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What is Business Model Canvas, and How to Use It? 

image of Business Model Canvas

Alex Osterwalder of Strategyzer created the business model canvas, a nine-block diagram of a company’s value and profit logic.

The nine blocks address a business’s desirability, viability, and feasibility. The business model guides strategy implementation through organizational structures, processes, and systems.

Business Model Canvas

The nine blocks are described below with links to detailed support. Click on the left diagram to navigate through the blocks. Our online course teaches the canvas in depth: Business Models.

Desirability

The Value Proposition’s Building Block describes a Customer Segment’s bundle of products and services that create value. Customers choose companies based on their Value Proposition. It meets customer needs.

Customer Segments Building Block describes an enterprise’s target markets. Businesses depend on customers. No business survives without profitable customers.

The Channels Building Block describes how a company communicates and reaches its Customer Segments.

Channels impact customer experience.

The Customer Relationships Building Block describes a company’s relationships with Customer Segments. A company should define its relationship with each Customer Segment.

Viability

Revenues are subtracted from costs to calculate Revenue Streams Building Block earnings.

Revenue Streams are a company’s arteries. What is each Customer Segment willing to pay?

Cost Structure describes all business model costs. This building block lists the main business model costs.

Feasibility

Key Assets Building Block lists the most crucial business model assets. Every business model needs Key Resources. These resources enable an enterprise to create a Value Proposition, reach markets, maintain Customer Segments, and generate revenue.

Key Tasks Building Block lists a company’s steps to make its business model work. Every model requires Key Activities. These are the most crucial steps a business must take.

The Key Partnerships Building Block describes the business model’s supply chain. Many business models rely on partnerships.

Business Model Canvas Includes:

Value proposition

Any business/product relies on its Value Proposition.

It’s the basis of your business’s value exchange with customers.

When your business solves a customer’s problem, they pay you.

Business/product definition questions:

What am I fixing?
Why fix this?
What drives this issue?

Tips:

Based on Maslow’s Hierarchy of Needs, look at your customer segments and determine where your product/service solves their problem.

If you sell to another business, you help them deliver their Value Proposition to customers.

Understanding the company’s Customer Segment goals and your business’s value chain position is crucial.

 

Client Groups

Age, gender, interests, and spending habits segment customers.

Customer segmentation considerations:

Who are we fixing?
Who will value my offer?
Another company?
What are those businesses like?
Other people?
My value proposition: men/women?
Does it attract 20–30-year-olds or teens?
What do my value proposition seekers look like?
Market size and customer segment size are also important. This will aid your market analysis.

Customer personas for each Customer Segment can help you understand your customers.

Persona Development Guide.

 

Client Relations

Our Value Propositions and Personas help us understand our Customer Segments, but what is our relationship with them?

Customer relationships are how a company treats its clients.

Do you visit? By phone? Will your relationship be online because your business is mostly online?

Examples are:

In-person (one-on-one)
External contractors
Events (one-to-many)
Phone
Creating a Customer Journey Map is helpful.

This clarifies your customer engagement points and modes.

This will help you define your business and identify automation opportunities.

Channels

Customers enter your sales cycle through channels.

Business marketing plans usually cover this.

When choosing customer-reach channels, ask:

How will we communicate our value proposition to customers?
Customer whereabouts?
Social media?
Listening to the radio while driving?
Attending a conference?
Friday night TV?

Traction (Audiobook) by Gabriel Weinberg & Justin Mares is recommended.

Key Tasks

Key Activities are the actions your business takes to deliver value to customers.

To ask:

How does the company deliver customer value?
Which resource?
Time?
Expertise?
Product delivery?
Tech progress?
Strategy?
Human/physical resources?
How does your team achieve value exchange?

Key means business resources.

Your business needs these resources to operate:

Offices Computers
Staff Internet
Car Bike Oven Electricity
Car Parts

Key Partners

Key Partners are external companies/suppliers/parties you may need to complete key activities and provide customer value.

Who else can if my business needs help to achieve the value proposition?

If I sell groceries, I may need a local baker to supply fresh bread to my store.

My business needs them to deliver customer value.

Cost Structures

image of Cost Structures

Operating a business costs money.

My business’s key activities cost how much?
My key partnerships and resources cost what?
How much does my customer/user value proposition cost?
Are there additional business costs?
Legal?
Insurance?
My business cost?
Also, put a price on your time.
Hire you for how much?
Your business’s opportunity cost?
Revenue Sources
Revenue Streams are how your business turns your Value Proposition or customer solution into profit.

It’s important to price your business according to the pain of purchase versus the pain of solving the customer’s problem.

How do you make money?

Many revenue models exist:

Pay-per-product (pay-per-view)
Service fee
Flat rate
Subscription Dividends
Referral feeds
Freemium
Equity gain

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