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Business Model Canvas

The Business Model Canvas (BMC) was developed in 2008 by Alexander Osterwalder and his Co-Author Yves Pigneur in their book Business Model Generation. Soon it started to gain more and more popularity due to its ability to summarize the most complex ideas and make them easily accessible. Thus, it is nowhere near as detailed as a final business plan and contains almost no numbers, but it gives you an excellent initial overview. Filling out the template will clearly show you what you have, what you don’t have, and what you want to achieve.

Although multiple different versions developed overtime, the classical BMC is divided into 9 sections:

  1. Customer segments
  2. Value Proposition
  3. Channels
  4. Customer Relationships
  5. Revenue Streams
  6. Key Resources
  7. Key Activities
  8. Key Partners
  9. Cost Structure

To enable you to fill out each of the categories we will take a closer look at them.

 

Customer segments:

This part determines who is a potential customer of your business. Ask yourself the question: For whom do I create value? Normally there is not only one answer to this question. Rather you will develop different customer groups which can broadly be divided into private (B2C) and business (B2B) customers. Thus, the second important question in this section of your BMC is: Which customergroups provide the biggest value to me? Hereby, try to not only consider which customers will generate the most revenue, but also look at other factors like customer loyalty, frequency of business interactions and degree of profitability.

To summarize, this part should answer:

  1. Who buys my product?
  2. How is my targetgroup constituted?
  3. Which customergroups do I have and which bring the most value to me?
  4. How do I reach the respective customer groups?

 

Value Proposition:

A customer will buy your product because it solves a problem or satisfies a need they have. In other words because it brings value to them. That’s why it is key to your business to identify how you can bring value to the customer and what you do better than your competitors to create a competitive advantage. Four major categories you should consider to evaluate are:

  1. Price
  2. Quality
  3. Service
  4. Reputation

To summarize, this part should answer:

  1. What exactly do I offer?
  2. Which problem does my product solve for whom?
  3. Why is it better than those of my competitors?

 

Channels:

No product will magically sell itself. Customers first need to know about it and then have easy access to it. Therefore, it is important to think about potential marketing and distribution channels. Do you market your product via social media or do you come up with exciting public events? Will you sell your product yourself or via a retailer? Is it going to be an online or offline shop? Those are questions you need to consider before starting your business. Also think back to the customers segments you identified earlier. There is not one perfect channel, but you rather need to find the best way to reach your desired target group.

To summarize, this part should answer:

  1. How can I reach my customers?
  2. Where can they by my product?
  3. How can I make their experience as easy and accessible as possible?

 

Customer Relationships:

Once you succesfully acquired a customer you should aim to keep him and generate repurchases. Thus, you should think about customer service, customer satisfaction and regular interaction with your customers to establish your presence in their consciousness.

To summarize, this part should answer:

  1. How do I generate repurchases?
  2. How can I ensure high customer satisfaction?
  3. How can I get customers to remember me?

 

Revenue Streams:

Whereas in the first part of the BMC the focus was on the customer, it now needs to be determined how you can make money off of it. Think about the different revenue streams you have and try to estimate for how much of your total revenue they will account for. Do you only sell a product? Do you offer services in after-sales (e.g. repair)? Can you include a subscription model?

To summarize, this part should answer:

  1. How do I generate revenue?

 

Key resources:

Key resources are all those things which are essential to run your business. They can be divided into 4 categories:

  1. Material (Buildings, equipment, etc.)
  2. Knowledge (Property rights, recipes, etc.)
  3. Team (Skills, characteristics, etc.)
  4. Finances (How much money do you need? Where do you get it?)

You don’t need to list every detail in this section. Try to focus only on those things which are essential to get your business up and running.

 

Key activities:

In every business there are million things to do and especially if you are self-employed this can be quite overwhelming. Therefore, the key activites section of the BMC tries to identify what activities are most important to generate value for your business so you can prioritize your tasks more easily. This is closely connected to other sections of the BMC. As a start think about:

  1. Product development
  2. Customer analysis & service
  3. Marketing and distribution
  4. Recruiting
  5. Strategic planning
  6. Finances

To summarize, this part should answer:

  1. What do I need to do to keep my business running?
  2. How can I improve my business in the long run?
  3. Which tasks in my business are most important?

 

Key partnerships:

Usually you cannot do everything on your own. In this section try to think about which partners you need for your business. Most commonly you need:

  1. Suppliers
  2. Service providers
  3. Distribution partners

 

Cost Structure:

The profit you make is the difference between your revenues and your costs. Thus, the last step of your BMC is to forecast your costs to see if your idea is viable or whether you need to revise it again. Think about all the different costs that could come up and try to group them into different categories.

To summarize, this part should answer:

  1. Which costs do I have?
  2. How big are my profit margins? How do they relate to the market?
  3. Which parts of my business will be most cost intensive?

Congrats! You now know how to set up your BMC. If you want to start creating one for your own company, here is a link to a classical Business Model Canvas template: Business Model Canvas – Download the Official Template (strategyzer.com).

 

You can also find our own adaption of the model in our courses. So feel free to check them out!

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