A businesses model is the Holy Grail of every business – a blueprint for your product and how you’re gonna deliver it. It can determine whether your business is gonna make it – or break it.
Traditionally, every company had their business model written in a business plan. Yet, things have changed. 100 – page long plans got too clunky to keep up with a fast-moving nature of lean businesses and startups. Last decade a new approach has been developing, that fits perfectly with the new agile environment. It’s called the Business Model Canvas.
Elements of the Business Model Canvas
Before digging in the benefits, we’ll shortly go through the elements of the Canvas.
1. Key Partnerships: What can the company outsource to partners so it can focus on its key activities?
2. Key Activities: What key activities company does to deliver the value proposition?
3. Key Resources: What unique assets company has in order to compete?
4. Value Proposition: Why would customers want to buy and use the product? Why is it different than other similar products?
5. Customer Relationships: How do you interact with your customers through their “journey” with the product?
6. Channels: How do you promote, sell and deliver your products to customers?
7. Customer Segments: Who are your customers? What do they feel, see, think?
8. Cost Structure: What are the business’ major cost drivers? How are they linked to revenue?
9. Revenue Streams: How does the business earn revenue from the value propositions?
Benefits of the Business Model Canvas
It’s Short and Intuitive
Unlike lengthy business plans, the Business Model Canvas fits on a single sheet of paper. We can divide the model scheme into three groups of elements:
1. On the left side of the model are product related elements outlined in blue. They represent all activities and resources necessary for a product delivery. Product-related elements create costs.
2. Colored green, on the right side of the scheme, are customer related elements. They represent all aspects of a product that customers are in touch with. Customer-related elements create revenue.
3. Previous two elements interfere with each other and create a central element – the Value Proposition.
It makes sense – right? This logical structure makes the model catchy and easy to understand. Plus, the visual representation and spatial layout of elements make the model even more intuitive.
It’s Easy to Modify
This is the world of continuing changes. Especially in the business world. New technologies, market niches, customer needs…all of those affect your business model. So, finding an easy way to adapt your model to the changes is crucial.
Imagine rewriting a 100-page long business plan. It isn’t a pleasant thought – right? Well, the Business Model Canvas is certainly a faster way for updating your business model. It will probably take you under 10 minutes to completely rewrite your old model. However, if you stick with a business plan, it will take you longer than that just to read the first two pages.
It Focuses on a Customer Value
As I mentioned in a previous paragraph, the central part of the Business Model Canvas is the value proposition. It represents the coherence between what you’re selling and what customers need. Most importantly, it should highlight the uniqueness of how you bring that coherence.
If you can’t define a clear, concise customer value proposition it may be a sign of a bad business model. The value proposition is the most important part of the Business Model Canvas and you have to explicitly define it. So, if it turns out you’re not really sure what your proposition is – you can promptly react. You will get a timely signal to redefine your business model and avoid possible disastrous outcomes.
The Business Model Canvas is proven to work – and not just in the startup environment. Mega companies like LEGO, Microsoft or General Electric are also using this approach. They have all realized the power of this simple tool.
LEGO has revamped the entire business model using the Canvas. Not only did they avoid the bankruptcy, but they quadrupled the revenue and brought back the love of the kids around the world.
Make Your Own Business Model Canvas
It’s time for you to make your own Canvas. Click the interactive canvas below and use the post it tool to add new or edit existing post-its. Zoom in for the details, or zoom out to see a big picture.