models. The BMC has key information about the business such as customer segments, value proposition, cost structure, and revenue streams.  

Business Model Canvas Template

Using the business model template helps business owners see how all of the key business elements fit together. The business model canvas template is structured to help business owners think about how they are going to fill their business with customers, money, and resources all at once.

A business model canvas is made up of nine elements to include:

Key Partners

Key activities, key resources, value proposition, customer relationships, distribution channels, customer segments, cost structure, revenue streams.

By using this business model canvas template, business owners can make sure that their business has the financial backing it needs while also making sure it attracts the right customer demographic.

If business owners use the business model canvas template they can ensure that their business idea is feasible and profitable. The business model canvas template also allows business owners to self-assess, which can help make the business planning process easier for them in the long run.  

How To Create a Canvas Model For Your Business

The business model canvas is key to business planning. It is an essential business tool that business owners need to use when they are creating business plans or nurturing business ideas.

Business owners can create a business model canvas by answering the questions provided for each section of the canvas below.  

The Key Partners section should include a list of all business partners, companies, or other individuals that are involved in making this company a success. This part will help to determine how much revenue each person can contribute and if there is another way that they could be compensated for their efforts, such as getting paid with equity instead.

• Who are your key partners?
• Who else has an interest in the company’s success?
• How do they contribute to its growth?

For example, if you’re using the affiliate model, then one of your key partners’ lists might include a blogger who agrees to write about your product in order to generate more leads.  

The Key Activities section will include a list of all the tasks that need to be completed in order for this model to work.

• What activities are required to support your value proposition?
• What activities are required to support your advertising model?
• What activities are required to support the relationships with your consumers?
• What activities are required to support your revenue sources?

For example, if you’re using paid search advertising, then it’s necessary to complete research on keywords and create ads that meet specific criteria.  

The Key Resources section should focus on what types of equipment, labor, and funds are needed in order to make this business successful.

• What equipment is needed to start this business?
• What type of labor does this business require?
• How much funding will I need in order to start this business?

For example, if you’re using paid search marketing then you will need a computer that has access to the internet as well as specific programs for creating ads.  

The Value Proposition section details what your customer base will receive in return for their money and time, such as free shipping or an item that is sold at a discounted rate.

• What makes your product or offering unique?
• What value does it bring compared with other similar businesses?
• What are the different benefits that your company offers to its customers?
• How will you be able to differentiate yourself from other brands or products on the market?

For example, if you’re creating a gaming app that allows users to play interactive games with characters in their own family tree then this is something unique compared with similar apps. This would be included as part of your value proposition section because it shows what makes your product unique.  

The Customer Relationships section should include all of the ways that you plan on communicating with your consumers, including email, live chat sessions for customer support, and even social media to help promote this company.

• How will you communicate with consumers throughout the buyer’s journey?
• What is the best way to market your business?
• Which social media platforms do you use?

For example, if you’re using paid search ads then it’s important to include platforms like Google Adwords, LinkedIn Ads, and Facebook Ads because these are the best ways to reach potential customers.  

The Channels section is all about how the product or service will be sold.

• What are the best channels to reach your target audience?
• How are these channels integrated?
• Which channels perform the best?
• Which channels are the most cost-effective?

For example, you could use paid search advertising to promote your business on Google and generate traffic through internet ads. You might also want to consider email campaigns if your target audience tends to check their emails more frequently than they browse websites online.  

This section includes a list of all potential customers within your target group.

• How do I identify my customer segments?
• What are their demographics?
• Which geographical areas will this product or service be offered in?
• Why would these particular groups purchase from me over others that sell similar products and services to mine?

To illustrate, if a business selling vegan shoes aims to specifically serve women between 18-35, then they would need to determine how their strategy will work for reaching these types of individuals.

You can also customize each customer segment with specific information about which industries or markets they belong to as well as things like age groups and gender so that it’s easy for everyone on your team to understand who exactly is your target consumer.  

The Cost Structure section is a list of everything that you will need to invest in order to run this business successfully.

• What are the different costs associated with starting and running this company?
• How much money do I need upfront?
• Which resources am I able to provide myself without having any additional expenses?

For example, if you are creating an online business then it’s important to include things like hosting costs or website design fees. If your startup requires physical products, such as clothing for a fashion brand, then you’ll need to factor in materials and labor costs into this section of the canvas.  

The Revenue Streams section is a list of all the ways that you plan on making money from your company.

• What are my different streams of revenue?
• How much money can I make from each one?
• Which resources am I able to provide without having any additional costs or expenses attached to them, such as advertising fees for paid search marketing?

For example, if you’re selling a product then your revenue stream could be the price of each unit sold. If you are an ad agency offering services to businesses in different industries or markets, then it’s important to list all potential clients here so that everyone on your team is aware of who exactly will be paying for this and how much money they will potentially provide.

Download Growthink’s Business Model Canvas Template

The business plan canvas should be able to answer these questions in an easy-to-understand format. This is why it’s very helpful when trying to figure out what your target market wants, how you can make more money, and how you plan on competing with other companies in your industry.  

The business model canvas template allows business owners to visualize, understand, and manage their businesses more effectively.

It’s an efficient business tool for outlining business ideas because it gives you the opportunity to consider every little detail related to your simple business plan template before making a decision on whether or not it is worth pursuing.  

How to Finish Your Business Plan in 1 Day!

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With Growthink’s Ultimate Business Plan Template you can finish your plan in just 8 hours or less!

OR, Let Us Develop Your Plan For You

Since 1999, Growthink’s business plan consulting team has developed business plans for thousands of companies who have gone on to achieve tremendous success.

Click here to see how our professional business plan consultants can create your business plan for you.  

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HDD & More from Me

The 20 Minute Business Plan: Business Model Canvas Made Easy

Table of Contents

What’s the Business Model Canvas?

How do you get started, why use the business model canvas, when should you use the business model canvas, how do you use the canvas to facilitate alignment and focus, step 1 (of 10): customer segments, step 2 (of 10): value propositions, step 3 (of 10): channels, step 4 (of 10): customer relationships, step 5 (of 10): revenue streams, step 6 (of 10): key activities, step 7 (of 10): key resources, step 8 (of 10): key partnerships, step 9 (of 10): cost structure, step 10 (of 10): applications, analysis & next steps, example a: enable quiz (startup), example b: hvac in a hurry (enterprise), using the google doc’s/powerpoint template.

If you’re already familiar, you can skip to the next section, ‘ How do I get started ?’.

The Business Model Canvas (BMC) gives you the structure of a business plan without the overhead and the improvisation of a ‘back of the napkin’ sketch without  the fuzziness (and coffee rings).

Together these elements provide a pretty coherent view of a business’ key drivers–

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

The Canvas is popular with entrepreneurs and intrapreneurs for business model innovation. Fundamentally, it delivers three things:

• Focus : Stripping away the 40+ pages of ‘stuff’ in a traditional business plan, I’ve seen users of the BMC improve their clarify and focus on what’s driving the business (and what’s non-core and getting in the way).
• Flexibility : It’s easier to facilitate alignment by tweaking the model and trying things (from a planning perspective) with something that’s sitting on a single page.
• Transparency: Your team will have a much easier time understanding your business model and be much more likely to buy in to your vision when it’s laid out on a single page.

The first time you engage with the canvas, I recommend printing it out or projecting it on a whiteboard and going to town (see below for a PDF). However, if you’re ready to put together something a little more formal (for distribution, presentation, etc.) here’s a Google App’s template you can copy or download as MSFT PowerPoint:

*Omnigraffle a popular diagramming program for the Mac. It has a fairly easy to use layering environment which you may find handy as you want to tinker with and produce different views of the canvas. You can try Omnigraffle for free (the basic paid version is $99).

The short answer is this: because it’s simple yet focused and that means more of your audience is likely to pay attention to it. Also, it’s highly amenable to change on the margins.

This matters a lot- more than most people think. A company that wants to innovate has to be ready to be wrong . A good VC in early stage investments succeeds with a prevalence of something like a 1/10. If you think you’re doing a lot better than that with substantial new innovation investments (a startup or a new line of business inside an enterprise) you’re probably throwing good money after bad.

Transparency, simplicity, and focus are great facilitators of the ‘creative destruction’ a good innovation program needs, and the Canvas does a nice job of delivering that across lines of business. For a large corporation with multiple lines of business at various levels of maturity, I actually prefer the Corporate Innovation Canvas as a starting point. However, from there, the Business Model Canvas does an excellent job of bringing clarity to the questions of how, for example, a given line of business creates focus and then implements it in an innovation-friendly way with, for example, ‘objectives and key results’ OKR’s . It’s a central element in the ‘innovation stack’ where an enterprise is able to go from priority innovation areas (with the Corporate Innovation Canvas) to testable business model designs (with the Business Model Canvas) to product charters (with an agile team charter ) to individual learning pathways to cultivate the talent they need to execute.

Even more important than the top down cascading of objectives with testable results and KPI’s is the improvement in the feedback in outcomes that helps the overall innovation program learn and adapt quickly. With layer appropriate innovation metrics, it’s much easier for the achievements of individuals to cohere (or not) to the job of teams and in turn from there to lines of business back up to corporate objectives. This helps both help the company’s talent understand where they might benefit from more practice and learning as well as what constitutes success in their individual roles and collaborations.

Anytime you want to have a focused discussion about what matters to a given line of business, the Business Model Canvas is a good place to start. The Canvas has received a lot of attention as a tool for startup entrepreneurship. While this may be one of the ‘sexier’ and more ostensibly simple applications of the Canvas, I actually think it’s one of the least compelling. For a startup, the only thing that matters is product/market fit, which the Canvas represents as a set of relationships between Customer Segments and Value Propositions. The Canvas doesn’t do a bad job of describing this, but it’s kind of overkill- the whole left side of the Canvas which describes the delivery infrastructure is mostly irrelevant for startups that are still finding product market fit, since all that’s provisional about where (and whether) they arrive at product/market fit.

Where the Canvas really shines is describing an existing line of business to answer questions like: a) What does product/market fit mean for this business? b) Where have we focused our company building and is it still relevant to ‘a’? c) What are our key revenue, cost, and profit drivers, and how do we improve those?

Now we’re taking! Whether you’re an ‘intrapreneur’ exploring a new extension to the business or a ‘digital transformation’/IT consultant trying to facilitate a discussion about what ‘strategic IT’ means and how you’ll know if you achieve it, the Canvas is a quick and productive place to anchor such a discussion.

First and foremost, I’d try it out for yourself. Fill out the elements the business you’re working on and then ask yourself ‘Does this make sense?’ ‘What are the most important linkages and components of the model?’

From there, you may just want to use the Canvas you sketch to facilitate alignment on some other topic. However, if you’re working with a team on a new venture or with a client on a new project, you may then want to take it from the top and facilitate a workshop where you facilitate a fresh take on the Canvas, levering your experience thinking through it once. The link below will take you to a related curriculum item that has workshop slides, prep. items, and agenda.

LINK TO WORKSHOP PAGE

Otherwise, the next sections (10 steps) offer a tutorial on how to think through a business model design with the Canvas. The closing sections offer notes on how to use the Google Doc’s/PowerPoint and Omnigraffle templates.

Output : a list of Personas, organized by Customer Segment if you have more than one segment. I recommend trying to prioritize them- Who would you pitch first if you could only pitch one? Who next? And so forth…

Notes : If you’re spending a lot of time on this first item, that’s OK (and it’s probably good). The Canvas is a tool, not a strategy and not all the nine blocks are equal. The pairing of Customer Segments and Value Propositions is really the ‘independent variable’ that should be driving everything else in your business model. When I use the Canvas in my Venture Design classes, we usually spend all of the first session (plus time for field research) on Customer Segments and Value Propositions.

For example, at Leonid, an enterprise software company I founded, we thought our largest customers worked with us because of the cost savings we offered and our knowledge about best practices. It turned out that was mostly wrong- reducing their time and risk to get new services to market was the most important. It’s not that the other things weren’t important, but they weren’t the top Value Proposition. That made a difference on how we sold the product and how we focused on operationalizing it for customers.

This mapping says ‘We have 3 personas. Persona 1 cares about VP 1 & 2. Persona 2 cares about VP 2; Persona 3 cares about VP3. (One segment only so segments not noted)’.

Output : a prioritized list of Value Propositions and linkages from each Personas to the VP’s relevant to them.

Notes: Again, this pairing is the key driver for most business models and if you want more on how to describe and discovery what to put in this part of the canvas, I recommend this: Tutorial- Personas .

Maybe you feel like you’re in good shape on understanding the customer’s world but you don’t have any validation on whether the Value Propositions are clicking because this is a new venture? If you’re not sure, that’s OK and good for you for acknowledging the uncertainty! It’s the responsible thing to do. The key is to write down those assumptions, prioritize them, and figure out the quickest and cheapest way to prove or disprove them. That’s what Lean/Startup is about and there are resources here to help you with that, if you’d like- Tutorial: Lean Startup .

Channels includes entities you use to communicate your proposition to your segments, as well as entities through which you sell product and later service customers (see AIDAOR journey below). For example, if you sell bulbs for light houses and there’s a website all light house attendants purchase equipment, that site is a sales Channel. If you use Google AdWords, that’s a Channel, too (for getting attention). If you use a third party company to service the bulbs when they break, that’s also a Channel.

Output : a list of important Channels, linked to Personas or Segments if they differ substantially. Make notes on what steps are relevant for each- promotion, sales, service, etc. See Note this section for more structure on this.

Notes: Channels and the next item, Customer Relationships, define your interface with the Customer. It’s important to think all the way through the customer ‘journey’ in specific terms. For most businesses, the way they get a customer’s attention is different than the way they onboard them or support them over the long term. For this, I recommend the AIDA.OR framework (attention-interest-desire-action-onboarding-retention) and storyboarding your way through it. Here’s a post explaining all that- Storyboarding AIDA(OR) . If you don’t want to do the storyboards, I recommend at least making notes about your customer journey through the AIDA(OR) steps.

Another consideration is whether your channels will give you enough visibility into the user, including, for example, a way to follow up with users. Not sure? Document your assumptions Lean Startup style and figure out how you’ll quickly prove or disprove them.

Output : a description of Customer Relationships, with notes if they differ across Customers (between Segments or among Personas within a Segment) or across the customer journey.

Notes: If you’re a startup, be sure to document and review critical assumptions here. Also, the focal items are in a kind of specific order- you should validate your Segments and their relationship to the Propositions above all else. If this means you provide personal support in the early days (a ‘concierge test’ in Lean Startup terms) to do discovery and validation of Segments and Propositions, that’s OK. You can subsequently test the Customer Relationship models. (Here’s a post on using consulting as a concierge vehicle in B2B if you want more detail: Consulting as B2B Concierge Vehicle ).

Notes : If you have a startup or are re-engineering the business, this is a time to look at where you’re driving revenue and whether it aligns with the rest of your focal points. Are you charging on value? Perceived value? They say everyone loves their banker; hates their lawyer. Why is that? Is there an actionable analog in your business?

For a product-driven business, this probably includes ongoing learning about users and new techniques to build better product. If you’re focused on doing a bunch of things for a particular set of customers (ex: comprehensive IT for law offices), this probably includes maintaining superior expertise on the segment(s) and creating or acquiring products and services that are a good fit, whatever that entails. For an infrastructure business (ex: electric utility), it probably includes keeping the infrastructure working reliably and making it more efficient.

Outputs : a list of Key Activities linked to your business’ Value Propositions.

Notes : One question this analysis should raise for you is whether or not certain Activities and Resources are actually core, actually focal to your business, something you’ll want to think through .

Outputs : a list of Key Resources linked to your business’ Key Activities.

Notes : Product-driven businesses have a differentiated product of some sort. Rovio, the company that makes the popular app Angry Birds, is such a company. Key Resources in product-driven businesses are typically key talent in critical areas of expertise and accumulated intellectual property related to their offering.

Scope-driven businesses create some synergy around a particular Customer Segment. For example, if you started a business that would take care of all the IT needs for law firms, that would be a scope-driven business. These businesses typically have key knowledge about their segment, a repeatable set of processes, and sometimes infrastructure, like service centers.

Infrastructure-driven businesses achieve economies of scale in a specific, highly repeatable area. Telecommunications is traditionally an infrastructure business. Retailers focused on retail, like Walgreens or Costco, are primarily infrastructure-driven businesses. The Key Resources for this type of business are, you guessed it, various types of physical or virtual infrastructure.

Let’s take a single product category: diapers. The Honest Company or another innovating around compostable or otherwise more environmentally friendly diapers would be a product-driven take on the category. Procter & Gamble which has a cradle-to-grave strategy for providing consumer products is a scope-based take; so are various baby-focused retailers. Kimberly-Clark (wood pulp) or DuPont (chemicals and polymers) are both infrastructure-based takes: diapers is just another way to sell something they produce at scale with relatively little differentiation.

If there are major cost components that don’t map to a Key Activity, I’d take a closer look at those costs.

Output : a list of Cost Structure elements with notes on their relationship to Key Activities.

Congratulations- you have a working canvas! The section below offers a few analytical ideas and suggestions for next steps.

Core Applications The most core and obvious applications of the Canvas are to ask: – Does it make sense? – Could it be better? – Does the rest of my team understand and agree? Have additional ideas? – (rinse and repeat at least quarterly)

Competitiveness The canvas does a good job of helping you figure out your business, which is a good place to start. You also want to look at the competitive environment and think about if and how you have/maintain a long term competitive advantage.

For this, I like Michael Porter’s Five Forces framework ( Wikipedia Page ; see also Chapter 2 of ‘ Starting a Tech Business ‘). Try walking through the Five Forces for your company and then bounce back to your canvas. How does it all hang together?

Next Steps Every business is a work in progress (sorry, I try to avoid saying things like that but it seemed to fit here). As you go through the canvas, you may encounter areas that give you trouble. The table below summarizes a few of the most common that I see in my work as a mentor and coach:

Want to make innovation an everyday thing?

What is Enable Quiz?

Enable Quiz is a (fictional) startup that’s building a lightweight quizzing application for companies that hire a lot of technical talent (engineers). Their take is:

For hiring managers who need to evaluate technical talent, Enable Quiz is a talent assessment system that allows for quick and easy assessment of topical understanding in key engineering topics. Unlike formal certifications or ad hoc questions, our product allows for lightweight but consistent assessments of technical talent.

Why and how would Enable Quiz use the Business Model Canvas?

They have a small team, but arriving at a clear, shared understanding of what they’re after is still important. That said, it’s important that the way they talk about this is both highly visible and amenable to change. Given that, the Canvas is a good fit.

The Business Model Canvas at Enable Quiz

This page shows Enable Quiz’s current working view of product/market fit:

What is HVAC in a Hurry?

HVAC in a Hurry is a mid-sized enterprise that services commercial HVAC (heating, ventilation, and air conditioning) systems. Their take on the business is:

For facilities managers & business owners who need their heating & cooling systems managed and repaired, HVAC in a Hurry is a full service provider that allows for easy and responsible management of a business’ HVAC systems. Unlike smaller firms, our commitment to best practices and training allows customers to worry less and realize superior total cost of ownership for their HVAC systems.

Why and how would HVAC in a Hurry use the Business Model Canvas?

HVAC in a Hurry has a working version of product/market fit. However, their industry is competitive and successful firms increasingly use technology to improve customer experience (CX) and reduce cost (overhead) in their operations. HVAC in a Hurry has a small ‘digital transformation’ team that’s working on digital applications to improve the company’s performance. This team decided to use the Canvas to ‘manage upwards’ in order to facilitate better discussions about where they should focus, how that aligns with the business as a whole, and what success definition makes sense for them.

The Business Model Canvas at HVAC in a Hurry

Here’s their current view of product/market fit:

If you’re not familiar with it, Google Doc’s is a web-based office suite, similar to MS Office. If you have a gmail account, you can access it (no guarantees- that was the case last time I checked).

First, you’ll want to link to the template file: BUSINESS MODEL CANVAS TEMPLATE IN GOOGLE DOC’S .

Once you’re accessed the file, you can make make it your own by going to the File menu and either ‘Make a copy…’, creating a copy in your own Google App’s domain or you can use the ‘Download as…’ option to download it as PowerPoint (and a few other formats).

What’s your experience with the Canvas? How have you used it? What worked? What didn’t? Please consider posting a comment!

Copyright © 2022 Alex Cowan · All rights reserved.

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The 15 Minute Business Plan: Business Model Canvas for Validating Your Startup Idea Fast

If you have ever thought of starting a new business or working on a tech startup idea , then you must definitely have come up with some sort of a plan.

At least in your mind, you may be thinking of a way to execute your idea and achieve the goal you are looking for from your business.

But how should you plan and how much should you plan? After all, with so much uncertainty and ambiguity what if your plan really doesn’t materialize?

Don’t worry, we are here to help you.

If you are brainstorming about the key aspects of your business and don’t know where to begin or if you are an existing manager who needs a better view of your current business, then you must read this article.

Instead of coming up with a 500 page document, articulating each and every aspect of your business plan, there is a wonderful standard template that applies wonderfully to all different kinds of businesses.

Be it an online business like blogging or ecommerce, or a manufacturing based business, retail or aviation, all types of businesses can use the elegant ‘Business Model Canvas’.

A Business Model Canvas will not only save you the time or hassle of complicated planning, but also provide you a brilliant single page look of your business that you can then use to analyse various aspects of it.

But what is Business Model Canvas?

Let’s dive straight in.

What’s the Business Model Canvas?

“ A Business Model Canvas is a tool used to visualize all the building blocks when you want to start a business, including customers, route to market, value proposition and finance. “ – eship.ox.ac.uk

In fact, a Business Model Canvas divides all the key activities, internal processes and stakeholders of a business into 9 building blocks , each representing an important area or aspect of business.

Following are the nine building blocks and the key questions they answer.

• Customer Segments : Who are the key customers of your business? And what are their key characteristics and needs?
• Value Propositions: Why do customers buy your product or service? What is the key benefit that your business offers?
• Channels : How are these benefits communicated to your customers and how is the product or service sold or delivered and why?
• Customer Relationships : What are the key touch points between you and your customers? And how do you connect with them throughout their journey?
• Revenue Streams: How does business actually earn money from various value propositions?
• Key Activities: What are the key things that your business strategically does to deliver this proposition?
• Key resources : What are the assets that business requires in order to stay competitive and create value?
• Key Partnerships: What are the external entities or stakeholders that are key to delivering the product and service to your customer? What are some of the partners to whom you have outsourced certain activities to focus more on your core work?
• Cost Drivers: What are the major cost drivers for your business and how are they linked to your revenue?

Here is an example of a simple Business Model Canvas for an ice cream vendor.

These 9 blocks are essential in order to create, capture and deliver value to your customers and affect each other in various ways.

In fact, a change in one of these building blocks may affect other areas and thus looking at them together will give you a sense of what happens in one area if you change another.

For example, say you are in an ecommerce business selling physical products. Today you manufacture your products yourself, but considering the scale you want to achieve you want to outsource manufacturing to an external vendor.

This may affect your key partnerships, cost structure, key resources and key activities. You can then clearly visualize all the changes that such a decision would require.

Well, this gives you a basic idea of what a Business Model Canvas is and its basic template.

But why should you really use a Business Model Canvas and not some other method? And how will it fit in what you want to do?

Why You Should Use the Business Model Canvas. And Not a Business Plan.

A business plan is like a blueprint of the business with detailed business models and financial projections, typically running into hundreds of pages.

On the other hand a Business Model Canvas is like a single page template with 9 building blocks that are key to delivering value to your customers.

So which one should you use and why?

If you are just starting a business or have started one already and are in a growth phase or an environment that is dynamic, we would recommend using a Business Model Canvas and not a business plan .

In fact, today Business Model Canvas is being used for a variety of reasons. And almost 36% of people who use it, do it for an entirely new business.

Here are a few reasons why using a business model makes better sense than using a business plan.

1. Business Model Canvas is Built for Handling Change

A Business Model Canvas represents all the key aspects of your business in a very simple fashion on a one page model.

If there is any change that happens in any one part of the model then you can easily visualize the trickling effect and understand what other blocks will be affected.

This way you can easily change and adjust everything in one place . This is important because when you are starting out or working on a new problem in your existing business, there is great deal of uncertainty.

Modern day business work in an iterative manner. That is, they start with certain assumptions and then as things become clearer they keep on adjusting according to the changing environment.

A business plan on the other hand requires you to put in a lot of work upfront and come up with projections that may or may not turn out to be true.

Adjusting the whole business plan is also tough as various parts are present in different sections of a lengthy document. It is also possible that you may miss out on understanding how a change in part affects the other.

2. Business Model Canvas is a Simple and Commonly Understood and Proven Template

Do you know, companies like Microsoft and Mastercard actually use Business Model Canvas.

Not only that it has proved to be an important tool for startups as well.

The key point here is that this template is not only simple but also well understood by a lot of people hence it facilitates great discussion .

If you want to discuss some key points to strategize or propose some business model to your colleagues then it surely makes a lot of sense to use the Business Model Canvas.

The issue with a 400+ page document is that you tend to lose focus in skimming through such a heavy file.

And also, there are so many different templates of business plans available and some sections of those may not really make sense for your business.

On the contrary, all the 9 blocks of a Business Model Canvas are inherent and applicable to almost all business models.

This leads to much better collaboration and understanding, better teamwork and a structured conversation.

In fact, according to a research , with a score of 3.5/4 better strategizing and sharing a common language were the top two areas that people believed following a Business Model Canvas helped them in.

3. Business Model Canvas Reduces Risk of Failure

When you look at all aspects of your business in a structured manner in a single page template, you are much better able to understand the bonds or pillars that keep your business stable.

Running a successful business involves both strategic planning and efficient implementation.

In order for both these to work, different departments, areas, resources and customers have to be considered and a balance has to be created.

To avoid the risks of failure, it makes a lot of sense to have a robust Business Model Canvas.

For example, consider that you want to shift your business from offline to online in light of the recent pandemic and your long term vision.

Just cataloging your products and building a website will not make your existing and new customers come to your business.

You may have to revisit your customer segments who now have to be digitally savvy and your channels. Your touch points with your customer or the Customer Relationship block will also evolve.

Since, you can see all these aspects you are now better prepared to execute the plan and make sure that all necessary factors are taken care of while evolving your model.

Now, that you understand the importance and usage of a Business Model Canvas, you need to understand how to really create a Business Model Canvas, and how each of the 9 building blocks can be thought of and filled for best results.

It is important to give careful thought to each of these. Don’t worry we will help you out.

Proceed to the next section of the article.

Practical Business Model Canvas Walk-through

Step 1: customer segments.

Arguably, the most important stakeholders for your business are your customers.

Irrespective of whether you start an online business to earn money , or a business with a physical presence, knowing your customers comes first.

And rightly so, the process of building your Business Model Canvas begins with identifying your customers.

The first step in this exercise is dividing your prospective customers into groups with similar features known as segments .

This is necessary because different groups or segments may have very different needs and hence the product/service that would be most relevant for them may be very different.

Not just for the design of the product or service, but segments are also important when you plan about your marketing communication.

For example, say someone who buys your product in small packs very often may be targeted differently than someone who buys high volumes of your product infrequently.

So, how to go about segmentation.

Deciding between B2C or B2B model

You have to first identify, whether you are going to be in the Business to Business (B2B) or a Business to Consumer (B2C) model .

Typically in a B2B business your customers are other businesses, while in B2C your customers are individual consumers .

The behavior and characteristics of these two types of customers are very different.

B2B customers follow a much more stringent and rational approach towards buying than individual customers and B2B buying is almost never based on impulse.

There are usually clear requirements regarding what a B2B customer is looking for in the product.

On the other hand, a B2C business is mostly driven by brand awareness and the decision making cycle for buying is also much shorter.

In terms of the number of buyers, you may be able to run a very profitable business with a handful of customers in B2B, but you will require a larger base when it comes to B2C.

If you are already an expert in a particular field or have come up with a SaaS product that enterprise can use, you can be in B2B, but if you want to play on brand awareness and individual engagement, then B2C may be a fit for you.

The segmentation strategy will differ according to whether you are in B2B or B2C business. To segment your prospective customers you will need something called a segmentation variable.

Segmentation variables are the basis on which you will divide your customers.

Choosing a Customer Segmentation Variable

Broadly, there are two ways in which you can divide your audience.

Demographics

Psychographics

The number and characteristics of people who live in a particular area or form a particular group, especially in relation to their age, how much money they have and what they spend it on. – Definition of Demographics by Cambridge University

Demographics will help you understand the basic features or characteristics of your customers and are typically easy to understand and collect.

For example, you can source demographic data from the US Census Bureau and the Pew Research .

Alternatively, you can collect this data through primary research, surveys and questionnaires by asking your customers to fill up forms .

If you are in an online business and want to improve your SEO or find out what are the demographics of users who are searching for relevant keywords, we recommend a tool called Demographics.io .

For example, say you own a website that publishes content related to writing blogs. A search for the keyword ‘blog’ on this site tells you that around 27% of people searching for this keyword are between the age group 25-34 and more than 54% are females.

For a B2B business your segments may be something like Industry type, turnover, geography, number of employees etc.

While demographics are an important indicator of some things, for a deeper understanding of your customers you would need a more nuanced understanding of their motivations and behavior.

Market research or statistics classifying population groups according to psychological variables (such as attitudes, values, or fears) – Definition of Psychographics by Merriam-Webster

Here are some of the questions that psychographics can answer for you.

• How do your customers spend most of their time?
• What do they do on weekends?
• What are their hobbies and interests?
• What are their religious inclinations?
• Are they heavy users or light users of your products?

Psychographics are extremely important in order to add value to your customers.

For instance, the same product or service may mean different things for different people and the motivations behind using them may vary.

For example, some people may eat healthy food in order to feel energetic throughout the day, others may be doing it to support their gym routine while some others may just want glowing skin.

Understanding your customers this way will not only help you tailor your products or service according to their specific needs but also help you to create your communication in a way that is the most effective.

Now after this exercise you need to understand your target segments.

Choosing your target customer segments

Two extremely important things that would determine whether you earn money from your customers or not are:

• Ability to pay
• Willingness to pay

Ability to pay depends on the income of individuals or businesses that you want to engage with and can be more or less determined from the demographics data.

On the other hand willingness to pay can be estimated on the basis of the psychographics and whether your product or service has a major value add for the lives of your customers.

Some other factors to consider are:

• High audience revenue potential : The market size for your chosen segment should be high.
• Expected growth rate over time: The growth rate of usage and market over time.
• Customer loyalty: The current loyalty levels of customers to available products.
• Attainable Market Share: What amount of market share is achievable for you?
• Market Profitability: Is there enough margin that you can obtain from customers that justifies your cost and goals?

In a nutshell, you would ideally want to be in a market that has substantial demand, which is expected to grow and you can make the existing customers switch to your product because you serve their needs better, at the same time earning profit.

One important thing to understand is that it is possible that you target different segments, this is especially true if you operate a multi sided platform .

For example, say you own a marketplace platform where you earn through your customers by charging them a subscription fee and charge a fixed price from your sellers for advertisements.

Here both end consumers and sellers become your customer. In order for the platform to succeed, you would need to pay close attention to both these stakeholders.

We would recommend, if you are just starting out, to keep your focus on one particular segment.

For instance, say you want to start a blogging business and are deciding on the niche , it is always better to cater to particular segments. This will increase your chances to earn money and your customers are more likely to draw value and become loyal.

Possibly you would be certain about your target customer segments by now, so you can fill out these details clearly in your Business Model Canvas.

For instance, say you are opening a romantic restaurant targeted at young couples and the theme of the restaurant is adventure and will be situated in California, then your target segment could be…

“Young men and women aged between 25-40, who reside in California and are fond of adventure”.

Step 2: Value Propositions

A value proposition is like a simple statement of benefits that your target customers get from your products or services.

This is extremely important because your customers use your products or service depending on how strong your value proposition is.

If you are starting a new business then this becomes even more important because you would want your customers to switch from your competitors to you.

Only if you meet their needs better and they find more value in what they pay you than your competitors will they think about switching.

So, how do you begin?

Understand Customer Problems and Competition

First thing is to understand the problems faced by your customers .

The idea is to answer and resolve the most pressing issues faced by your customers effectively.

Once you narrow down on the key problems and needs of the customer, study your competition to understand what needs or problems they are solving well and where the gap lies.

For example, say you are starting an ecommerce business and want to sell physical products like portable bluetooth speakers.

One great place to understand the demands of your customers and the performance of your competitors is Amazon.com .

You could develop a good understanding of your competition from the reviews section.

In the image, you can clearly see where your prospective competition is good and where customers expect better.

The number of reviews also give you an indication of how much demand already exists for the product.

In fact, it can provide you information on a lot of categories all the way from electronics to baby care and from automotive parts to groceries.

All you have to do is search for the product you want to research on and study the results.

Here is the list of top product categories on Amazon.com.

Another way to research demand and competition is through keywords .

Estimating Consumer Demand and Competition Through Keywords

The internet today gives you a lot of information about what people are searching.

Do you know, around 48% of online shoppers begin their online journeys through search.

Thus, understanding what keywords are being searched for the most and the competition for advertisements and seo for those keywords is a great first step to estimate demand.

One tool we recommend is SEMRush.com . 

This tool not only gives you an idea of the total volume of search, but also of how much competition exists for the keyword.

For instance, searching for the keyword ‘bluetooth speakers’ clearly gives the exact volume of search.

The ‘keyword difficulty’ and ‘Com.’ metrics tell you how difficult it would be for you to rank in the first page of Google search if you are new to business.

In our case keyword difficulty level is 92% which is on the higher side.

Now that you know the key questions your customers are asking and what is required in order to beat the competition, next is to decide how you are going to differentiate yourself.

Building a Strategy to Make Your Customer Switch to Your Product/Service

To make the customers switch to your products you can choose one of the four quadrants from the above matrix.

A narrow focus means that you concentrate on a particular segment or niche rather than a mass market.

If you are just starting out, it is better to focus on a narrow approach because you will be able to meet the needs of a particular segment better.

The other option you have to choose from is whether you want to beat your competition on price or by offering a better product .

You can make the customers switch to your product by selling the available product in the market at a lesser price. But to follow this strategy you would either need scale or a way to produce your goods and services at a lesser cost than the competitor.

Hence, we would suggest to first differentiate your product and give benefits and features that are not provided in the market by your competitors.

Writing a Value Proposition Statement

Now that you have a fair idea of what your consumer needs and how you will beat the competition.

You have to come up with clear value proposition statements .

If you are catering to multiple target customer segments, then you should have a clear and simple value proposition mapped to each of these customer segments in your Business Model Canvas.

For instance, say you start a blog that offers tips on making regular food healthy.

The typical target customer segments you have are the people who want to build muscles and stay at home moms.

Now these are two very different segments and your value proposition would be very different.

A good value proposition statement would look like this:

We help stay-at-home moms lose 14 pounds of fat in 45 days without having a jojo-effect .

We help muscle building enthusiasts reduce fat by 5 percent in 60 days without lowering energy .

Now you just have to enter these in the value proposition segment of your business model canvas.

Here is a quick checklist to validate if your value proposition is good or not.

• Are the benefits explicit and clearly stated?
• Is the target customer segment clearly identified?
• Is the value proposition clear and simple?
• Is the value proposition supported by evidence of demand?
• Is the value proposition viable in light of competition?

Step 3: Channels

The third building block of the business model canvas is ‘channels’.

Channels refer to the touch points through which the company delivers value to its customers .

The primary functions of a channel are:

• Educate the prospects regarding services and products that a company offers
• Provide an opportunity to prospects to try these services/products
• Facilitate the purchase of products or services for the customers
• Helping the customers realize and benefit from the value proposition
• Providing the after sales services for the clients

But how do you go about planning your channels and what are the factors to be considered. Don’t worry we have you covered.

First let us classify the channels to be decided.

Broadly we can divide the channels into two types:

• Acquisition Channels : These are the channels that help you acquire your customers and bring to the point of sale.
• Delivery Channels : These are channels through which the product or service is actually delivered to your customers

Let us see how to go about deciding each of these.

Acquisition Channels

Your acquisition channels help you generate more leads that eventually become paying customers.

This part consists of deciding how you will advertise and communicate about your products to the customers and guide them into buying your products .

You can choose to advertise on billboards, television, radio and other physical areas to make a large number of people aware about your offering. However, these channels help you reach a large audience but are also extremely expensive.

Today the internet offers you various avenues where you can get these leads in a very cost effective manner.

If you want to make money online and are in a digital business, it makes even more sense to try digital channels for advertising and generating leads.

Your methods of traffic acquisition could be either organic , which means natural growth and acquisition of your customers without paying. Or inorganic , which includes paid media and channels online.

The main way to acquire traffic online in an organic manner is through SEO .

Search engine optimization or SEO involves making your content search friendly and relevant so as to feature in the top results when someone searches for a product/service you offer.

With most online journeys beginning with search, SEO is the one of most effective ways for long term victory online.

Only downside is that it may take a while before you build your SEO to promising levels.

The next option you have is to advertise on social media channels like Facebook , Instagram, Youtube, Pinterest etc.

The great advantage that these channels offer is that they have sophisticated ways to target customers and you can customize who you want to target based on a variety of factors like demographics, geography and interests.

But how to decide between these channels?

First you have to make sure that the kind of traffic or leads you are looking for are actually logging into these sides.

For instance, if you are in a B2B business then advertising on LinkedIn would be more relevant, given that most decision makers from corporates actually spend time on it or have their profiles there.

While for B2C other channels may make more sense.

It is best to start with multiple channels and then invest more money into the ones which give you better results .

For example, say you invest $50 each on Facebook and Youtube. From Youtube you get 100 leads but only 20 from Facebook.

20 of the 100 leads from Youtube become paying customers and only 5 from Facebook eventually purchase.

Clearly Youtube is offering you better return on investment. Hence it makes sense to pump in more dollars into this channel.

Distribution Channels

Next comes distribution channels. These channels enable the delivery of goods or services to a customer.

For example, if you are in a business of selling clothes. Then how do these clothes reach the end customers? Is it through a retail outlet, or can they purchase online?

All these questions are answered by what channels you choose to distribute your products.

Broadly speaking there are two different types of channels:

• Direct Channels
• Indirect Channels

Direct channels are those wherein you as a company directly interact and sell to your end consumers.

For example, say you own a website which sells physical products. Your customers ‘directly’ purchase from you online.

Similarly, if you own the brick and mortar retail stores where your customers come and get your products then also you are directly interacting with your consumers.

On the other hand if you sell to some middlemen and they in turn reach your consumers then it counts as an indirect channel.

While you have more control over your margins in a direct channel approach, indirect channels usually offer less margins.

But the flip side is that indirect channels usually buy in bulk and hence are good for volumes.

To choose a particular channel you should consider these factors.

• Number of consumer segments and types of market you are targeting : You want to be selling at a place where your target customers are most likely to visit. For instance, notice how Coke and Pepsi sell their soft drinks at fast food outlets like McDonalds or Burger King.
• Total cost for each channel: There is an associated cost for each channel that you wish to set up . For example, the cost of setting up an ecommerce website or leasing or building your own retail channel could result in higher costs than simply selling your products to a wholesaler.
• Type of product being sold and the consumer's awareness about it: If the product you are selling is fairly standard then you may need much explanation to be given to customers. But a complicated product may require the company to be in direct contact with customers to explain the offering.
• Amount of control required over experience: Channels owned directly offer more chances of making the experience in line with the brand and product, while indirect channels will offer a similar experience for you and competitor products.
• Duration of partnership: How long you intend to sell through the same customers also has a bearing on which channel you would choose. Hence, it is important to negotiate your terms in case you employ indirect distributors for your products.

Once you are sure of which channels to choose you can simply write them in the block. Make sure it is extremely convenient to find and buy your products for all your target customer segments.

Remember, the easier it is for customers to get the products, the more you will sell .

Step 4: Customer Relationships

This is an important block of the Business Model Canvas and helps you engage with customers in one or several ways .

Customer relationships block mentions all the ways in which a company chooses to maintain relationships with the customers.

Customer relationships are maintained with a primary motive of selling more to the customers while keeping the customer satisfied.

The goal of customer relationship management is to assist the customer in three stages of his journey with the company.

Customer Acquisition

Customer retention.

Your first task here is to guide a prospect to become a customer .

Typically this happens through different steps in a customer journey.

Let us see how each step in this journey may require different efforts on your part for customer relationship management.

Your customers mainly follow four broad steps before they become paying customers.

These stages are awareness , desire , interest and action .

The first step is to make your target customer segment aware about your offering. This includes letting your customers know that you have a potential solution to a problem that affects them.

Based on the type of business this may be done either in an automated or a manual way.

For instance, if you are in a B2B business you may choose to send over a sales representative or a solution expert to a customer.

Or wait for leads to show up themselves after you publish about your expertise in places like magazines or blogs where these prospective customers find you themselves.

Mostly awareness is built through advertising, SEO and word of mouth for a B2C business .

For instance, to build awareness about your offering you may choose to show a video ad to users who see a music video regarding your online music course.

While many users may become aware about your business, some of them may actually be convinced of its value or at least become curious about your product or service.

Consider that you showed an ad which generated 10,000 impressions or 10,000 users saw the ad. Now say 2,000 of them clicked and visited your website to read about your offering.

These 2,000 have now moved up the funnel by showing interest to buy the product.

At this stage, you may choose to save their email addresses for a more personalized conversation. You may even assign a sales rep to contact them if they choose to leave their details.

All these touch points become part of your customer relationship management strategy.

Now say that the person from your company who contacted the user showing interest manages to explain the value proposition you offer to around 500 of these users who now desire to buy your product.

The next step is to seal the deal with an action on the prospect’s part. The action of purchase by which they become your paying customers.

The goal of CRM (Customer Relationship Management) here is to make this journey as smooth as possible and convert the maximum number of prospects into paying customers.

There are certain goods and services that provide continuous value to customers and so customers keep buying them.

This stage deals with creating loyal customers who stick to your brand .

For instance, say you run an ecommerce website selling gifts. You realize that on an average a person buys gifts for someone at least once every two months. You would ideally want your customers to keep coming back for more orders every second month.

To do this your customer relationship program will have to make sure that you keep communicating with the users, apprising them of latest offers and products.

These are the few ways in which you can increase the chances of customer retention:

• Create a brand image that your customers associate with.
• Deliver the quality you promise.
• Always solve problems and reduce friction for your customers.
• Incentivize them for buying regularly from you with points or freebies.
• Promptly resolve all their complaints.

Your sales will increase by either getting new customers or selling more to the existing customers.

Upselling deals with making your existing customers buy more from you. You can do this by increasing their usage of the existing products or by selling different kinds of products to them.

For example, if you have an online business that helps people find relevant jobs and you charge a subscription fee for sending them relevant openings. You can add more value to them by offering resume making services and earn more for yourself as well.

In a B2B setup, your engagement manager can actively look for opportunities to sell more.

If you are an independent consultant, then you can offer more services to your customers if you have some expertise.

Maintaining Customer Relations through Touchpoints

Now that you understand the main objectives that you can accomplish with this block, you may want to know how to maintain relationships with your customers for different touch points.

There are broadly six ways of engagement:

• Personal Assistance : In this method you personally contact the customers through a human touch. These contacts may be made through call center agents or other employees.
• Dedicated Personal Assistance: For buyers who are very valuable, for example, take people with high net worth for a bank who deposit millions of dollars. A bank may have a dedicated person to maintain the relationship.
• Self Service: The ‘do it yourself’ method works great for reducing cost, but isn’t as strong as a human touch. This can be accomplished through videos explaining a process or an FAQ section on the website.
• Automated: These include all the automated methods like an IVR or a chatbot that interacts to solve problems for your customers.
• Communities: You may create communities and forums with your best customers playing a key role to solve problems for other customers. For example, there are tech groups that help all the users related to a particular technology.
• Co-creation: There are products and services where you engage with your customers to co-create services that suit them. In this method the customer actively participates in the process to add value to himself/herself. For instance, an interior designing service which actively asks customers to define their taste and be involved in the designing process.

You have to focus on the cost of each of these methods and whether the value that the customer brings to you justifies it or not.

For instance, you may not want to have a dedicated person who you pay $1,000 a month for a customer who only gives you $100 business a month.

All you have to do now is enter your chosen ways maintaining customer relations and put it in the block. Remember you should have touchpoints mapped to each of the customer segments.

So for example, if you have an SaaS (software as a service) online business wherein you charge for monthly usage of the product and have individual users as well as enterprise users.

You can map ‘automated’ service of individual users and ‘dedicated’ personnel for enterprise.

Step 5: Revenue Streams

The revenue streams block covers the various ways in which you monetize your business and earn money from your customers.

There are multiple ways of earning money. Some these are:

• Sale of Assets : You can completely transfer the goods or property for a price to a buyer. For example, a hotel chain selling one of the hotels to raise some cash.
• Usage : Payment collected for each usage of a product or service.
• Subscription: When payment is made for a repeated use of a service over a particular period. For instance, Netflix, Amazon Prime etc.
• Leasing/Renting: Renting out an asset for use for a fixed period. For example, renting an apartment for a fixed period.
• Licensing: Allowing the use of your intellectual property for usage by another company or person.
• Brokerage Fees: Acting as an intermediary between two parties and earning a commission as a result. For instance, stock brokers who earn a commission by enabling sale and purchase of equity shares.
• Advertising: Allowing your medium to be used as an advertising platform for other companies. For example, Google, Facebook and other platforms that earn money for allowing other companies to advertise on their platform.

Which method and price will work for you, depends on what kind of business you are in.

Pricing your product or service

The basic rule is that your customers pay you when the ‘perceived value’ they get from your product/service is more than what they pay.

From your perspective, you have to sell higher than the cost on an average so you earn money for yourself.

While this is the basic rule, other things to consider is the price at which competition offers similar products and the supply and demand for the kind of product/service you offer.

If your value proposition is very strong, then you can charge a higher price than your competition. Otherwise to make the customers switch you will have to keep your prices lower.

It is possible that you don’t get your pricing right the first time. You can start with some assumptions and planning, and adjust your prices as you go forward. It is important to have a learning mindset.

Here is a quick snapshot of various pricing strategies that can help you.

One you decide on the price of the service, then next is to choose one of the methods of charging.

Method of charging customers for your product/service

• Transaction Revenue : Charging for each transaction that customer does. For example, each time a user buys an item from your website you charge a fixed amount.
• Recurring Revenue : Similar to a subscription based service where the revenue is collected automatically every month (or any fixed period) depending on usage. For example, your electricity service that charges every month based on usage.

Onboarding customers to services where the charges are recurring is tougher than transactional method because the customer is worried about committing for a longer duration to a service which is new for him/her.

Hence, you see companies offering a free trial before asking the customers to pay.

This way they try to reduce the ‘cost of trial’ for the customer.

You can decide which method will work for you based on the usage of your offering. For example, if you offer a product that is used only once in a long time, then a subscription based charging may not be the best for you.

Thinking long term with pricing

Most businesses exist to earn profit. So, remember no matter what pricing method you choose it should result in a positive cash flow for your business.

It should also be sustainable and should lead to long term success of your business.

With a dynamically evolving environment, various new offerings may be released in the market and you may get new competitors from time to time. Hence, it is possible that you may have to revisit your pricing strategy from time to time.

The important thing is that you keep the customer at the core of your decisions and be extremely clear about the value that you are adding.

If your customer is also convinced of the value, then it will be easy to make them pay.

Managing multiple revenue streams

Different customer segments may contribute to your revenue in different ways.

Take the example of Microsoft, they sell licenses for softwares like Windows, Microsoft Office for individual customers and also earn from enterprises by offering bulk deals or enterprise services through cloud.

You should be aware about what percentage of revenue is contributed by which customer segment, basis the value proposition.

For example, if you are in an ecommerce business, you may have a corporate gifting option specifically for office going people which contributes 10% of revenue .

This is important for you to understand which part of business contributes the most amount of cash for you.

Step 6: Key Activities

This block consists of all the activities that are key to delivering your value proposition to your customers .

The span of control and how you handle the key activities will vary depending on what kind of business you are in.

Some parts of your activities may be outsourced while some may be controlled internally.

To understand the key activities carried out by your business you should focus on the value chain of your business.

Following are the key activities and how to decide if they are key to your competitive advantage. While these activities may differ depending on your business model, the basic flow and idea will remain similar.

Let’s dive.

Research and Development

The value of R&D is particularly high in technology based companies and big companies spend billions of dollars on it.

Here are the top 10 spenders on R&D (values in million dollars)

Nevertheless, to stay relevant and innovative you always need to research and improve your products.

There are three basic things for which you will use R&D.

• New Product Development : For growth, one of the ways to increase revenue is by offering more products in the market. Imagine a company like Apple, which first came up with iPods, then iPhones and iPads, and then Airpods. With each of these products it was able to grow its revenues multifold.
• Modifications to Existing Product: With the needs of the users changing and improvement in other areas you may choose to make modifications to your existing product. The goal of this exercise may be to reduce cost, earn more revenue, stay relevant or a combination of these factors. For instance, Android comes up with a new version of their operating system with added functionalities and increased efficiencies.
• Radical Innovation: Radical innovation gives you an opportunity to completely disrupt the current ways of working. This innovation may be to develop a product or a process that completely changes the status quo.

Though the chances of success are less in this scenario the gains may be very high. Consider how Uber and Airbnb changed the world, or the invention of smartphones revolutionized the mobile phone industry. If you manage to get a patent, then you can monetize it even better.

This part deals with manufacturing or procuring the end product that your customers may use.

There are three basic models that you can use:

• Producing everything in house: You may choose to produce everything in your factories or facilities by procuring raw materials. The benefit here is that you are able to control the quality of your product extremely well and if you have some specialized technology this can become your competitive edge. The downside is that it is usually very capital intensive and scaling your business may also be difficult using this approach.
• Outsourcing production: The next option you have is to completely outsource production and procure the end product through manufacturing partners. This reduces your overheads, allows you to scale quickly while also covering your risks. The only reason to not follow this approach is when you have some proprietary technology you don’t want to share or when the product is so different that it is difficult to find manufacturing partners.
• Outsourcing a part of the production process: You can also follow a mixed approach where you can outsource a part of the production process. In this case you procure some part of the product and then process it to make the final product. For example, say you manufacture smartphones. You can procure all the parts from outside and just assemble them in house.

This part of the activity will also include handling logistics and inventory.

Logistics include all the transportation including bringing in the raw materials to your facilities, moving the unfinished products between factories (if required), moving the finished products to inventory and then finally delivering to the end customer.

Inventory includes the storage of your products in warehouses that is needed to fulfil demand of the customers. You will have to estimate demand and then plan your inventory to avoid stock outs.

Remember, managing inventory is essential as it is a major cost and you may want to minimize wastage while also maximizing sales.

Sales and Marketing

The key activities that will be performed by this function range from designing the strategy to enabling the last mile fulfillment.

• Strategy : This includes the overall planning for what the company is trying to achieve from the marketing perspective and how it will go about doing it. For instance, say you are targeting a million dollars in revenue in a year, then the strategy would include everything from what products you will sell, how it will be advertised and so on.
• Product Development: The marketing team works together with R&D or product development team to validate consumer demand for the new products being developed and help them design features that are most relevant to customers.
• Communications and Advertising : All the communication to the customers and messaging about the company and product offerings are controlled by marketing. This includes the events that will be arranged for activations of products like exhibitions etc.
• After Sales Support: These set of activities include helping your customers in the post purchase journey. Your customer support departments, automated chatbots and other ways in which you help your customers maximize the value from products they have bought and solve the required problems are covered here.

These sets of activities are just indicative. It is possible that some of them may not be relevant to your business model.

For example, if you are in a blogging business then production may not apply to you like a manufacturing process. Instead it would mean the development of content, which again you can choose to do by yourself or by hiring external help.

Similarly if you are in an ecommerce retail business then you may or may not own inventory depending on your model. In that scenario, partner management would become your key activity.

Step 7: Key Resources

This building block comprises the assets that help you unlock and create value for your customers. Key resources deal with the operational aspects of your business and are responsible for bringing the value proposition to life for your customers.

There are various kinds of key resources that act as enablers for your business.

These key resources should be well differentiated from your customers in order to be better than them

Types of Key Resources

Broadly there are four different kinds of key resources.

Physical Resources

Physical resources, like equipment, machinery, buildings etc, are tangible resources which are used to create the products and services for the customers.

While these may not be extremely vital for an online business, they have great importance when it comes to businesses which have to deal with the physical world.

For example, Amazon will need to have large warehouses, where the products are sorted and stored. Similarly, a giant like Apple would need labs to experiment on its devices and manufacturing facilities to deliver value.

A telecom company would need towers, switching centers and servers to ensure continuity of services. A cloud company like Oracle will need data centers to meet the demands of the customers.

Depending on the type of industry, these assets may comprise a large portion of the capital required for setting up business.

Intellectual Resources

Intellectual resources are powerful intangible tools that enable a company to maintain its edge over competitors.

Do you know, Coke has a secret formula for producing the syrup that eventually translates into the beverage. Similarly, Google has its proprietary page rank algorithm that retrieves the most relevant search results for you.

In the world of pharmaceuticals, this is even more important when producing medicines which have been patented.

Another intellectual resource that an online business has is the data that it collects over a period of time. With analytics and machine learning uncovering insights and patterns, data can unlock great opportunities. This also includes the customer lists or emails that you collect over a period of time.

In fact, intellectual resources are a great way to get a competitive advantage . No wonder the number of patents granted in the US is increasing year on year.

Human Resources

Employees are the key enablers of value in an organization. In fact, hardly any company can run successfully without its employees.

Imagine, would the big machines in so many industries function without any operators or maintenance staff? Would Dominos be able to deliver pizzas without delivery guys?

In service industries the role of employees is even more profound. The quality of work delivered by consulting organizations like McKinsey, BCG, Bain or the Big4 is highly dependent on the quality of consultants they have (no wonder they hire the best of people).

Hence, this block should include the key human resources that are important to your business.

In online business, content creators or people who write code for you are very important. Google may not have been the giant that it is, if it did not have expert coders.

This will also give you an idea of what kind of hiring your business would need to deliver the key products.

Financial Resources

Financial resources include the capital , the sources of debt (or line of credit) and the stock owned by a company. The requirement of this kind of resource will vary depending on the kind of business that you choose to do.

For example, the capital requirements of a bank may be completely different from that of a business that makes money through online sale of educational courses.

If you are just starting a business, you may choose to raise funds from friends and family in the beginning. Once it gets established you may turn to investors and venture capitalists.

If your business has massive requirements of advertising or needs rapid expansion to various geographies then financial resources will be the key to your success.

Another important consideration here is working capital . Working capital is the money required to meet your day to day operations like paying your vendors and buying inventory etc to keep your business running.

Which resources are most important?

To decide which resources are the most important for you, you will need to evaluate the resources without which you cannot continue your business and those which contribute greatly to your success.

Hence, employees may be more important than machinery when it comes to consulting business. Similarly, power generation will have a major dependence on plants that produce electricity.

Step 8: Key Partnerships

This block consists of entities which are not internal to your business but are extremely important in delivering value .

Consider the supplier of goods for your business, or the manufacturer to whom you have outsourced business, or the investor who has promised to back your venture.

All these are important partners for your business and are critical to the success of your model.

In fact, with the rise of outsourcing partnerships have become even more important.

Would Kindle be a successful product if book writers don’t agree to publishing their content in the format? Or would the Apple iPod be successful without the music producers selling their music on the platform.

Hence, these outside partners are equally important and this justifies their place in the Business Model Canvas.

There are four broad types of partnerships that you will have:

• Strategic Alliances : These are partnerships between non competitors that benefit both the parties. For example, an automobile manufacturer may give exclusive rights to a partner in one country to distribute its products.
• Coopetition : These are alliances between competitors for mutual gain. For example, two video content creators may collaborate for an even greater share of audience, leading to increase in popularity of both influencers.
• Buyer-Seller Relationships: You may procure raw materials or sometimes finished products from outside. These types of relationships or partnerships are referred to as Buyer-Seller relationships. Sometimes, these relationships can also become a great source of competitive edge. For example, say you have exclusive rights to buying a superior quality of coffee in a particular region with a seller. Outsourcing relationships with partners also fall under this category.
• Joint Ventures: Joint ventures are partnerships between two separate companies when they have some sort of a mutual gain in working together. This could include sharing of resources, sharing of technology or if they produce complementary products. For instance, a data storage company may partner with an enterprise software firm to offer an end to end solution to the customer.

Key questions to ask before getting into partnerships

• Have I researched my partner well? The first thing to do is to research your partner well. This includes the history of the company, financial stability, integrity and the quality of products delivered.
• Is it a win win agreement? The partnership should be mutually beneficial. A good long term relationship cannot be built if one loses and the other wins. Therefore, there should be enough money to be made for both the parties.
• How long should the partnership be? Your contract duration should be negotiated on the basis of length of the relationship required to make your business successful.
• Are the key expectations and deliverables well defined? You should be clear about the terms of agreement and they should specifically contain what is to be expected from the partnership.
• Is the process being outsourced part of my core activity? As long as possible you should have direct control of the most key core activity of your business.
• Are my financial resources enough to cover the cost of partnership? You will need to pay your vendors on time to stay in business. Hence, be sure that the rate being negotiated is something you can easily pay for.
• Do I have quality checks in place? Getting work done from partners may require strict levels of quality control. Hence, make sure you have dedicated employees to validate quality.

Why Should You Choose Partners for Some Activities?

We should remember that some types of outsourcing in business process are more common, and there are specific reasons why companies choose to delegate some work to partners.

The major reasons are reducing costs and focussing on core activities.

For instance, you may choose to focus on the core activities that generate value and outsource the ones that can be easily done by others.

Do you know, Coke mostly focuses on its marketing activities and outsources bottling to another company?

Some other reasons are improving quality , conserving capital and increasing speed to market .

Step 9: Cost Structure

This brings us to the last building block – the block for cost structures.

Cost structures include the major sources from which your business incurs cost.

The first step is to understand what are the costs contributed by each of the key activities and key partners. In order to be cash positive you should collect your revenues on time and have cost under control.

Now, different business models will have different kinds of costs attached to it. While some business businesses will be capital intensive, that is, they will require a large amount of capital in order to function (e.g. telecom) while others may not require a lot of capital to begin with (e.g. software development).

There are two major kinds of costs associated with a business:

Fixed Costs

Variable costs.

Fixed costs are costs which are paid upfront and do not vary with the number of customers served by a business.

For example, consider the money that the airlines pay to the airports. There is usually a fixed component to it known as the yearly fee. No matter how many customers fly, this cost will always exist.

Another example is rent. Consider a restaurant which pays monthly rent for the building it operates in. No matter how many customers come to dine in, this cost always remains the same.

Now, fixed cost doesn’t always have to remain fixed, it only means that it remains fixed for a particular period of time.

Example of fixed costs:

• Advertising and marketing expenses
• Depreciation

Contrary to fixed cost, variable cost varies with the number of customers served. For example, sales commissions paid for each dollar of sales or shipping charges per item delivered to the customers.

The biggest portion of variable costs in most businesses are the raw materials and utility bills.

Examples of variable costs:

• Raw material cost
• Labor costs
• Shipping costs
• Packing supplies
• Utility bills like electricity

Your business model will decide whether you have a larger proportion of fixed costs or variable costs.

For example, consider a brick and mortar apparel business and an ecommerce based apparel business.

A brick and mortar based business will have rent as the major fixed cost while the cost of operations is the major driver of cost in an ecommerce business.

Another way to classify costs is categorizing them as Capital Expense (CAPEX) or Operational Expense (OPEX). Capital expenses are costs which are spent in order to acquire an asset.

Operational costs are costs which are expensed. Consider a company buying stationery, this will be counted as an operational expense. On the other hand the expenditure done to buy a big server to support operations will be classified as a capital expense since the acquired server becomes an asset.

Ideally, the margin that you obtain from your revenue over variable costs should be enough to cover your fixed costs in order to generate positive cash for you.

This can be done in two ways:

• Economies of Scale : Economies of scale occur when you sell enough quantities of an item such that the cost of serving each customer reduces. This happens due to multiple reasons. A first that operates on scale is able to negotiate better prices with the vendors. This is because they get volume discounts. Since, the scale is big, fixed costs are much better covered.
• Economies of Scope: Economies of scope occur when the same fixed costs are covered by different products and services. For example, consider a firm that operates its own logistics network. If it enters multiple product categories then the same trucks can now transport these multiple products sharing the cost for each of them.

How conservative should you be with costs?

This will depend on whether you consider yourself as a cost driven business or a value driven business .

A cost driven business focuses more on reducing cost. For example, consider ‘Ryanair’, the airline is based on removing all the frills and just offering the basic airline services in order to cut costs.

On the other hand a luxurious hotel business will focus less on cost and more on providing the best of comfort and facilities to its guests.

Usually luxury products are focused more on value and basic products that have less differentiation focus more on cost.

Once you decide your major cost heads, jot them down in the cost driver block and see them in conjunction with revenue from various sources.

It is important to validate whether your business model will be successful in generating cash and what level of scale you will require to make it work and whether it is doable or not.

Business Model Canvas FAQ

A business model canvas is a one page visual template that covers the key aspects required to make a business work. It consists of 9 building blocks which should work in conjunction with each other in order to deliver the key value proposition of business to the target customer segments.

A business model canvas has 9 building blocks. These are: 1. Customer Segments: Who are the key customers of your business? And what are their key characteristics and needs?  2 . Value Propositions: Why do customers buy your product or service? What is the key benefit that your business offers? 3 . Channels : How are these benefits communicated to your customers and how is the product or service sold or delivered and why? 4 . Customer Relationships : What are the key touch points between you and your customers? And how do you connect with them throughout their journey? 5 . Revenue Streams: How does business actually earn money from various value propositions? 6 . Key Activities: What are the key things that your business strategically does to deliver this proposition? 7 . Key resources : What are the assets that business requires in order to stay competitive and create value? 8 . Key Partnerships: What are the external entities or stakeholders that are key to delivering the product and service to your customer? What are some of the partners to whom you have outsourced certain activities to focus more on your core work? 9 . Cost Drivers: What are the major cost drivers for your business and how are they linked to your revenue?

Instead of coming up with a 500 page document that describes your business model, you should start with a quick business model canvas. This will give you an idea of the key parts that are required to make your business work. Start with a business model and come up with an initial version of your business model canvas. Then test your key hypothesis through experiments and take the learning from those experiments to adjust your business model canvas. Use this as an iterative process for learning and keep adjusting your business model canvas till it becomes perfect. Business model canvas is better for testing model assumptions because it is easy to change. It is also a standard template and is well understood by all. Many companies have successfully used it especially in dynamic environments.

There are various kinds of business models depending on what method of monetization you use and how charge your customers for your value proposition. Here are a few of them you can adopt if you don’t have a completely new business model. 1. Brokerage : Bring together buyers and suppliers and charge a commission for the transaction. 2 . Bundling: Offer a few products or services together as one package (eg. iPod and iTunes) 3 . Crowdsourcing : Raise funds from a group of people who are interested in supporting your offering 4 . Disintermediation : Sell directly by cutting out the middlemen 5 . Freemium: Charge a few customers for specialized service and offer a free version with limited functionality 6 . Auction: Sell products through an auction rather than a fixed price (Eg. eBay) 7 . Subscription: Charge for a fixed period of time for unlimited usage of service (Eg. Netflix) 8 . Leasing: Lease or rent an asset for a fixed period of time for money 9 . Usage : A simple model where you charge per transaction or usage of product/service 10. Advertising : Charge other businesses for advertising on your platform. 11. Affiliate: Earn a commission by selling someone else’s products.  This list is just indicative, you can have a lot of business models based on one or many of these ideas.

Business model canvas was invented by Alexander Osterwalder. He is a Swiss theorist, author, consultant, speaker and entrepreneur.

A lean canvas is just an adapted version of the business model canvas which is more suited for startups. It was created because there are some blocks of the business model canvas which are difficult for a startup to know when it starts doing business. This is because by definition a startup tries to do something that no one has done before making the whole model extremely uncertain. Here is a complete list of differences between the two.

Source: canvanizer.com

Ready to Launch Your Startup using the Business Model Canvas?

Having read this article in detail, you must now be well versed with a business model canvas and how to create a quick one for your business.

If you are looking to start a side business to earn some money online or any full time business then this template is going to be very useful for you.

A lot of learning about your business and whether your assumptions are true or not will become clear only when you start your venture.

The important thing is to think like an entrepreneur and have a learning mindset and you will definitely succeed.

If you are short on money you can apply the business model canvas to earn money from a blogging business with less than a $100 investment or you can choose any business model that suits you.

The important thing is to take the dive and begin, and if you follow all the tips and tricks shared here, you will definitely succeed.

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Anastasia belyh.

Anastasia has been a professional blogger and researcher since 2014. She loves to perform in-depth software reviews to help software buyers make informed decisions when choosing project management software, CRM tools, website builders, and everything around growing a startup business.

Anastasia worked in management consulting and tech startups, so she has lots of experience in helping professionals choosing the right business software.

• Create your own canvas

Create a new Business Model Canvas

The Business Model Canvas was proposed by Alexander Osterwalder based on his earlier book: Business Model Ontology . It outlines nine segments which form the building blocks for the business model in a nice one-page canvas. You can find a detailed explanation in his bestselling book "Business Model Generation".

If you want to try it a Business Model Canvas without entering your email address, please use our Canvanizer 2.0 Business Model Canvas Demo for a first impression.

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More about the Business Model Canvas

The Business Model Canvas reflects systematically on your business model, so you can focus on your business model segment by segment. This also means you can start with a brain dump, filling out the segments the spring to your mind first and then work on the empty segments to close the gaps. The following list with questions will help you brainstorm and compare several variations and ideas for your next business model innovation.

Key partners

• Who are your key partners/suppliers?
• What are the motivations for the partnerships?

Key activities

• What key activities does your value proposition require?
• What activities are important the most in distribution channels, customer relationships, revenue stream…?

Value Proposition

• What core value do you deliver to the customer?
• Which customer needs are you satisfying?

Customer Relationship

• What relationship that the target customer expects you to establish?
• How can you integrate that into your business in terms of cost and format?

Customer Segment

• Which classes are you creating values for?
• Who is your most important customer?

Key Resource

• What key resources does your value proposition require?
• What resources are important the most in distribution channels, customer relationships, revenue stream…?

Distribution Channel

• Through which channels that your customers want to be reached?
• Which channels work best? How much do they cost? How can they be integrated into your and your customers’ routines?

Cost Structure

• What are the most cost in your business?
• Which key resources/ activities are most expensive?

Revenue Stream

• For what value are your customers willing to pay?
• What and how do they recently pay? How would they prefer to pay?
• How much does every revenue stream contribute to the overall revenues?

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How to make a lean business model canvas

Imagine that you have an idea for a new product or business. Yet, as enthusiastic as you are about the potential for this nugget of inspiration, you’re also plagued by this question: Will it work? Is it actually a viable idea?

A lean business model canvas is a one-page business plan that helps you break down your product or business model, question and test your assumptions, and determine if your idea actually has legs.

Lean business model canvas explained: What is a lean canvas?

You might also hear a lean business model canvas referred to as a variety of other, similar terms like a lean business canvas, lean business plan, or even simply a lean canvas.

This tool was created by Ash Maurya and is an adaptation of the original business model canvas by Alex Osterwalder .

You can think of a lean business model canvas as a straightforward business plan that skips the fluff and gets to the most important elements you need to identify or evaluate (primarily, the problem you’re solving).

When you have an idea for a product or business, you’ll use a lean business model canvas template to fill in the various sections (more on those in a minute) and validate your idea.

The lean canvas is most frequently used by lean startups, which use a lean startup methodology to deliver products to customers faster and determine whether or not the business model itself is viable. In short, lean startups and lean canvases are all about moving fast, testing, and iterating.

Lean canvas example

One of the best ways to understand a lean business model canvas is to see one. So, let’s set up a lean canvas as an example.

Perhaps you have an idea for a business: You want to create an app or a website that’s essentially a database of parks and playgrounds, which parents can search and filter using location, features (splash pad, baby swings, etc.), and more.

You want to dig into your idea even further using a lean business model canvas. Here’s a simple peek at what that could look like after jotting your initial notes down:

Lean canvas vs. business model canvas

There’s a lean business model canvas and then simply a business model canvas . The two terms are often confused, as they have a lot in common — and the lean canvas is an adaptation of the business model canvas.

However, the biggest difference is that a business model canvas is focused on a specific product while a lean canvas focuses on a specific problem.

This means that the business model canvas has a few blocks that you won’t see on a lean canvas. These are:

• Key partners (lean canvas replaced with problem)
• Key activities (lean canvas replaced with solution)
• Key resources (lean canvas replaced with key metrics)
• Customer relationships (lean canvas replaced with unfair advantage)

That’s the gist, but here’s a chart that digs even more into the difference between a business model canvas and a lean canvas:

What is included in a lean canvas?

Now that you have a better grip on what exactly a lean canvas is let’s break it down even further. The typical lean business model canvas has nine elements or quadrants. These are:

• Problem: A brief description of the top three problems you’re addressing.
• Solution: The proposed fix for the problem you’ve identified.
• Unique value proposition: Why your solution is different and what will make people buy.
• Unfair advantage: Something you have that can’t be easily copied or bought.
• Customer segments: Who your target customers or users are and if they can be further segmented.
• Key metrics: The important numbers that will indicate how your business is doing.
• Channels: The free and paid channels you’ll use to reach your customers.
• Cost structure: All of your fixed and variable costs.
• Revenue streams: How your business model will earn income.

However, our lean canvas template here at Miro dives even deeper with the addition of a few more elements, including:

• Existing alternatives: How these problems are currently solved today.
• High-level concept: A simple X for Y analogy (e.g., “Zillow for playgrounds”).
• Early adopters: Characteristics of your ideal customers who will jump right on the bandwagon.

How to make a lean canvas in Miro

A lean canvas can provide a lot of clarity about a business model or a product idea. Ready to create one with your own team? Getting started is easy.

• Grab our lean business model canvas template and create a new Miro board . You can put as many canvases on one board as you need.
• Define the product or business idea you’re working on, and then fill in the blocks with different types of content. You don’t just have to use text — you can also use pictures, videos, and more.
• Invite your team and/or advisors to the board so you can brainstorm , collect feedback, and collaborate in real-time.
• Come back to the board regularly to make necessary changes, add new information, and discuss progress.

And that’s it! Once you’ve created your own lean business model canvas, you can move forward with a product or business idea with more strategy — and a lot more confidence too.

Get started on your own lean business model canvas with Miro

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Canva has a new plan as it continues to court big business

I t’s been missing since Canva launched ten years ago - now, the company is at last introducing an enterprise-level tier to its design platform. 

Aimed at meeting the demands of larger organizations, Canva Enterprise builds on the platform’s graphic design toolset to improve internal and external visual communications. Or, to put it another way, make presentations and data more engaging and readable.

The business-focused subscription plan isn’t the only new addition unveiled at this year’s Canva Create, with new design resources built for a range of departments and teams and an improved interface set for an August release. 

What's new in Canva?

While Canva has grown a reputation as some of the best free graphic design software , it’s done much in the last couple of years to step outside the marketing and social media departments that became its home. With the opening of a new European HQ, and the introduction of the Visual Worksuite - a one-stop shop for businesses, complete with word processor and website builder , the company has made no secret of courting bigger businesses. 

So, what can we expect from Canva Enterprise? Beyond the existing features, the new plan allows companies to grow with secure, scalable cloud storage solutions, while consolidating AI, collaboration tools, and content creation. New brand controls will let organizations manage assets, from what’s on the page to who can share and see it. Canva also promises a host of security features. And, for businesses concerned about using AI for professional use, the company said it is also “including indemnification for AI-generated content for eligible customers.” 

“As demand for visual content soars, navigating organizational complexity is more challenging than ever. We democratized the design ecosystem in our first decade and now look forward to unifying the fragmented ecosystems of design, AI, and workflow tools for every organization in our second decade,” said Melanie Perkins, co-founder and CEO of Canva. 

Alongside Canva Enterprise, comes Canva Work Kits. These new tools are tailored to sales, marketing, creative, and HR departments. With uses cited for pitch decks, job ads, content calendars, and brand strategy docs, the fully customizable, branded kits let users create “templates, from presentations to documents, built to enable teams to scale their output with easy-to-access tools.” And to help onboard users, Canva Courses is designed to help transform existing designs into interactive courses for workplace learning. 

Watch for August, too, when the design platform will also receive a slight facelift. The “glow-up”, as Canva put it, will place more useful tools closer to hand, adds customizable homepages, and gives users more space to create by nudging the ever-present side-bar out of sight when not in use. 

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