The Business Model Canvas is a graphical representation of the critical components of a new or existing business.
It serves as an organizational blueprint for future planning and action, designed by Alexander Osterwalder and Yves Pigneur.
The canvas collects data in nine critical areas for the success of an organization or product – value proposition, customers, infrastructure, and finances.
The Business Model Canvas (BMC) provides the structure of a business plan without the overhead and the spontaneity of a back of the napkin sketch without the fuzziness (and coffee rings).
The business model canvas is a strategic planning tool that managers use to visualize and refine their business models. The business model canvas template clearly defines the critical components of a business.
Additionally, it condenses a business plan. Thus, the business model canvas template serves as a synopsis of the business plan.
Please read the article till the end to Download the Business Model Canvas Template in DOC and PDF.
1. What is the History of Business Model Canvas?
Alexander Osterwalder first introduced the concept of business model canvas template in his 2004 thesis, “The Business Model Ontology – A Proposition in a Design Science Approach.” Since then, business schools have taught the business model canvas template, and it has been refined to fit more niche businesses.
2. What is the Structure of the Business Model Canvas Template?
The business model canvas template contains nine major building blocks:
- Key Partners
- Key Activities
- Key Resources
- Value Propositions
- Customer Relationships
- Customer Segments
- Cost Structure
- Revenue Streams
Each of these nine components is discussed in detail below. All elements are interconnected and work in concert to ensure the business’s success.
2.1 Key Partners
Key partners are businesses or individuals with whom your business establishes a strategic relationship. Suppliers and distribution partners are just a few examples of key partners in the supply chain.
Consider the following points about key partners:
- What critical resources does your business obtain from these partners?
- What critical functions do these partners perform?
- What is your organization’s rationale for collaborating with these strategic partners? Is there something specific that they can provide that no one else can? Do they contribute to cost savings?
Note: In this section, describe your business partners, considering their motivations, whether they are suppliers, service providers, or outsourced companies, among others.
2.2 Key Activities
The term “key activities” refers to specific tasks or activities that are critical to the operation of your business. A key activity might be the bulk procurement of fresh produce for a restaurant.
Consider the following points about critical activities:
- What are the most important activities required to deliver your value proposition?
- What activities distinguish your business from the competition?
- What distinguishes your revenue streams, distribution channels, and customer relationships from those of your competitors? What effect do your primary activities have on these?
- Do you require specialized niche resources?
- Are you looking to streamline your process to keep costs and prices low?
Note: In this section, list all of the activities required for your company to function and provide value to its customers. They can include technology development and maintenance, manufacturing lines, logistics and distribution, and so on.
2.3 Key Resources
The term “key resources” refers to the physical assets required to operate and deliver your value proposition.
A diamond mining company, for example, cannot operate without mining equipment. Alternatively, an automobile manufacturer cannot function without the human capital and expertise required to design automobiles.
Consider the following points about critical resources:
- Which specific assets are required to operate and deliver your value proposition?
- What resources are required to operate your distribution channels and revenue streams?
- What resources are required to ensure the continued success of customer relationships and satisfaction?
- Is your business capital- or human-resource-intensive?
Note: To fill this block, you must first ask yourself, “What resources are crucial for my companies to be profitable to deliver value to the customer?” Then, you must include the resources needed to keep your channels and relationship strategies operational. In short, they are all critical assets for the operation of the business, such as software, human resources, and machines, among others.
2.4 Customer Relationships
Customer relationships refer to the various types of interactions that a company has with its customers.
For instance, a designer suit company will assist the customer significantly by tailoring to their specific needs and working directly with them to design the suit they desire.
On the other hand, telecommunications companies frequently have poor reputations and customer relationships due to their call centers’ aggressive and predatory sales practices.
Compared to telecommunications companies, the designer suit company’s customer relationships are significantly more robust and fulfilling.
Consider the following points regarding customer relationships:
- How is your business’s relationship with its customers? For instance, do you provide individualized assistance, or do you expect them to self-serve their needs via provided support channels?
- How does the business interact with its customers, and how does it vary according to the customer segment?
- Is your business in regular contact with its customers?
- How much assistance does your business provide?
Note: The purpose of this block is to consolidate all of your business’s service, communication, and after-sales strategies for developing a relationship with the customer to ensure their retention and prevent them from migrating to the competition.
2.5 Value Propositions
The most important aspect of the business model canvas template is arguably the value proposition.
The value proposition defines the fundamental offering that the company is attempting to provide to its customers. It is the primary motivator behind business operations.
Spotify’s value proposition, “Music for everyone,” for example, eloquently states its mission and offers. Spotify aspires to be a music streaming platform with music for everyone.
Here are a few things to understand when it comes to value propositions:
- What exactly is your company attempting to offer customers?
- What problem is your company attempting to solve, and what needs does your company meet?
- How do you provide something unique that meets the needs of your customer segments (e.g., price, quality, design, status, etc.)?
Note: After defining your audience in the first block, you must consider the needs of those people that your product can address. Consider the following: “What value do I provide to my consumer?” Essentially, emphasize what sets your product or service apart from the competition.
2.6 Customer Segments
A company’s customer segments are the various types of customers it manages. A company that manufactures a different variety of products will need to interact with a variety of customers.
Airline companies are a good example of this. Airlines sell tickets in economy, business, and first-class.
First-class passengers are entitled to special benefits and luxury travel arrangements. On the other hand, economy passengers receive much less assistance, costing less but bringing in significantly more money.
Here are a few things to think about when it comes to customer segments:
- Who is the primary target of your value proposition? For whom are you creating value?
- Who are your most valuable clients? What are their personalities like? What do they require? What do they like?
- What are your various customer types?
- How would you describe the customer base? Is your business aiming for a small niche community or a mass-market?
Note: When you know who you’re selling to, it’s easier to design your business. Answer the below question as briefly as possible: “Who is my primary customer?” or “For what type of customer can I create value”?
Channels are the various structures and methods your company uses to deliver its product and value proposition to its customers.
The term “channels” refers to all of a company’s supply, distribution, and marketing channels. It is critical to consider all of a company’s channels and ensure that they all work together.
To send out timely shipments, a company like Amazon, for example, must consider how its fulfillment centers and shipping services are integrated.
Here are a few things to think about when it comes to channels:
- How do you communicate your value proposition?
- How do you reach out to your target markets? What channels are employed?
- Are you into supply, distribution, marketing, and communication channels cost-effective and well-integrated? Are they being used efficiently?
Note: The question here is, “How can I best reach my customer?” Please list all of how your business can add value to your customer in this block, whether it’s through sales channels, distribution, or even communication and marketing.
2.8 Revenue Streams
Revenue streams are the source of cash flows for a business. They are the last component of the business model canvas template.
Revenue streams are the various methods by which your company’s value proposition generates money. A business may have multiple revenue streams.
Apple, for example, has multiple revenue streams from its various products and services, such as Apple Music.
Here are a few things to think about when it comes to revenue streams:
- Is your company’s revenue generated in a variety of ways?
- What is your pricing strategy for your company’s products?
- What payment methods do your customers use?
- Is your company willing to accept multiple forms of payment (cash upfront, payment plans, financing, etc.)?
Note: “How and at what price will my customer pay for the value proposition that I will deliver?” This section discusses how your business will generate revenue. Additionally, you can have multiple revenue streams, and it is critical to include all of them here. For instance, sales, subscriptions, and licensing.
2.9 Cost Structure
The cost structure of a company refers to how much money it spends on operations. It consists of the company’s key costs as well as the company’s level of cost focus.
When a company is cost-driven, it focuses on lowering costs and, as a result, customer prices. A company that is value-driven, on the other hand, focuses on creating value for its customers while putting less emphasis on cost.
A comparison of fashion retailers Forever 21 and Gucci is an example of this.
Forever 21 is a fast-fashion company that focuses on delivering the latest styles at low prices – a cost-driven company. On the other hand, Gucci is a luxury brand focused on delivering high-quality clothes and accessories designed with the latest fashion industry trends in mind – a value-driven company.
Here are a few things to think about when it comes to cost structure:
- What are the most important costs in your company’s business model?
- What are the primary cost drivers?
- What role do your key activities and resources play in the cost structure?
- What is the relationship between your costs and your revenue streams?
- Is your company making the best use of economies of scale?
- How much of the cost is fixed, and how much is variable?
- Is your company more concerned with cost-cutting or with adding value?
Note: It’s interesting to leave this as the final block to complete the Business Model Canvas. This way, you’ll have defined the primary activities and resources necessary for your business to deliver value to the customer. As a result, you will define the costs associated with these and other blocks and explain them.
3. What are the Benefits of Using Business Model Canvas?
3.1 Provides a framework for creativity.
The Business Model Canvas is a great tool for visually structuring your business model.
This is useful at various stages of developing your business model. Many people find that visualizing a business model in a single simplified view is easier.
3.2 Helps you focus on your value proposition.
It’s easy to become distracted by all of the moving parts that go into running a business.
The value proposition is central to the entire Business Model Canvas, allowing you to stay focused on why your company exists.
You should use your value proposition as a guiding star to help you fill out the rest of the canvas.
3.3 It is simple to complete.
Whether your business model is well defined or you are experimenting with new ones, the BMC can be completed quickly and can help you generate new business ideas.
This enables faster feedback, faster ideation, and faster iteration.
3.4 Provides a comprehensive view of your company.
The Business Model Canvas allows you to see how all of the elements of your business are interconnected and how they inform or affect one another.
This gives you a better understanding of how your company functions as a system or ecosystem.
3.5 Provides you with a centralized document to share with others.
After you’ve completed your Business Model Canvas, you can distribute it widely, solicit feedback, and make any necessary changes.
Teams, advisors, stakeholders, and partners should find the canvas relatively straightforward and easy to understand because the visual presentation is simple to grasp and understand.
5. Frequently Asked Questions About Business Model Canvas
5.1 What is the purpose of a business model canvas?
A business model canvas is a tool for visually representing a business model. Business models are frequently long and tedious documents that are difficult to follow; a business model canvas enables you to create something more attractive and engaging while still covering all the topics you need to cover for your business.
5.2 How Can I create a Business Model Canvas?
A business model canvas must include the following nine key components: Begin with the key partners, activities, resources, and propositions that define your company and allow you to offer a product or service.
Then, describe your relationship with your customer base, including customer segments and the channels through which you will reach them. Finally, describe your company’s cost structure and revenue streams.