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Business Model Canvas

Business Model Canvas

What is this?

The tool was first designed by Alexander Ostwerwalder, and co-authored by Yves Pigneur among 470 contributors. It is a tool to help you visualize your business plan. The Business Model Canvas tackles several parts of the business plan: the market, the offering, the marketing strategy, business operations and money or business financials. These aspects are divided into nine interconnected blocks. Each block defines how a specific part of your business functions.

When and why is this tool used?

The Business Model Canvas is a starting point for any entrepreneur to make a quick assessment for his business. As a strategic management tool, it can be used to illustrate, modify and pivot your business. As the building block of a business model, it helps you build a better understanding of where your business stands, and acts as a starting point for further analysis or planning for enhancements.

How is this tool used?

Step 1 (Draw your canvas):

The canvas is a simple diagram to help you map your business model components. Download our template, you can fill it digitally or print it out and use sticky notes or draw on it. It’s always preferred that you use the canvas in your own way.

Step 2 (Fill the nine blocks):

The tool consists of a group of blocks representing different components that shape your business. In each block, think about ways to explain these components, ask your questions that guide you through. Fill your canvas with the following order:

Customer Segment 
Customers are crucial for any business model. Try to group them, understand them and think about their lifestyle, preferences and mentality. Who are they? How do they think? For example, your customer segment could be companies, individuals, web users, smart phone owners, children, females or a combination of any of them.

Value Propositions
Why do customers buy your product/service? What makes your product better than others available in the market? It is your unique offering. For example, mobile internet with the highest speed or and an education provider who offers blended learning content.

Customer Relationships
Your customer relationships should give you constant feedback from your customers to your value propositions. Do you interact with customers? How? How is this relationship integrated in your business in terms of cost and form? Your customer relationships could be self-service or automated service. Additionally, you can offer your customers a dedicated personal assistant, or a customer service agent to ask for their feedback on a certain product or service.

Channels
How are these services/products promoted or sold? Why? Retail, online selling or website, vending machines, and warehouses are all different types of channels. Your company could have more than one channel.

Revenue Streams
How does the business earn revenue from the value propositions? How do your customers prefer to pay for your product or service? Revenue streams depend on your company activities, your business could make money from retail sales, revenue from ads, commisions, or customers' subscription.

Key activities
What does the business do to deliver its propositions? What are the most important activities? For example, software development, manufacturing, sales, quality control or any other activites your company does to produce a product or a service.

Key resources
What are the assets that the business needs to perform and compete? Your resources could include; human asset, equipment and machines, knowledge, or virtual assests.

Key Partners
Who are they?  How they can fill in what the business can not do? What are their motivations for their partnerships? Key partners depend on your industry. The can mainly be suppliers, manufacturers, investors or any network that your business can benefit from partnering with.

Cost Structure
Where does the business spend most of its money? What are the most expensive costs in your business? How is this related to the revenue? As the last block of your Business Model Canvas, the cost structure can be either software programs, staff of employees, sales and marketing, website or any other relevant costs that you business spends money on.

Step 3 (Analyze your data):

After you answer all these questions, you can use this data to think of ways to modify your business and improve it. Look at each block and write down suggested enhancement that will improve your overall performance.

Hints for using this tool

One of the common mistakes while using the Business Model Canvas is filling it once only. The canvas has to be revisited repeatedly as it doesn’t take changes in consideration. Do not rely on your assumptions and make sure you test all of them as your business continues to grow.

Case Study
Facebook the leading social networking site targets mainly 3 types of customers, internet users all over the world, advertisers and developers. With a unique offering to each of them, Facebook value propositions become diverse. For Internet users, it offers social context and networking. Advertisers benefit from reach and engagement. It enables developers to make new apps or platform integrated websites.

Facebook has a self-based relationships with their customers, through optional feedback channels using the Internet. Channels include the Facebook website, mobile applications and Facebook ads, pages or games. As a social networking site, they make money from paid advertisements, or payment revenues from developers or users who pay for games they play on Facebook such as: candy crush and farm ville.

The key activities of Facebook are mainly the development of the platform and the data center management which enables Facebook to manage all the data and content on it effectively. Key resources are human resources such as: software developers, and virtual assets which represent the technology infrastructure of the website. The key partners are content partners, that provide Facebook with videos and new articles.The company mainly spends on three aspects: marketing, data center management and research and development costs.

This was Facebook's Business Model Canvas for 2011. After Facebook's acquisitions to Whatsapp and Instagram this canvas will change a lot, try to think of what you can add to the nine blocks.
 

Pros and Cons

This tool is simple and flexible. It saves the time and effort normally required for preparing a traditional business plan. However, the tool is not detailed enough and does not provide any priorities and does not take competition in consideration. It can only help you conceptualize, further analysis is needed.

Download Attachment Business Model Canvas_Template.docx Send Your Feedback