Business Model Canvas

The Business Model Canvas (BMC) is a strategic management tool to quickly and easily define and communicate a business idea or concept.

It is a one page document which works through the fundamental elements of a business or product, structuring an idea in a coherent way.

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Key Partners are a list of other external companies/suppliers/parties you may need to achieve your key activities and deliver value to the customer.

This moves into the realm of ‘if my business cannot achieve the value proposition alone, who else do I need to rely on to do it?’.

An example of this is ‘if I sell groceries to customers, I may need a local baker to supply fresh bread to my store’.

They are a key partner to achieve the value my business promises to the customer.

The Key Activities of your business/product are the actions that your business undertakes to achieve the value proposition for your customers.

Questions to ask:

What activities does the business undertake in achieving the value proposition for the customer?
What is the resource used?
Time?
Expertise?
Distribution of product?
Technical development?
Strategy?
Offer resources (human/physical)?
What actions does it take you and/or your staff to achieve value exchange?

Key Resources

Next you should think about what practical resources are needed to achieve the key activities (actions) of the business?

Key means the resources your business requires to do business.

These resources are what is needed practically to undertake the action/activities of your business:

Office space
Computers
Hosting
People (staff)
Internet connection
Car
Bike
Oven
Electricity
Car Parts

Your business cost structure is defined as the monetary cost of operating as a business.

How much does it cost to achieve my businesses key activities?
What are the cost of my key resources and key partnerships?
How much does it cost to achieve the value proposition for my customers/users?
Are there additional costs to running a business?
Legal?
Insurance?
What is the cost of my business?
It is important also to place a monetary value on your time as a cost.
How much would it cost you to hire you?
What is the opportunity cost of running your business?

Channels describe how your company will communicate with and reach out to your customers. Channels are the touchpoints that let your customers connect with your company.

Channels play a role in raising awareness of your product or service among customers and delivering your value propositions to them. Channels can also be used to allow customers the avenue to buy products or services and offer post-purchase support.

There are two types of channels

Owned channels: company website, social media sites, in-house sales, etc.
Partner channels: partner-owned websites, wholesale distribution, retail, etc.

In this section, you need to establish the type of relationship you will have with each of your customer segments or how you will interact with them throughout their journey with your company.

There are several types of customer relationships

Personal assistance: you interact with the customer in person or by email, through phone call or other means.
Dedicated personal assistance: you assign a dedicated customer representative to an individual customer.
Self-service: here you maintain no relationship with the customer, but provides what the customer needs to help themselves.
Automated services: this includes automated processes or machinery that helps customers perform services themselves.
Communities: these include online communities where customers can help each other solve their own problems with regard to the product or service.
Co-creation: here the company allows the customer to get involved in the designing or development of the product. For example, YouTube has given its users the opportunity to create content for its audience.

Value propositions is at the heart of the business model canvas. And it represents your unique solution (product or service) for a problem faced by a customer segment, or that creates value for the customer segment.

A value proposition should be unique or should be different from that of your competitors. If you are offering a new product, it should be innovative and disruptive. And if you are offering a product that already exists in the market, it should stand out with new features and attributes.

Value propositions can be either quantitative (price and speed of service) or qualitative (customer experience or design).

Customer segments

These are the groups of people or companies that you are trying to target and sell your product or service to.

Segmenting your customers based on similarities such as geographical area, gender, age, behaviors, interests, etc. gives you the opportunity to better serve their needs, specifically by customizing the solution you are providing them.

After a thorough analysis of your customer segments, you can determine who you should serve and ignore. Then create customer personas for each of the selected customer segments.

Revenues streams are the sources from which a company generates money by selling their product or service to the customers. And in this block, you should describe how you will earn revenue from your value propositions.

A revenue stream can belong to one of the following revenue models,

Transaction-based revenue: made from customers who make a one-time payment
Recurring revenue: made from ongoing payments for continuing services or post-sale services

There are several ways you can generate revenue from

Asset sales: by selling the rights of ownership for a product to a buyer
Usage fee: by charging the customer for the use of its product or service
Subscription fee: by charging the customer for using its product regularly and consistently
Lending/ leasing/ renting: the customer pays to get exclusive rights to use an asset for a fixed period of time
Licensing: customer pays to get permission to use the company’s intellectual property
Brokerage fees: revenue generated by acting as an intermediary between two or more parties
Advertising: by charging the customer to advertise a product, service or brand using company platforms

Business Model Canvas

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Key Resources

Channels describe how your company will communicate with and reach out to your customers. Channels are the touchpoints that let your customers connect with your company.

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Value propositions is at the heart of the business model canvas. And it represents your unique solution (product or service) for a problem faced by a customer segment, or that creates value for the customer segment.

Customer segments