Created by Alexander Osterwalder of Strategyzer, The Business Model Canvas is a great tool to help you understand a business model in a straightforward, structured way. Using this canvas will lead to insights about the customers you serve, what value propositions are offered through what channels, and how your company makes money.
The business model canvas is a shared language for describing, visualizing, assessing and changing business models. It describes the rationale of how an organization creates, delivers and captures value.
The Business Model Canvas consists of 9 inter-related sections:
- Key Partners
- Key Activities
- Key Resources
- Value Propositions
- Customer Relationships
- Customer Segments
- Cost Structure
- Revenue Streams
Using the Tool
The best way to use the tool is to start with the segments that you best understand and generally work your way to the rest of them. Here is some guidance on what to ask yourself. Note that links to other sections are bolded.
1. Key Partners
Identify your company’s key partners. This can consist of important suppliers in your supply chain. What key resources does the company receive from these partners? What key activities are performed by these partners. Thank about why your company works with these key partners and the motivations behind them.
2. Key Activities
What specific key activities are necessary to deliver your value proposition? What activities set your company apart from others? Consider your company’s unique differences in its revenue streams, distribution channels or customer relationships. Do you need to procure specific niche resources? Do you need to streamline to keep costs and prices low?
3. Key Resources
What specific key resources or assets are necessary to deliver your value proposition? Consider what resources your distribution channels and revenue streams may require to function. Additionally, think about what resources are needed to maintain customer relationships. Does your company require a lot of capital or human resources?
4. Value Propositions
Identify the core value the company provides to customers. What exactly is the company trying to give to customers? What problem is your company trying to solve and what needs is your company satisfying? How do you offer something different that satisfies the demand of your customer segments (e.g. price, quality, design, status)?
5. Customer Relationships
What type of relationship do you have with your customers? How do yo interact with customers and how does this differ among customer segments? Do you communicate frequently with your customers? How much support does your company provide?
How do you deliver your value proposition? How do you reach your customer segments? What channels are used? Consider your supply, distribution, marketing, and communication channels. Are they well-integrated and cost efficient? Are they utilized effectively?
7. Customer Segments
Identify who are your value proposition targets. Who are you creating value for? Who are your most important customers? What are they like? What do they need? What do they enjoy? What is the customer market like? Are you targeting a small niche community or a mass market?
8. Cost Structure
Identify the key costs in your company’s business model. What are the major drivers of costs? How do your key activities and key resources contribute to the cost structure? How do your costs relate to your revenue streams? Are you properly utilizing economies of scale? What proportion of costs are fixed and variable? Is your company focused on cost optimization or value?
9. Revenue Streams
Identify the ways your value proposition generates money for your business. Does your company have multiple methods of generating revenue? What is the pricing strategy for the products offered by your company? Through what channels do your customers pay? Does your company offer multiple forms of payment?