So you have a business idea? You can enhance this business idea by creating a Business Model Canvas. This will allow you to think differently about your business. It gets you thinking on the key elements of your business in a more visual manner.
Doing this exercise is very helpful in getting to know what you need to do next. Using the Business Canvas map gives you an overview of the items you need to plan for. It also makes communication easier.
Excellent Framework for Business Strategy
We like to use this as a framework for a business. It enables you to think about your business way faster than traditional models. It also maps your whole business setup on a 1 A4 size paper, instead of a large stack of papers and document. Tip: print out this on a large scale to generate a A3 business model canvas or, try this: print an even bigger version and hang it on your (office) wall and add comments on it with post-its. This hugely saves you time. After this exercise, still you need to create a business plan, which becomes easier by doing this exercise first.
The origins of the Business Model Canvas
The business model canvas was created by Osterwalder and Pigneur in 2010 and has been used extensively since in business strategy. This scheme is derived from Osterwalder and Pigneur and provides you with insight into the different aspects, that determine the overall structure of your company, such as primary partners, cost flows, etc.
Download the Business Canvas Template here and start designing your Value Proposition.
Key Elements of the Business Model Canvas
PRIMARY PARTNERS
- Who are your Primary Partners?
- Who are your Primary Suppliers?
- What resources do you get from your Suppliers?
- What activities do your Primary Partners carry
CORE ACTIVITIES
- Which core activities are necessary for the Value Proposition?
PRIMARY MEANS
- What are the most important resources needed to ensure that the Business Model works?
VALUE PROPOSITION
- What value is created for specific Customer Segments?
CUSTOMER RELATIONS
- What kind of relationships do you deal with specific Customer Segments? Are they different.
CUSTOMER SEGMENTS
- What are the different types of groups of people or organizations that you want to serve with your company? Think indirect distribution of the value chain.
CHANNELS
- Through which Channels your company communicates with specific customer segments a value.
COST STRUCTURE
- What Costs must be incurred to make the business model work?
REVENUE STREAMS
- What income (Revenue Streams) does your company generate from the various activities and Customer Segments?
- You can pick multiple options.
- Commission per product, advertising, online sales, fee on shipping, royalties, saas, licencing, seats, pay per use, pay per view, look for new earnings models as digital business models change in time, etc. etc.
Approach
Start with the Value Proposition in the center first. Describe: What do you offer, What is the customers pain, what problems are you trying to solve and how do you provide the Solution, which elements does it have? Then you have a part of the Value Proposition. Then check for a high price range (quality) or low price range (volume). Then work from there to the other fields.
Segments are relevant, because your solution could be different for different Customer Segments. Think for example of demographics of customers (women /men, or age groups), or segments like large or small organizations. The Cost / Revenue part is the basis of your profitability. Then fill in all the fields and improve. Use different colors at first for new segments or start a new canvas just for the segment.
Conclusion
After creating your business canvas, you see you could have multiple versions. Choosing is the hard part. How to choose the right one? You ask your potential Customers of the Customer Segments what they think of this. Show them, interview them, reach out to them. That’s called Business Model Validation. This is essential of all business ideas. You really need to check in with the/your target customer. Read more on how to get customers for testing out your startup idea.
Tip: Print your business model canvas out on A3/A2 size in your work area. Hang it on your wall. Ask others. Then you could have a map on where to go. This also helps keeping focus as you move on.
That’s it. Good luck & Enjoy!
Do you need the original book of the concept and a more in depth approach? You could order the book here.