Business Model Canvas – what is it and how to create one?

Business Model Canvas is a tool that revolutionises the way business models are planned and analysed. It enables entrepreneurs and managers to clearly understand key aspects of their business and identify potential areas for innovation.

From this article you will learn:

• What is the Business Model Canvas?
• What are the differences and dependencies between Business Model Canvas and other business model design tools?
• What are the elements of a Business Model Canvas?
• How to create a Business Model Canvas?
• How to implement the Business Model Canvas?
• What can you gain from a Business Model Canvas?

Business Model Canvas – definition

The Business Model Canvas is used to develop and present company business models. It was developed by Swiss entrepreneur Alexander Osterwalder and Yves Pigneur, a Belgian computer scientist and management professor. It is a graphical template with nine key components: customer segments, value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partnerships and cost structure. These form a comprehensive picture of how a company creates, delivers and captures value.

A Business Model Canvas is a graphical template depicting the key elements of a company’s business model to facilitate strategic planning and analysis.

Definition of Business Model Canvas.

This tool gained popularity in the early 2000s as a method for designing business models quickly and efficiently, especially among startups and innovative companies. It is valued for its simplicity and effectiveness, and its versatility makes it applicable to different industries and types of organisations, as well as to business creation and scaling.

Business Model Canvas versus other business model design tools

The Business Model Canvas is one of many tools used to design business models – other popular tools and methodologies include:

• Lean Canvas, developed by Asha Maurya, is an adaptation of BMC but is more applicable to start-ups and new ventures by focusing on identifying and testing business assumptions, which is important in the early stages of business development.
• SWOT analysis is a more general strategic analysis tool. It is used to assess a company’s internal strengths and weaknesses, as well as external opportunities and threats, so it is more oriented towards the company’s environment than the internal structure.
• Porter’s five forces analysis is another method of strategic analysis that focuses on five key forces affecting competitiveness in an industry. It is a more detailed competitive analysis tool than the BMC.
• The Value Proposition Canvas focuses on the value proposition aspect of the business model and is considered as a complement to the BMC to help you gain a deeper understanding of customer needs and how your company can meet them.

The Business Model Canvas focuses on a holistic view of a company’s business model, whereas other tools and methodologies may offer a more detailed analysis of specific aspects of the business.

Elements of a Business Model Canvas

The Business Model Canvas consists of nine core elements that together form a comprehensive picture of an organisation’s business model. All together, they form the framework of the business model, enabling entrepreneurs and managers to clearly understand key aspects of their business. We refer to the following components:

• Customer segments define the different groups of people or organisations the company intends to serve. This component defines the various needs and characteristics of the customers that the business focuses on.
• Value propositions describe the products and services that create value for specific customer segments. This is the heart of the business model – it defines the reasons why customers choose a particular company, the problems that the offering solves and the needs it meets.
• Channels are ways of communicating and delivering the value proposition to customers. They can be direct, like selling in person, or indirect, like selling through intermediaries.
• Customer relationships define the type of relationship a company has with different customer segments. These can be self-service, building customer communities or value co-creation.
• Revenue streams indicate where the company gets its revenue from and how it diversifies it, which may include product sales, subscriptions, licences, user fees, rentals, brokerage and others.
• Key resources are the resources required to create and deliver the value proposition, channel service, customer relationships and revenue generation. They can be physical, intellectual, human or financial resources.
• Key activities are nothing more than the most important activities that a company needs to do to operate effectively. They can be production, building and maintaining a network platform, supply chain management or marketing.
• Key partners describe the network of suppliers and partners that contribute to the business. These partnerships can help reduce risk, obtain resources or optimise operations.
• Cost structure is all the costs associated with running a business. Costs can be fixed, variable, scale or economies of scope – by identifying them, you can understand how the business makes money and what its main areas of expenditure are.

Creating a Business Model Canvas

Creating a Business Model Canvas requires both creativity and strategic thinking. At the start of the process, it is important to approach each element of the BMC with an open mind and avoid assuming you know all the answers, and instead explore different possibilities and perspectives. This is particularly important when defining customer segments and value propositions, which are the heart of the business model. It is equally important to understand and clearly define each of the nine elements of the model.

During the work, it is important to bear in mind the interdependencies of the model elements. The way a company plans to generate demand and revenue should be linked to its value proposition and customer segments, and key activities and resources should be aligned to their needs. It is also important to be flexible and update the BMC regularly – it is a living document that should evolve as the business grows.

It is also worth being careful in assessing and designing fixed and variable cost structures and revenue streams – establishing realistic and achievable revenue paths and controlling costs are key to the financial viability of the business. And don’t forget to include different viewpoints, whether from internal teams, external advisors or clients.

Implementing the Business Model Canvas

Implementing the Business Model Canvas is not a one-off task but an ongoing process, but start by making sure the team understands the purpose and importance of the BMC. Joint training sessions can help them learn more about the tool and how to use it. Every member of the team should have the opportunity to express their opinions and ideas.

When implementing the BMC, it is important to be flexible and not treat the model’s provisions rigidly. Firstly, strategies and business models may need to be adjusted, and secondly, each element of the model is part of a larger whole, so attention should be paid to how changes in one part affect others. Avoid treating the BMC as a rigid blueprint, as it serves to explore different paths and opportunities.

One of the potential pitfalls of implementing the Business Model Canvas is to focus solely on short-term outcomes. The model is more effective when applied to strategic planning and long-term thinking, so it is worth looking beyond current financial performance and considering the long-term viability of the business.

Benefits of the Business Model Canvas

Using the Business Model Canvas provides a clear and concise overview of the key elements of the business, making it easier to understand and communicate the business model across the organisation. The Business Model Canvas allows you to quickly identify connections and dependencies between different aspects of the business, helping you to detect problems or opportunities.

The Business Model Canvas also fosters creativity by allowing teams to experiment with different scenarios and test new ideas in a controlled environment. The model can be easily modified, making it possible to dynamically adapt to changing market conditions or customer preferences. The Business Model Canvas also forces companies to think deeply about what is really valuable to their customers, which can lead to more targeted business and marketing strategies.

The tool helps with strategic planning and decision-making, and by identifying key areas of the business it also facilitates resource allocation, time management and prioritisation of activities. It is also a versatile tool that can be applied to different types of organisations – from start-ups to large corporations.