Business Model Canvas: Explained with Examples

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Got a new business idea, but don’t know how to put it to work? Want to improve your existing business model? Overwhelmed by writing your business plan? There is a one-page technique that can provide you the solution you are looking for, and that’s the business model canvas.

In this guide, you’ll have the Business Model Canvas explained, along with steps on how to create one. All business model canvas examples in the post can be edited online.

What is a Business Model Canvas

A business model is simply a plan describing how a business intends to make money. It explains who your customer base is and how you deliver value to them and the related details of financing. And the business model canvas lets you define these different components on a single page.   

The Business Model Canvas is a strategic management tool that lets you visualize and assess your business idea or concept. It’s a one-page document containing nine boxes that represent different fundamental elements of a business.  

The business model canvas beats the traditional business plan that spans across several pages, by offering a much easier way to understand the different core elements of a business.

The right side of the canvas focuses on the customer or the market (external factors that are not under your control) while the left side of the canvas focuses on the business (internal factors that are mostly under your control). In the middle, you get the value propositions that represent the exchange of value between your business and your customers.

The business model canvas was originally developed by Alex Osterwalder and Yves Pigneur and introduced in their book ‘ Business Model Generation ’ as a visual framework for planning, developing and testing the business model(s) of an organization.

Business Model Canvas Explained

What Are the Benefits of Using a Business Model Canvas

Why do you need a business model canvas? The answer is simple. The business model canvas offers several benefits for businesses and entrepreneurs. It is a valuable tool and provides a visual and structured approach to designing, analyzing, optimizing, and communicating your business model.

  • The business model canvas provides a comprehensive overview of a business model’s essential aspects. The BMC provides a quick outline of the business model and is devoid of unnecessary details compared to the traditional business plan.
  • The comprehensive overview also ensures that the team considers all required components of their business model and can identify gaps or areas for improvement.
  • The BMC allows the team to have a holistic and shared understanding of the business model while enabling them to align and collaborate effectively.
  • The visual nature of the business model canvas makes it easier to refer to and understand by anyone. The business model canvas combines all vital business model elements in a single, easy-to-understand canvas.
  • The BMC can be considered a strategic analysis tool as it enables you to examine a business model’s strengths, weaknesses, opportunities, and challenges.
  • It’s easier to edit and can be easily shared with employees and stakeholders.
  • The BMC is a flexible and adaptable tool that can be updated and revised as the business evolves. Keep your business agile and responsive to market changes and customer needs.
  • The business model canvas can be used by large corporations and startups with just a few employees.
  • The business model canvas effectively facilitates discussions among team members, investors, partners, customers, and other stakeholders. It clarifies how different aspects of the business are related and ensures a shared understanding of the business model.
  • You can use a BMC template to facilitate discussions and guide brainstorming brainstorming sessions to generate insights and ideas to refine the business model and make strategic decisions.
  • The BMC is action-oriented, encouraging businesses to identify activities and initiatives to improve their business model to drive business growth.
  • A business model canvas provides a structured approach for businesses to explore possibilities and experiment with new ideas. This encourages creativity and innovation, which in turn encourages team members to think outside the box.

How to Make a Business Model Canvas

Here’s a step-by-step guide on how to create a business canvas model.

Step 1: Gather your team and the required material Bring a team or a group of people from your company together to collaborate. It is better to bring in a diverse group to cover all aspects.

While you can create a business model canvas with whiteboards, sticky notes, and markers, using an online platform like Creately will ensure that your work can be accessed from anywhere, anytime. Create a workspace in Creately and provide editing/reviewing permission to start.

Step 2: Set the context Clearly define the purpose and the scope of what you want to map out and visualize in the business model canvas. Narrow down the business or idea you want to analyze with the team and its context.

Step 3: Draw the canvas Divide the workspace into nine equal sections to represent the nine building blocks of the business model canvas.

Step 4: Identify the key building blocks Label each section as customer segment, value proposition, channels, customer relationships, revenue streams, key resources, key activities, and cost structure.

Step 5: Fill in the canvas Work with your team to fill in each section of the canvas with relevant information. You can use data, keywords, diagrams, and more to represent ideas and concepts.

Step 6: Analyze and iterate Once your team has filled in the business model canvas, analyze the relationships to identify strengths, weaknesses, opportunities, and challenges. Discuss improvements and make adjustments as necessary.

Step 7: Finalize Finalize and use the model as a visual reference to communicate and align your business model with stakeholders. You can also use the model to make informed and strategic decisions and guide your business.

What are the Key Building Blocks of the Business Model Canvas?

There are nine building blocks in the business model canvas and they are:

Customer Segments

Customer relationships, revenue streams, key activities, key resources, key partners, cost structure.

  • Value Proposition

When filling out a Business Model Canvas, you will brainstorm and conduct research on each of these elements. The data you collect can be placed in each relevant section of the canvas. So have a business model canvas ready when you start the exercise.  

Business Model Canvas Template

Let’s look into what the 9 components of the BMC are in more detail.

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.

Customer Persona Template for Business Model Canvas Explained

There are different customer segments a business model can target and they are;

  • Mass market: A business model that focuses on mass markets doesn’t group its customers into segments. Instead, it focuses on the general population or a large group of people with similar needs. For example, a product like a phone.  
  • Niche market: Here the focus is centered on a specific group of people with unique needs and traits. Here the value propositions, distribution channels, and customer relationships should be customized to meet their specific requirements. An example would be buyers of sports shoes.
  • Segmented: Based on slightly different needs, there could be different groups within the main customer segment. Accordingly, you can create different value propositions, distribution channels, etc. to meet the different needs of these segments.
  • Diversified: A diversified market segment includes customers with very different needs.
  • Multi-sided markets: this includes interdependent customer segments. For example, a credit card company caters to both their credit card holders as well as merchants who accept those cards.

Use STP Model templates for segmenting your market and developing ideal marketing campaigns

Visualize, assess, and update your business model. Collaborate on brainstorming with your team on your next business model innovation.

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.

You can understand the kind of relationship your customer has with your company through a customer journey map . It will help you identify the different stages your customers go through when interacting with your company. And it will help you make sense of how to acquire, retain and grow your customers.

Customer Journey Map

This block is to 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.

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

What are the activities/ tasks that need to be completed to fulfill your business purpose? In this section, you should list down all the key activities you need to do to make your business model work.

These key activities should focus on fulfilling its value proposition, reaching customer segments and maintaining customer relationships, and generating revenue.

There are 3 categories of key activities;

  • Production: designing, manufacturing and delivering a product in significant quantities and/ or of superior quality.
  • Problem-solving: finding new solutions to individual problems faced by customers.
  • Platform/ network: Creating and maintaining platforms. For example, Microsoft provides a reliable operating system to support third-party software products.

This is where you list down which key resources or the main inputs you need to carry out your key activities in order to create your value proposition.

There are several types of key resources and they are

  • Human (employees)
  • Financial (cash, lines of credit, etc.)
  • Intellectual (brand, patents, IP, copyright)
  • Physical (equipment, inventory, buildings)

Key partners are the external companies or suppliers that will help you carry out your key activities. These partnerships are forged in oder to reduce risks and acquire resources.

Types of partnerships are

  • Strategic alliance: partnership between non-competitors
  • Coopetition: strategic partnership between partners
  • Joint ventures: partners developing a new business
  • Buyer-supplier relationships: ensure reliable supplies

In this block, you identify all the costs associated with operating your business model.

You’ll need to focus on evaluating the cost of creating and delivering your value propositions, creating revenue streams, and maintaining customer relationships. And this will be easier to do so once you have defined your key resources, activities, and partners.  

Businesses can either be cost-driven (focuses on minimizing costs whenever possible) and value-driven (focuses on providing maximum value to the customer).

Value Propositions

This is the building block that 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).

Value Proposition Canvas

What to Avoid When Creating a Business Model Canvas

One thing to remember when creating a business model canvas is that it is a concise and focused document. It is designed to capture key elements of a business model and, as such, should not include detailed information. Some of the items to avoid include,

  • Detailed financial projections such as revenue forecasts, cost breakdowns, and financial ratios. Revenue streams and cost structure should be represented at a high level, providing an overview rather than detailed projections.
  • Detailed operational processes such as standard operating procedures of a business. The BMC focuses on the strategic and conceptual aspects.
  • Comprehensive marketing or sales strategies. The business model canvas does not provide space for comprehensive marketing or sales strategies. These should be included in marketing or sales plans, which allow you to expand into more details.
  • Legal or regulatory details such as intellectual property, licensing agreements, or compliance requirements. As these require more detailed and specialized attention, they are better suited to be addressed in separate legal or regulatory documents.
  • Long-term strategic goals or vision statements. While the canvas helps to align the business model with the overall strategy, it should focus on the immediate and tangible aspects.
  • Irrelevant or unnecessary information that does not directly relate to the business model. Including extra or unnecessary information can clutter the BMC and make it less effective in communicating the core elements.

What Are Your Thoughts on the Business Model Canvas?

Once you have completed your business model canvas, you can share it with your organization and stakeholders and get their feedback as well. The business model canvas is a living document, therefore after completing it you need to revisit and ensure that it is relevant, updated and accurate.

What best practices do you follow when creating a business model canvas? Do share your tips with us in the comments section below.

Join over thousands of organizations that use Creately to brainstorm, plan, analyze, and execute their projects successfully.

FAQs About the Business Model Canvas

  • Use clear and concise language
  • Use visual-aids
  • Customize for your audience
  • Highlight key insights
  • Be open to feedback and discussion

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Amanda Athuraliya is the communication specialist/content writer at Creately, online diagramming and collaboration tool. She is an avid reader, a budding writer and a passionate researcher who loves to write about all kinds of topics.

Business Model Canvas Explained: Definition, Pros, Cons, and Building Blocks

describe the concept of business model canvas

So, here's the thing. We all know that we need structure to work effectively, but where do we start with so many options available? One tool worth considering is the Business Model Canvas (BMC) . Used effectively, it can give solid structure to your planning. 

In this article we will examine how the model works and a few ways to use it effectively. Then, we will describe its best practices and some recommendations on getting started. Finally, we will explore possible alternatives. 

Ready to get to know all about the BMC? Let's begin.

The Business Model Canvas, explained

The Business Model Canvas is a strategic management tool that helps businesses visualize and analyze their business models. It consists of 9 fundamental building blocks that describe the core aspects of a company's value proposition, infrastructure, customers, and finances (more on that later, we promise). 

By using it, organizations can gain a deeper understanding of their overall business model , identify areas for improvement, and develop new strategies for growth. One of the key benefits of the BMC format is that it's very visual. Used adequately, it allows organizations to create a display of their business model in alignment with strategic business objectives and the overall value proposition.

The nine BMC building blocks were initially presented in 2005 by Alexander Osterwalder. They were based on his Ph.D. work on business model ontology, supervised by Yves Pigneur. Since its release, the authors have developed other related tools, such as the Culture Map and the Value Proposition Canvas, which have helped the BMC tool to evolve and added value to it.

Business Model Canvas examples

Some examples of the BMC include:

  • Strategy planning
  • Business planning
  • Business modeling

Lean Canvas vs. Business Model Canvas

Both the Lean and Business Model Canvas enable you to capture your entire model on a single page. The primary difference between them is that the Lean Canvas focuses mainly on solving a particular problem. The Business Canvas Model, on the other hand, is more sales orientated and usually focuses on selling products or services. 

Advantages and disadvantages of the Business Model Canvas

Even though the BMC offers a series of features in order to effectively visualize and analyze your organization's business model, there are also some possible drawbacks to be aware of – and avoid. 

To start on the right note, the benefits of the Business Model Canvas include:

  • A clear and comprehensive business model overview in a single visual format. This makes it easier to understand, articulate, and communicate.
  • Strong collaboration and breaking down silos. Using the BMC approach incentives people to work as one team, as it involves all stakeholders, and enables them to actively participate in developing, improving, and refining the business model.
  • Colleagues constantly progressing with feedback (to borrow from an ITIL principle). The BMC approach allows for a fast and efficient testing of different business model configurations, speeding up the innovation process and reducing the time to market.
  • A structured and systematic approach to analyzing and designing business models, which helps identify areas for improvement and innovation.
  • A flexible approach that enables innovation instead of limiting it. The framework can be adapted to different types of businesses, industries, and customer groups.

However, if you choose to work with this management tool, you need to consider its potential disadvantages :

  • Using the BMC approach effectively can be challenging without prior knowledge of business modeling concepts and terminology. You will need to put the work in and do some pre-reading to get the most out of it.
  • Because it's so visual, it may oversimplify the complexity of a business model, making it more challenging to articulate some of the aspects of the organization's operations and performance. This makes it unsuitable for highly-specialized or complex businesses.
  • Because it's a framework rather than a prescriptive standard that must be strictly adhered to, it doesn't provide detailed guidance on implementing or executing the business model, which can lead to difficulties in translating the canvas into action.
  • It can rely on assumptions and hypotheses, which may not always be accurate or relevant for real-world situations.

The 9 building blocks of a Business Canvas Model

business-model-canvas-building-blocks

The Business Model Canvas is organized in nine  building blocks that represent a business model's key elements. These building blocks are:

  • Value Proposition - The unique value the business provides to its customers and how it differentiates itself from competitors. In other words, it’s what sets your business apart, what makes it special, and what value it brings.
  • Customer Segments - The different groups of customers the business targets with its products or services. This building block looks at your most important customers.
  • Customer Relationships - The business' relationships with its customers and how it interacts with them. This is a fundamental building block as not only does it help you build and maintain a relationship, it also enables you to map out the cost and deliverables needed to continue to improve that relationship.
  • Channels - T he different channels that the business uses to reach and interact with customers, including physical and digital channels.
  • Key Partnerships - The relationships and collaborations that the business has with its suppliers, vendors, and other external partners.
  • Key Activities - The key activities that the business must perform to deliver its value proposition and operate successfully. This building block helps you to define your most mission-critical actions and prioritize them accordingly.
  • Key Resources - The key resources the business requires to operate, including human resources, physical assets, and intellectual property. This can also include relationships, distribution channels, and virtual assets.
  • Revenue Streams - The different sources of revenue that the business generates from its customers, including one-time sales, recurring revenue, and other revenue streams. This building block also helps determine how each stream contributes to the business profit.
  • Cost Structure - The various costs that the business incurs to operate, including fixed costs, variable costs, and other expenses. It also helps you identify your most expensive assets and activities to make effective financial plans for the future.

How to build a Business Model Canvas in 14 steps

The Business Model Canvas is flexible – no one size fits all. But for our money, there are 14 steps to effectively build it.

Step 1: Define the purpose 

The first step is to define the purpose of the Business Model Canvas. Where are you now, and where do you want to be? What do you hope to achieve? Who is the target audience? Have you double-checked to ensure what you want to achieve is in line with the strategic objectives of the rest of the business?

Step 2: Identify the nine building blocks

Identify the nine building blocks of the BMC, review each in relation to your business, and understand their purpose.

Step 3: Define the Value Proposition

What will add value? Start by defining the unique value that your business offers to customers. This will be the foundation of your canvas.

Step 4: Identify your Customer Segments 

Define the different groups of customers your business targets and their specific needs and preferences so you can focus and direct your efforts accordingly.

Step 5: Define Customer Relationships 

Identify your business' relationships with its customers and how it interacts with them. You can also use this step to identify your most important relationships so you can focus more effort on maintaining and improving them.

Step 6: Determine the Channels

Identify your business's channels to reach and interact with its customers, including physical and digital channels. From a service desk perspective, this could be offering a tier 0 channel with self-service or AI-enabled support capabilities before providing tier 1 and level 2 channels which offer a more people-centric user experience .

Step 7: Define Key Partnerships

Identify your business's relationships and collaborations with its suppliers, vendors, and other external partners. Remember, it's not just relationships with customers and stakeholders that matter, your suppliers are part of your team, so manage those relationships appropriately.

Step 8: Identify Key Activities

Define the key activities that your business must perform to deliver its value proposition and operate successfully.

Step 9: Determine Key Resources

Identify the key resources that your business requires to operate, including people, knowledge and wisdom, financial assets, and IT assets.

Step 10: Determine Revenue Streams 

Identify the different sources of revenue that your business generates from its customers. If you have a finance team,  work with them to identify current revenue streams and plan for future ones.

Step 11: Determine Cost Structure

Work with your finance team to identify the various costs that your business incurs to operate, CAPEX, and OPEX costs. 

Step 12: Build the Canvas

Once you have defined all of the building blocks, you can start creating the canvas to visualize what you are planning to accomplish.

Step 13: Review and refine

The BMC isn't a one-and-done approach. Review your model and seek feedback from your stakeholders to correct the course when needed.

Step 14: Keep going! 

In the words of Walt Disney, "Keep moving forward." Build and refine your model over time to reflect current and future activities more accurately. 

How to complete a Business Model Canvas

No one likes a blank page, do they? The difficult part is always getting started, but I promise, if you follow these steps, you'll be off to a great start: 

  • Start with the Value Proposition - Before you do anything else, fill in the Value Proposition block in the center of the canvas. This should describe the unique value that your business provides to customers and how it differentiates itself from competitors. Focus on getting this point right because value is everything in terms of the BMC.
  • Add in your enablers - This will include your key activities, customer segments, relationships (both customer and supplier relationships) assets, key activities, and channels.
  • Add in your financials - Put in your revenue dreams and your cost models to make your BCM more transparent and ensure there are no hidden costs.
  • Progress iteratively with feedback - Once you have filled in all the building blocks, review your canvas, iterate, and redefine  as needed. Seek input from stakeholders and make adjustments.
  • Give the gift of clarity - Remember, this is a visual model, so don't get too stuck on the details or use too much jargon. The effect you're looking for is clear, concise, and visual.
  • Relationships matter - We are talking about the relationship between each building block, so ensure they are correctly represented in your diagram.

Six alternatives to the Business Model Canvas

While the Business Model Canvas is a popular tool for developing and communicating a business model, other options are available too. Some alternatives include:

  • Lean Canvas - This tool is similar to the BMC but focuses on startups and small businesses. It includes fewer blocks and focuses on validating hypotheses and testing assumptions quickly.
  • SWOT Analysis - This tool helps to identify a business's strengths, weaknesses, opportunities, and threats. This can be a valuable tool for assessing the current state of a company and identifying areas for improvement.
  • Business Model Innovation - This involves developing a new business model that is different from the traditional one used in the industry. It can be done through creative thinking, exploring new technologies, or adopting a new approach to customer relationships.
  • Blue Ocean Strategy - This framework helps businesses to create new markets and uncontested market space. It involves identifying and focusing on areas of innovation that competitors have not explored.
  • Value Proposition Canvas - This tool helps businesses to define and communicate their value proposition to customers. It focuses on the customer's needs, desired outcomes, challenges, and how the company can better meet those needs than its competitors.

Key takeaways

The Business Model Canvas or BMC is a strategic management tool that helps businesses visualize, design, and analyze their business models. Some of its common applications include business planning, value propositions, and modeling.

If you want to give it a shot to plan your organization’s strategy, make sure that you have your BCM template ready with the nine key elements that need to be completed. And don’t forget to follow through our six tips on how to get started!

  Frequently Asked Questions

How do you make a good business model canvas .

To make a good Business Model Canvas, clearly define the unique value proposition of your business and ensure that the key building blocks of the canvas (such as channels, revenue streams, and cost structure) are aligned with the overall strategic objectives of the business. Review and improve the canvas as needed to continue improving and aligning with business needs.

What are the four types of business models? 

The four types of business models are product, service, platform, and sub-subscription-based.

What are the three sections of the Business Model Canvas? 

Value Propositions, enablers, and financial planning.

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describe the concept of business model canvas

Strategic Management Insight

Business Model Canvas (BMC)

Business Model Canvas

What is the Business Model Canvas

Business Model Canvas (BMC) is a framework that helps determine how a business creates, delivers, and captures values. It is a visual representation of the important aspects or parts to consider when designing a Business Model.

BMC aids in constructing a shared understanding of a business by condensing it into a simple, relevant, and intuitively understandable one-page visual while not oversimplifying the complexities of how enterprises function.

This concept has been applied and tested around the world and is used in organizations such as GE, P&G, Nestlé, IBM, Ericsson, and Deloitte, including Government Services of Canada and many more [1],[2] .

The Nine Building Blocks

BMC describes a business through nine basic building blocks that show the logic of how a business intends to make money. These nine blocks cover the four main areas of a business: Customers, Offer, Infrastructure, and Financial Viability.

BMC acts as a shared language for describing, visualizing, assessing, and changing business models. It is like a blueprint for a strategy to be implemented through organizational structures, processes, and systems.

Nine building blocks of a business

Each of these blocks is explained in more detail as follows:

1. Customer Segments (CS)

These are the groups of people or organizations that a business aims to reach and serve. Customers are the heart of a business model, and without (profitable) customers, a business cannot survive.

Customers are grouped into distinct segments with common needs, common behaviors, or other attributes. Customer groups represent separate segments if:

  • Their needs require and justify a distinct offer.
  • They are reached through different Distribution Channels.
  • They require different types of relationships.
  • They have substantially different profitability.
  • They are willing to pay for different aspects of the offer.

An organization must make a conscious decision about which segment(s) to serve and which segments to ignore. Once this decision is made, a business model can be carefully designed around a strong understanding of specific customer needs.

The following two questions, if answered with clarity, help a business identify its CS.

  • For whom are we creating value?
  • Who are our most important customers?
  • What are the customer archetypes?

Examples of some of the Customer Segments are shown in the figure:

Examples of Customer Segments

2. Value proposition (VP)

Value Proposition describes the bundle of products and services that create value for a specific Customer Segment chosen by a business.

A VP is the reason why customers turn to one company over another. VP must solve a customer’s problem or satisfy a need. A business can have more than one VP, but each must consist of a selected bundle of products and/or services that caters to the requirements of a specific Customer Segment.

While some VPs may be innovative and represent a new or disruptive offer, others may be similar to existing market offers but with added features and attributes.

An organization’s VP must answer the following questions with clarity:

  • What value do we deliver to the customer?
  • Which one of our customer’s problems are we helping to solve?
  • Which customer needs are we satisfying?
  • What bundles of products and services are we offering to each CS?

Elements from some of the following can contribute to customer value creation:

Examples of Customer Value Propositions.

3. Channels (CH)

Channels describe how a company communicates with and reaches its Customer Segments to deliver a Value Proposition.

Channels are customer touch points that play an important role in the customer experience and serve several functions, including:

  • Raising awareness about a company’s products and services
  • Helping customers evaluate a company’s Value Proposition
  • Allowing customers to purchase specific products and services
  • Delivering a Value Proposition to customers
  • Providing post-purchase customer support

To establish an effective channel, a company must first answer the following:

  • Through which Channels do our Customer Segments want to be reached?
  • How are we reaching them now?
  • How are our Channels integrated?
  • Which ones work best?
  • Which ones are most cost-efficient?
  • How are we integrating them with customer routines?

There are five distinct phases (figure below) through which a channel passes, and it could cover more than one of these phases at a time.

Different phases of channels

Channels can be either direct, indirect or hybrid, as shown:

Different types of channels

Finding the right mix of Channels to satisfy how customers want to be reached is crucial in bringing a Value Proposition to market and can create a great customer experience.

4. Customer Relationships (CR)

Customer Relationships describe the types of relationships a company establishes with specific Customer Segments. Relationships can range from personal to automated. An organization’s CR strategy may be driven by one of the following motivators:

  • Customer acquisition
  • Customer retention
  • Boosting sales (upselling)

A business can arrive at the optimum CR by asking the following questions:

  • What type of relationship does each of our Customer Segments expect us to establish and maintain with them?
  • Which ones have we established?
  • How costly are they?
  • How are they integrated with the rest of our business model?

Several categories of Customer Relationships may co-exist in a company’s relationship with a particular Customer Segment. Some of which are:

Types of Customer Relationships

5. Revenue Streams (RS)

Revenue Streams represent the company’s cash (earnings) from each Customer Segment and are like the arteries of any business.

Revenue streams

There are two distinct categories of Revenue Streams:

  • Transaction Revenues which are one-time customer payments
  • Recurring Revenues that are ongoing payments to either deliver a Value Proposition to customers or provide post-purchase customer support

A business can arrive at its ideal revenue stream by asking the following questions:

  • For what value are our customers willing to pay?
  • For what do they currently pay?
  • How are they currently paying?
  • How would they prefer to pay?
  • How much does each Revenue Stream contribute to overall revenues?

There are several ways a business can generate revenue, such as:

Types of Revenue streams

A business may have one or more Revenue Streams, each with different pricing mechanisms. The choice of pricing mechanism greatly influences the revenues generated.

There are two main types of pricing mechanisms, Fixed and Dynamic, as follows:

Types of Pricing Mechanisms

6. Key Resources (KR)

The Key Resources describe the most important assets required to make a business model work.

These resources allow an enterprise to create and offer a Value Proposition, reach markets, maintain relationships with Customer Segments, and earn revenues. Different Key Resources are needed depending on the type of business model.

For example, a chip fabrication business like TSMC [9] requires capital-intensive facilities worth billions of dollars, while a chip designer like NVIDIA [10] would need skilled manpower as its Key Resource.

Key Resources can be owned or leased by a business or acquired from its key partners. They can be identified by answering the following questions:

  • What Key Resources do our Value Propositions require?
  • What resources are required to sustain our Distribution Channels, Customer Relationships and Revenue Streams?

Key Resources can be categorized as follows:

Key Resources

7. Key Activities (KA)

Key Activities describe the most important things a company must do to make its business model work. They are required to create and offer a Value Proposition, reach markets, maintain Customer Relationships, and earn revenues.

Key Activities differ depending on the business model type. For example, Microsoft’s Key Activity is software development, while for Dell, it is Supply Chain Management. For a consultancy firm like McKinsey, Key Activity is problem-solving.

A business can identify its Key Activities by answering the following questions:

  • What Key Activities do our Value Propositions require?
  • What activities directly contribute to maintaining our Distribution Channels, Customer Relationships and Revenue Streams?

Key Activities can be categorized as follows:

Key Activities

8. Key Partnerships (KP)

The Key Partnerships describe the network of suppliers and partners that make the business model. There are four types of partnerships:

Four types of partnerships

A business must ask the following questions before forming partnerships:

  • Who are our key partners?
  • Who are our key suppliers?
  • Which Key Resources are we acquiring from partners?
  • Which Key Activities do partners perform?

Primarily, there are three motivations for a business when creating partnerships, as shown:

Three motivators to creating partnerships

9. Cost Structure (CS)

Cost Structure describes all costs incurred to operate a business model. A business incurs costs in creating and delivering value, maintaining customer relationships, and generating revenue. Costs are business-specific, where some are more cost-driven than others.

A business must answer the following questions to arrive at an optimum cost structure:

  • What are the most important costs inherent in our business model?
  • Which Key Resources are most expensive?
  • Which Key Activities are most expensive?

While costs should be minimized in every business model, it is useful to distinguish between two broad classes of business model Cost Structures:

  • Cost Driven : This model focuses on minimizing costs wherever possible. This approach aims at creating and maintaining the leanest possible Cost Structure, using low-price Value Propositions, maximum automation, and extensive outsourcing. Examples: No frills airlines like Southwest & easyJet, Fast food joints such as McDonald’s & KFC.
  • Value Driven: Premium Value Propositions and a high degree of personalized service usually characterize value-driven business models. Examples: Luxury hotels, Expensive Cars like Rolls-Royce

Cost Structures can have the following characteristics:

characteristics of cost structures

Putting-it-all together

The nine business model Building Blocks form the basis for a handy tool, which is called the Business Model Canvas (figure below). This tool resembles a painter’s canvas preformatted with nine blocks that allow painting pictures of new or existing business models. It is a hands-on tool that fosters understanding, discussion, creativity, and analysis.

Template for The Business Model Canvas

BMC works best when printed out on a large surface such that groups of people can jointly note, sketch, and discuss business model elements.

Example of Business Model Canvas

Nespresso [17] , a fully owned daughter company of Nestlé, changed the dynamics of the coffee industry by turning a transactional business (selling coffee through retail) into one with recurring revenues (selling proprietary pods through direct channels).

The two-part strategy involved selling their patented coffee machine to retail customers first to lock them into the brand. This generated a recurring demand for coffee refills (pods) that led to constant revenues. These pods were sold directly through mail/website/own stores, thereby eliminating middlemen/dealers, which further increased profits [1] .

Nespresso’s strategy plotted on a Business Model Canvas looks as follows:

Example of business model canvas

Business Model Canvas helped Nespresso establish a solid and enduring foundation by engaging consumers directly and bringing a barista-like experience within the reach of a home or an office.

Advantages & Limitations

  • Encourages Collaboration – collaborative framework, which helps put different business stakeholders in sync. This improves the likelihood of generating new ideas and their quality.
  • Facilitates testing of ideas before launch – allows business owners, strategists, and managers to think through business ideas as well as test concepts that would otherwise get tested with potential customers where the stakes are higher.
  • Customer-centered approach – Key customer segments, relationships, activities, and value propositions are all elements that focus on creating, delivering, and capturing value for customers.
  • Clarity – Analyzing the business through the lens of nine blocks brings better clarity and structure to the business model.

Limitations

  • Lacks a section for defining the start-up’s mission statement, which is crucial to understanding the goals and objectives of any business.
  • Overlooks the importance of a profit mechanism beyond costs and revenues, including decisions on how to use potential profits.
  • The order of the canvas is not intuitive, making it difficult to read and understand the strategic decisions in a logical sequence.
  • Does not depict interconnections between different elements, which can have a significant impact on the overall business model.
  • Fails to acknowledge the company’s role within its ecosystem, including its impact on the environment and local communities.
  • External factors such as competition, history, and other industry-specific factors are absent from the canvas, which can greatly influence the success of a business model.

1. “A Better Way to Think About Your Business Model”. Harvard Business Review, https://hbr.org/2013/05/a-better-way-to-think-about-yo . Accessed 01 Aug 2023

2. “Business Model Generation”. Alexander Osterwalder, https://www.strategyzer.com/books/business-model-generation . Accessed 28 Jul 2023

3. “The Apple M1 is a revolution that is changing the computing world”. Citymagazine, https://citymagazine.si/en/apple-m1-is-a-revolution-that-changes-the-computer-world/ . Accessed 29 Jul 2023

4. “Mass Customization”. Corporate Finance Institute, https://corporatefinanceinstitute.com/resources/management/mass-customization/ . Accessed 29 Jul 2023

5. “Moka Pot”. Wikipedia, https://en.wikipedia.org/wiki/Moka_pot . Accessed 29 Jul 2023

6. “NetJets Homepage”. NetJets, https://www.netjets.com/en-us/ . Accessed 01 Aug 2023

7. “Distribution Channels – Definition, Types, & Functions”. Feedough, https://www.feedough.com/distribution-channels-definition-types-functions/ . Accessed 30 Jul 2023

8. “Lease from Hertz”. Hertz, https://www.hertz.com/rentacar/rental-car/car-lease . Accessed 30 Jul 2023

9. “TSMC”. Wikipedia, https://en.wikipedia.org/wiki/TSMC . Accessed 30 Jul 2023

10. “NVIDIA”. Wikipedia, https://en.wikipedia.org/wiki/Nvidia . Accessed 30 Jul 2023

11. “BMW, Daimler, Ford and Volkswagen team up on high-power charging network”. Techcrunch, https://techcrunch.com/2017/11/03/bmw-daimler-ford-and-volkswagen-team-up-on-high-power-charging-network/ . Accessed 31 Jul 2023

12. “Honda And Sony Combine Talents To Build Electric Vehicles”. Forbes, https://www.forbes.com/sites/peterlyon/2022/06/26/honda-and-sony-announce-joint-venture-to-build-electric-vehicles/ . Accessed 31 Jul 2023

13. “Uber and Spotify launch car music playlist partnership”. BBC, https://www.bbc.com/news/technology-30080974 . Accessed 31 Jul 2023

14. “Walmart Has the Scale and Infrastructure to Generate Positive Gains”. Yahoo Finance, https://finance.yahoo.com/news/walmart-scale-infrastructure-generate-positive-201822628.html . Accessed 31 Jul 2023

15. “Demand-Side Economies of Scope in Big Tech Business Modelling and Strategy”. MDPI, https://www.mdpi.com/2079-8954/10/6/246 . Accessed 31 Jul 2023

16. “The Business Model Canvas”. Strategyzer, https://www.strategyzer.com/canvas/business-model-canvas . Accessed 31 Jul 2023

17. “HomePage”. Nespresso, https://www.nespresso.com/us/en/ . Accessed 01 Aug 2023

18. “Business Model Canvas of Nespresso”. Alex Osterwalder, https://www.youtube.com/watch?v=dhQh-tryXOg . Accessed 01 Aug 2023

19. “Nespresso Capsule”. Electromall, https://electromall.net/product/nespresso-capsule/ . Accessed 01 Aug 2023

20. “The Best Nespresso Machine (But It’s Not for Everyone)”. Newyork Times, https://www.nytimes.com/wirecutter/reviews/best-nespresso-machine/ . Accessed 01 Aug 2023

21. “Business Model Canvas”. Think Design, https://think.design/user-design-research/business-model-canvas/ . Accessed 01 Aug 2023

22. “6 Problems with the Business Model Canvas”. The Pourquoi Pas, https://www.thepourquoipas.com/post/problems-with-the-business-model-canvas . Accessed 01 Aug 2023

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Business Model Canvas

What is the business model canvas.

A business model canvas provides a high-level, comprehensive view of the various strategic details required to successfully bring a product to market. The typical use case for this tool is to outline the fundamental building blocks of a business, but it can be used effectively for individual products as well. The exact ingredients may vary, but these are some of the typical components included:

  • Customer segments —Who is going to use this product?
  • Product value propositions —What is this going to do for the customer to make their life/job better?
  • Revenue streams —How will the company make money from this product?
  • Channels —How will the product be sold or distributed?
  • Customer relationships —What is the success and support strategy for new customers?
  • Key partners —What other companies or individuals are part of the development and go-to-market strategy?
  • Key activities —What must happen internally to release this product?
  • Key resources —What people, materials and budget are required to pull this off?
  • Cost structure —How much will it cost to develop, manufacture, distribute, and support the product?

Asking and answering these questions should be de rigueur for any new product, but this particular framework is useful for distilling the supporting business case down into something easily digestible. By forcing everything to be on a single page, each question must be answered succinctly, which often cuts through any grandstanding to illustrate whether each area is truly addressed and viable.

How do product managers use the business model canvas?

The business model canvas serves two primary purposes for product managers : focusing their thinking during its creation along with expediting and framing the conversation when communicating with others.

Because the business model canvas is a comprehensive summary of what the product will do, who will use it, why they’ll use it, how it will happen, and how the money works, it requires a lot of thinking and homework to put it together. This exercise is very helpful for product managers to fully understand the market opportunity and refine their story while uncovering potential problem areas and fully vetting their impact. Plus the process of boiling everything down to a single page ensures that what is included is as truthful and well supported as possible.

The business model canvas can serve as a continually referenceable touchstone for the product development process and beyond, essentially serving as a mission statement for the product. As conditions on the ground change and more is learned about the product’s market reception and usage, the canvas can be updated to accurately reflect the latest information; reviewing the canvas periodically is a worthy activity in and of itself.

As a communication tool, the business model canvas is an ideal document for our short attention span world and is as useful with the executive team as it is with a junior developer. Since it only contains the most salient and relevant information, the audience won’t be drowning in details or distracted by supporting evidence or non-sequiturs. The canvas can also create a universal vocabulary for the product and get everyone using the same language and concepts going forward.

[Free report] 2021 State of Product Management ➜

Tips for using the business model canvas

Here is how to make the most of the business model canvas and the process of creating and maintaining it:

  • Note assumptions and challenge them —Since a business model canvas is developed while a product is still “theoretical” there is often a lack of actual facts to rely on. Instead, educated guesses, informed opinions and assumptions are utilized to build it out. While there’s often no escaping these, anything in the canvas that is an assumption versus a proven fact should be called out, with every effort made to both challenge the assumption and anticipate the impact if the assumption turns out to be incorrect.
  • Bounce it off a virgin audience —Fellow employees and even board members will approach a business model canvas with a trunkload of inherent biases. To truly test the veracity and completeness of a canvas, allow some outside parties to validate it independently. It should be a self-explanatory document, so allowing them to review it and provide feedback without any dialogue or explanations is a great test of its worthiness and thoroughness.
  • It’s easy to update, so keep it current —Unlike longer, weightier documents, the single-page nature of the business model canvas means there’s no excuse for it to languish and fall behind the business’s current line of thinking or newly gathered information. Reviewing it on a regular basis and maintaining its accuracy enhances its usefulness and is a helpful process to note when assumptions or plans have changed.
  • An ever-present reminder —Thoughts, plans, goals, and assumptions were laid out succinctly in the canvas with great care and deliberation. Going forward the canvas can be continually referred to for guidance, inspiration, and level setting as folks become swept up in the momentum of product development, sales, and marketing.
  • Present it in pieces —Sure, the entire business model canvas fits on one piece of paper, but there is a lot of things on that 8 ½ x 11 inch page. When presenting it, discuss each piece individually, gradually revealing the entire contents. This will prevent information overload and allow the team to convey things narratively instead of an information dump.
  • Reference all the evidence —Any hard data should be clearly referenced (if not included) in the canvas to give the arguments and statements as much legitimacy as possible. Reviewers will be trying to poke holes (as they should), so firm things up whenever there’s a chance.
  • Be specific —No one needs a business model canvas to understand fundamental business case elements; it is intended to tell the story and rationale for this particular product. Cut out anything generic and make it as relevant to this exact opportunity as possible. In particular, link individual customer segments with their respective value propositions, since a product won’t be all things to all people.
  • Create multiple canvases —During the early phases, generating more than one business model canvas based on divergent assumptions, target markets, or value propositions can be a useful tool for exploring different directions the product could head. After the plans are firmed up, multiple canvases can still be employed, this time to see how different scenarios pan out when key factors change… it can be used as a wargaming tool to prepare for different potential outcomes.
  • Who, what, and why first. How and how much second —Although a business model canvas includes everything from a value proposition and personas to implementation costs and resources, everything should be driven from the market opportunity and rationale for bringing a product to market. If those aren’t solid, spending cycles on technology and costs is a waste of time.

Creating a business model canvas puts new product ideas under the microscope and pulls together disparate sources of intelligence, opinions, hunches and research into a single piece of paper. It forces critical thinking and analysis of assumptions and guesses and provides an excellent reference point for the entire organization.

Once the canvas is approved and productization begins, the canvas can also serve as a straw man for the product roadmap, lining up future features and functionality based on the priorities laid out in the document to achieve market success.

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The Business Model Canvas

What is the business model canvas.

The business model canvas is a tool designers use to map out a business or product’s key actors, activities and resources, the value proposition for target customers, customer relationships, channels involved and financial matters. It gives an overview to help identify requirements to deliver the service and more.

“A business model describes the rationale of how an organization creates, delivers, and captures value.” — Alexander Osterwalder, Co-creator of the Business Model Canvas  

Learn about the business model canvas and how it helps in design.

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The Business Model Canvas – Flexible Chart, Early-Warning System and More 

In service design , two tools are essential to use early in your design process: the business model canvas and the value proposition canvas . You can use the business model canvas to build an overview of changes to be made to an existing business (e.g., a merger) or of a totally new business opportunity or market gap . At the start of your design process, it’s vital to map out the business model of your service to see how it will fit into the marketplace. You’ll also need to ensure what you propose can bring maximum value to both your customers and business, and keep doing so in terms of customer retention, profitability and more.

To gain the most accurate vision of a proposed product or service, it’s essential to understand all the components and dynamics of not only the customer experience but also the service as a whole ecosystem . This ecosystem contains all the channels and touchpoints that must work together to deliver and sustain maximum value to the customer.

This canvas gives you several important advantages, namely these:

It’s collaborative – so you can bring the various partners together on the same page to generate and analyze ideas, and have an early testing ground for concepts before you advance to service staging a prototype.

It’s human-centered – so you can keep close track on how to create and maximize value for customers as well as stakeholders and other partners.

It makes it easier to collect rich data – if you have a clear purpose and strategy in mind. 

A business model canvas typically contains 10 boxes:

Key Partners – The people who will help you fulfill the key activities, using the key resources. 

Key Activities – Those vital actions that go into the everyday business to get things done; these are all the activities needed to realize and maintain the value proposition, and to power everything else involved.

Key Resources – The tools needed to get those things done, stretching across all areas the canvas covers to include, for example, customer retention.

Value Proposition – The item you think will create value for your customer: e.g., a new idea, a price drop. This is a summary of what your business will deliver to customers, and feeds into the value proposition canvas, the tool you’ll use to expand this.

Customer Relationships – Where you envision the relationship each customer segment expects: e.g., customer acquisition, retention and upselling (i.e., How do you get customers? How do you keep customers? How do you continue to create value for them?).

(Note: boxes 5 and 4 are closely linked as everything you do revolves around retaining the customer and considering the customer lifecycle.)

Customer Segments – Your most important customers (e.g., seniors); consider the value of personas here.

Channels – How you deliver the value proposition. Will it be online, through physical means or a combination? Here, you identify which channels are the best (both desirable for customers as well as cost-efficient and cost-effective for the brand).

Cost Structure – Here you find the most essential cost drivers. This allows you to consider the return on investment (ROI).

Revenue Streams – Where you find potential revenue sources (e.g., advertising). 

Sustainability – How sustainable your offering is overall, to the environment, to the social good, etc.

describe the concept of business model canvas

© Strategyzer AG, modified, CC-BY-SA-3.0

How to Build a Business Model Canvas

For the best results, follow these guidelines and aim to fill in all the gaps, looking out for cause-and-effect relationships that run between boxes/throughout:

Complete the top seven boxes (Key Partners to Customer Segments) – using all the information you can gather from your research.

Complete the next boxes:  

Cost Structure – Determine the cost drivers from the Key Partners, Activities and Resources boxes; and

Revenue Streams – Determine these from the Customer Relationships, Customer Segments and Channels boxes.

Once you have established these, you can work to estimate them in monetary terms.

Complete the Sustainability box – according to the insights you’ve found.  

Here’s an example of a business model canvas as a work in progress:

describe the concept of business model canvas

© Interaction Design Foundation, CC BY-NC-SA 3.0

Overall, remember your canvas is a flexible tool. It’s also a living document that you can revisit and use to find the most effective alternatives. With a clear sense of goals, a keen eye for detail and ear for input, and a readiness to refine this canvas, you can use it to fine-tune the best service prototype every time.

Learn More about The Business Model Canvas

Take our Service Design course , featuring a template for service blueprints.

Read this example-rich piece by experienced strategy designer Justin Lokitz for tips on using the business model canvas .

Find some additional tips on how to make the most of your business model canvas here .

Literature on the Business Model Canvas

Here’s the entire UX literature on the Business Model Canvas by the Interaction Design Foundation, collated in one place:

Learn more about the Business Model Canvas

Take a deep dive into Business Model Canvas with our course Service Design: How to Design Integrated Service Experiences .

Services are everywhere! When you get a new passport, order a pizza or make a reservation on AirBnB, you're engaging with services. How those services are designed is crucial to whether they provide a pleasant experience or an exasperating one. The experience of a service is essential to its success or failure no matter if your goal is to gain and retain customers for your app or to design an efficient waiting system for a doctor’s office.

In a service design process, you use an in-depth understanding of the business and its customers to ensure that all the touchpoints of your service are perfect and, just as importantly, that your organization can deliver a great service experience every time . It’s not just about designing the customer interactions; you also need to design the entire ecosystem surrounding those interactions.

In this course, you’ll learn how to go through a robust service design process and which methods to use at each step along the way. You’ll also learn how to create a service design culture in your organization and set up a service design team . We’ll provide you with lots of case studies to learn from as well as interviews with top designers in the field. For each practical method, you’ll get downloadable templates that guide you on how to use the methods in your own work.

This course contains a series of practical exercises that build on one another to create a complete service design project . The exercises are optional, but you’ll get invaluable hands-on experience with the methods you encounter in this course if you complete them, because they will teach you to take your first steps as a service designer. What’s equally important is that you can use your work as a case study for your portfolio to showcase your abilities to future employers! A portfolio is essential if you want to step into or move ahead in a career in service design.

Your primary instructor in the course is Frank Spillers . Frank is CXO of award-winning design agency Experience Dynamics and a service design expert who has consulted with companies all over the world. Much of the written learning material also comes from John Zimmerman and Jodi Forlizzi , both Professors in Human-Computer Interaction at Carnegie Mellon University and highly influential in establishing design research as we know it today.

You’ll earn a verifiable and industry-trusted Course Certificate once you complete the course. You can highlight it on your resume, CV, LinkedIn profile or on your website.

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The Business Model Canvas Guide: Examples, Structure, and Expert Tips

Dmytro CEO | Codica

Recent decades saw viral changes in business approaches. The primary trend in those changes is leveraging mobility and clarity. With the tech boom, the business processes speeded up, so businesses needed to adapt and involve flexible approaches. Such methods allow you to quickly adapt to the changing business environment and make the necessary decisions.

Similar transformations came into business planning. Business model canvas replaced lengthy business plans that consume time and considerable resources to develop. Adjusting a business plan as your company evolves would be challenging with this expense. So, business model canvas came to resolve this problem.

Business model canvas is a template helping to develop a strategy for managing your business. It comprises nine blocks covering your audience, resources, partnerships, and other aspects required for your business evolution. This template lets you understand your business progress and make necessary corrections anytime.

This article discusses the concept of the business model canvas and how it helps companies develop. Read on to understand the main blocks and how they will help your business grow.

Business model canvas: definition & structure

A business model canvas is a template that helps business teams to visualize, analyze, and adapt essential aspects of their business. The concept was coined and spread by Alexander Osterwalder, a Swiss entrepreneur and business theorist, and his graduate supervisor Yves Pigneur, a Belgian computer scientist. The term appeared thanks to the contribution of 470 entrepreneurs from 45 countries and was described in Osterwalder’s book Business Model Generation .

The basic idea of the business model canvas is to present a company’s business approach concisely. Thanks to simplicity, it helps teams to grasp the key elements of their business. The business model canvas includes nine areas, such as customer segments, value propositions, customer relationships, and others described in the article.

Now, let’s dive into the details of this model’s building blocks to learn how to create a business model canvas.

Each block of the business canvas model comprises certain information. You can fill them in and show them to your team. You can discuss each fundamental segment together and add the necessary research and data. Let’s see what information you can include in each part of the business model canvas. Below is a video that presents the concept of a business model canvas.

Business model canvas template

Customer segments

These include users and paying clients that purchase your product. How can you describe your different customer segments? Creating buyer personas to represent your target audience can be helpful.

A buyer persona is a concise but detailed description of a person who buys your product or services. The description shows the customer’s age, goals, interests and represents a specific customer segment. Also, it outlines problems the customer wants to solve and expectations about your product. By describing your buyer persona, you will better understand the pain points you must solve for your customers.

To create a buyer persona, perform research, surveys, and interviews with your prospects or customers. Thus, you will gain data on your customer segments’ expectations and needs.

Value propositions

It is a reason why customers prefer your company instead of others. The value you deliver helps customers satisfy their needs. So, a value proposition is a group of benefits you offer to a particular customer segment. Such benefits can be innovative or add exceptional features to existing products. For example, different value propositions can be as follows:

  • Innovative product or service;
  • Improved performance;
  • Unique design;
  • Easier accessibility;
  • Convenience in using.

For example, Yelp helps people and local businesses find each other. The company’s value is giving access to reliable information about local businesses. Also, Yelp users can save money when discovering new places. So, the platform provides information that helps connect local businesses and people.

Yelp business model canvas

In a business model canvas, channels are the means to deliver value to your customers. Channels include how a company delivers and distributes products and services. Also, this point includes how an enterprise interacts with customers. Channels should be cost-efficient for your business and common for your customers. So they can notice and buy your product.

Typical channels for a SaaS B2B company include a website or an app.

For example, HubSpot, a customer relationship management system, uses various channels, such as social media, e-mail marketing, and blog. The company also reached its target audience through webinars and tutorials. Thus, their prospects better understood how the HubSpot CRM works.

Customer relationship

This point in the business model canvas outlines how a company will attract, retain and nurture customers. While channels show how to deliver your services, the customer relationship segment emphasizes how you support customers. So, you can use the following approaches to find and build customer relationships:

  • Select the channels and platforms that your customers use the most.
  • Choose the strategies to attract new customers and retain existing ones. For example, exceptional services and dedicated customer support with direct contact will help you to maintain customer relationships. Also, you can use tiered pricing or discounts for loyal customers.
  • Define the ways to grow your audience. You can use content marketing to create blog posts, social media posts, and e-mails highlighting your benefits.

For example, Twitter deals with hundreds of millions of users, so the company needs to respond to their needs. Twitter uses customer service, social media, and e-mail support. These means help the company to maintain the necessary support and growth of their customer base.

Twitter business model canvas

Remember to define key channels for customer relationships through the touchpoints of the customer journey. From attracting to onboarding and support of customers, you will use different channels.

Revenue streams

This section represents the paid flows from your customers who pay for the value you provide. It shows how your business can generate revenue. Knowing this information, a business owner can choose a revenue stream for their product or service and a pricing mechanism. For example, you can choose between the following revenue models for a marketplace:

  • Commission monetization model;
  • Subscription model;
  • Freemium model;
  • Featured listings;
  • Signup fees;
  • Advertising fees.

Each revenue stream depends on the specifics of your product or service. You can choose from the above revenue models if you have an online business. Meanwhile, if you have an offline business, you must think about which monetization model you choose regarding the smallest details.

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Key resources

Every company has strategic assets that enable its operation. Key resources help you support your value proposition and maintain a connection with customer segments. Companies typically choose resources from the below categories:

  • Physical assets, including production facilities, machines, vehicles, and IT systems.
  • Intellectual resources, including patents, copyrights, brands, partnerships, and customer databases.
  • Human resources, including skilled employees in industries relying on knowledge.
  • Financial resources, including cash in bank accounts, credit lines, and stock option pool.

The image below gives a summary of the key resources by category.

Key resources in business model canvas

For example, Walmart would use and maintain its physical or virtual infrastructure as its core resources.

Another example is an activity booking marketplace that Codica created. The main asset, in this case, is the platform that enables parents to book activities for their children. The platform allows you to search for activities, book them, schedule with a calendar, and form itineraries for camps with prices. The key resources used in this case are technologies and qualified developers.

Key activities

These are your company's most important endeavors to keep business going successfully. Key activities depend on the niche of your business. For example, the main activities for a boat-selling website that we created include maintaining the platform and managing the interaction between sellers and buyers. Let’s see in more detail what the main key activity groups are as exemplified by this platform.

Production. This is how you deliver your product to end customers. If you create an online product, production includes discovery, design, development, testing, and maintenance of your product. For example, the boat marketplace chose our website redesign services for their platform to receive more conversions. The new design brought the company lead generation growth by 480%.

Problem-solving. These activities involve finding new approaches and addressing customers’ problems. For example, adding new features to your product helps solve your users’ pain points. In the case of the marketplace for boats, it is the decision to create a progressive web application (PWA) for the platform. This helped the company to cover mobile users in addition to desktop users.

Platform/network. These activities dominate companies functioning as platforms. Such enterprises create, run, and promote their platforms as a key resource. A platform that sells products or services requires regular maintenance and updates. For example, the Trade a Boat platform we mentioned above improved its search engine rankings and integrated service for placing ads. Check the video below to see how this boat sales platform works.

Key partnerships

Partnerships are crucial because you can win more with a partner than alone. With key partners, you can delegate specific tasks, mitigate business risks, and optimize your resources. For example, there can be such types of partnerships:

  • Buyer-seller partnerships to supply resources or share infrastructure. For example, Alibaba partners with logistics companies to reduce shipping costs.
  • Business competitors’ partnerships to mitigate risks and uncertainty. For example, Toyota and Suzuki created an alliance to promote their technologies in electrified transport.
  • Partnerships to get access to customers, licenses, or knowledge base. For example, Spotify and Uber partnered to give their customers a better experience while they ride. Thus, both companies reached wider audiences.

To understand if a partner is a key partner, ask yourself: would the business model work without them? If your business model needs this partner to connect business processes, then it is a key partner.

Cost structure

Your costs depend on the expensive key resources and key activities. Some businesses try to minimize costs. At the same time, companies like luxury hotels can be focused on delivering particular value rather than cutting costs. So, your cost structure should be grounded on choosing between spending and value delivery priorities.

Cost structure can be defined based on key resources, key activities, and key partnerships. For example, Tinder, a dating app, spends costs for platform maintenance, salaries, and marketing. Also, the company’s cost structure includes spending on innovations, security, customer support, and product development.

Tinder cost structure

Pros of a business model canvas

Many teams are engaged with current activities to run the business. To develop a successful business, they need a business strategy that provides them with details of where to move. Business model canvas is the right tool to keep them focused on day-to-day tasks with a clear strategy in mind.

But the question is, do you need a business canvas model in the first place? How can you discover if this template suits your business goals? We suggest its pros below.

Presents a concise and easy-to-follow business plan

Whether you are brainstorming business ideas or have a well-grounded venture, the concise strategy will help you plan the future. The business model canvas shows several blocks a team can fill and review at any time. Adjusting it is much easier than modifying a traditional business plan on 100 pages.

Helps to be focused on the action

A business model design focuses on operations and needs to outline actions for the team. For example, you plan to expand your audience or reach a certain profit during the year. Business model canvas is helpful to show you those goals and adjust internal processes if needed.

Enables scalability as the business evolves

Businesses do not remain the same but transform in the market climate. Companies must stay afloat among competitors. Also, they need to adapt to customers’ needs, industry innovations, and market conditions. Thus, you must see how your business plan and revenue goals align with consumers’ needs. A business model canvas is a handy instrument to bring up those aspects for your team. As your company runs, you can make changes and adapt your concise business plan to the current needs.

Puts customers at the forefront

Targeting the right audience is one of the keys for companies to survive. You must choose the right customers for your product to avoid wandering in the market and not reaching your customers. Business model canvas allows your team to understand who your customers are and why your product is valuable to them.

Attracts a team and investors

Any business needs a team with diverse skills and experiences to keep it going. Also, if you want to expand your business, you need to explicitly show your business's capabilities to investors. So, you need a framework that will engage both of these sides. Business model generation helps to outline the value that your company provides. Thus, stakeholders will get a clear view of your company’s perspectives.

Highlights unique value propositions

An outstanding service or feature you offer customers makes them come to you. The unique value proposition explains why customers choose your company among all others. If you look at the business model canvas structure, you will notice that this aspect is at your company's core. If you know your unique value propositions, you will understand other blocks of this template, and they will fall into place.

You may also like: How Much Does It Cost to Build an Online Marketplace in 2023

Business model canvas exemplified by Airbnb

You can find it helpful to see a real-life business model canvas example applied to a business model canvas. Below we illustrate the nine building blocks relevant to the business approach of Airbnb . This is a huge company with a great number of employees. Despite that, the business model canvas is simple and concise. It proves that the approach helps to focus on the main aspects of your business and have a bird’s eye view of business peculiarities. Let’s dive into it.

Airbnb business model canvas

Customer segments: Airbnb customers can be divided into two separate groups: hosts and guests. Hosts differ by the type of property they offer, location, and activities. Guests differ by the type of trip they take and their interests in activities.

Value propositions: the primary reason why users choose this platform is to rent property simply and reliably. The value proposition for hosts includes income generation and risk minimization with insurance. Hosts can easily join the platform and manage their accounts. On the other hand, guests value this resource for the opportunity to stay in new places or while they are on a trip. Often, it is cheaper compared to hotel services.

Channels: the Airbnb platform operates through two channels: website and app. These channels help Airbnb connect the customer segments. Also, Airbnb reaches new customers through social media, digital advertising, and referral program. Many users simply trust the word of mouth and personal recommendations of the hosts. It is remarkable that Airbnb does not use travel agencies as its channels.

Customer relationship: the platform allows hosts to rent out the property on the conditions hosts choose and agree with guests. Also, the platform offers personalized property suggestions and customer support for both parties. The company maintains its reputation through the strong support of communication between customer segments and managing conflicts.

Revenue streams: Airbnb charges a commission from hosts of 3%-5% per deal and guests of up to 20%. More expensive reservations require less commission. As of 2022, Airbnb’s revenue made 8.4 billion , which is a record for the company.

Key resources: key assets for Airbnb are its platform and listed properties. The company makes it possible for guests and hosts to use them. Also, Airbnb’s resources include technologies and engineering staff to support the platform.

Key activities: these are website support and customer nurturing. For example, by developing the category of Superhost, Airbnb encourages hosts to provide better service. This, in return, will attract more guests to the platform. The company acquires new users through sales and marketing and ensures platform security. Also, Airbnb intermediates conflicts arising between hosts and guests.

Key partnerships: Airbnb’s key partners are hosts, including Superhosts. They list their property and attract guests. The company’s key activity is maintaining its website. So, its key partners are technology firms offering relevant software to list the property and manage bookings.

Airbnb’s partnerships also involve cooperation with charity organizations, such as the Red Cross, and support of animal protection initiatives. Besides, Airbnb partners with the Adventure Travel Trade Association to give hosts and guests tips on outdoor activities and adventures. Thus, Airbnb also improves customer relationships.

Cost structure: Airbnb supports its website, so the technologies and employees require spending. Also, the costs include giving away resources on marketing and customer support. Other Airbnb’s spendings cover customer acquisition, insurance, and administrative costs.

You may also like: An Online Marketplace Marketing Strategy That Works in 2023

Key steps in creating a business model canvas

Filling the business model canvas takes several steps. Moving with these steps, you will get insights into the nine elements. We listed the crucial steps in the image below.

Key steps to create a business model canvas

Now, let’s see what these steps imply.

1. Gather materials and stakeholders

Developing a business model canvas involves many teams, such as marketing, sales, and project managers. Participation of the company’s top management, investors, and the business development department is also advisable. This collaboration will bring up the vision of the necessary business aspects. You and your teams will know where to move further by defining them.

Also, you will need research and data on your industry, target audience, and competitors. These valuable data sources will help you correctly fill the business model canvas.

2. Fill in the canvas template

Representatives of the necessary teams can together decide on the vital aspects of the business model canvas. You do not need to make a thorough plan at this stage. You add the essential data to form the direction for your company and teams. If required, you can adjust data later as your business evolves.

3. Test assumptions

The filled business model canvas can be changed at any time. This is the main benefit of this tool. By trying assumptions, your team can develop new ideas and discover that the filled data can be replaced. For example, you can choose other key partners with more competitive conditions. Or your revenue streams can be adjusted with alternative paid methods.

4. Support and maintain

A business model canvas is often seen as a planning method. But you can get more use of it. As your team gets new ideas, fill in your canvas to keep it up-to-date. In case of significant changes, you can rewrite it on the whole. An updated business model canvas is a powerful tool to realize how you will develop your business. You can also show it to stakeholders to obtain investments. In any case, it is a multifaceted and flexible asset.

Need to discover your product’s business potential?

Project discovery as the most crucial step in creating BMC

Creating a business canvas is crucial to define your business development strategy. But how can you start by outlining the vital points for this? At Codica, we rely on the product discovery process. This step in custom software development service is crucial to identify the project requirements. As a result, a client gets an estimation of project development terms and costs.

Key reasons to hold product discovery sessions

So, the main goals of the product discovery process are as follows:

  • Identify the problems that the product solves;
  • Discover the target audience and competitors;
  • Define the project’s timeline and budget;
  • Elaborate user flow;
  • Create prototypes;
  • Prepare a feature list, including killer features.

Since you better understand the needs of your target audience and the project’s potential, you minimize risks when launching your product. So you can deliver better results to your prospects.

Project discovery parties

Product discovery sessions serve as an umbrella for parties who discuss the project requirements. The representatives taking part in this process include the following:

  • Client and their representatives who describe the purpose and requirements of the solution;
  • Business analyst/product manager who collects, analyzes, and structures the data from the client;
  • UI/UX designer who creates prototypes based on the information from the client and their research for custom app design ;
  • Lead of software engineers who suggests optimized team composition and tech stack based on research and requirements.

All of the parties contribute to creating a thorough plan for solution development. Below you can see in more detail how the sides of the product discovery process are involved in the discussion.

After the series of discussions, you will get documents with your solution's timeline, costs, and final look. These documents include the following:

  • The list of primary features;
  • Clickable prototypes;
  • The product architecture and tech stack;
  • Time and cost estimates;
  • Project specification;
  • Advice on team composition.

Just like in a business model canvas, these documents can be changed if you or the team see the need for this.

For example, relying on this method, we created a multi-vendor marketplace platform for B2C and C2C segments. The client wanted to create a platform where people can shop online in one place. This would save them hours and even days compared to searching for products online in different stores. Also, the aim was to make the platform engaging for customers where they could share their experience with the platform. Despite the platform's versatility, its design should be intuitive so that users can navigate through the product categories and filters.

During the detailed discovery sessions, we helped our client clarify how to implement features for displaying product categories and subcategories. We suggested how to divide the platform into sections with a simple switch in the menu.

As a result of development, the platform helps users find products in many categories. We optimized the platform for better search engine rankings. Our team elaborated on the Local and Connect sections. They make the platform more engaging as users can search for local stores and share their experiences with the platform.

Also, we created a minimalist design with convenient functions that allows you to find items quickly. Check the video below to grasp how the platform works.

Viable questions in each building block

As you fill your business model canvas template, addressing the right questions is crucial to making correct assumptions. So, we prepared a list of possible questions you can put in each of the nine blocks of a business model canvas.

These questions break each segment into smaller chunks. You can manage each broad category with these elements and get relevant answers. Feel free to adapt them to your business needs. Also, you can select some questions from the given if that suits you better.

  • Who are your potential customers?
  • What are your customers’ pain points?
  • What sorts of products do you provide to particular groups of customers?
  • What is the value you deliver to customers?
  • Which customers’ problems do you solve with your products?
  • Which channels are beneficial to deliver value to customers? Are you using them now?
  • Are your channels cost-efficient? What channels work best?
  • Do your channels suit well customers’ routine actions?

Customer relationships

  • What relationships do you hold with each customer segment?
  • Are those relationships costly?
  • How do those relationships connect with the rest of your business model canvas?
  • What are the values your customers are ready to pay for?
  • What are the best ways for your customers to pay for your value?
  • Do revenue streams contribute to your total?
  • How do you involve new financing sources, if needed?
  • What key resources do you need to run your business?
  • How do they help to improve your relationships with customers?
  • How do they help make channels and revenue streams advantageous?
  • What are your key activities to improve customer relationships, channels, and revenue streams?
  • How do you bring up the value propositions to customers with your activities?
  • Who are your main partners?
  • What are the resources that you gain in your partnerships?
  • What are the key activities that your key partners carry out for you?

Cost structure:

  • What are the expenditures necessary for your business model?
  • Which activities and resources are the most expensive?

Related reading: 10 Best Marketplace Monetization Strategies to Succeed

Life after creating your business model canvas

Once you’ve created your business model canvas, you can use it in your everyday business routines. This is its purpose, to guide you in your business journey. So, how can you use your business model canvas for the best of your company?

Tracking your progress. Use your business model canvas as a statistics board reflecting your progress in particular sections. Highlight those areas that can perform better and those where you succeed.

Discussions with teams. The business model canvas is helpful for discussing it with your teams. Everyone can see the bright and dark spots and bring solutions or improvements.

A better understanding of customers. Your customers are the force that keeps your business running. When they feel your care, they are more loyal to your brand. So, you can use your business model canvas to get insights on how to build strong relationships with them.

Hiring new talent and showing it to investors. When engaging new talent, you can show them the business model canvas so they familiarize themselves with the company’s state. Also, you can use it to support your business ideas when talking to investors about attracting capital.

You may also like: MVP Development Cost: 5 Main Aspects for Aspiring Entrepreneurs

Software for creating a business model canvas

A traditional way of creating a business model canvas is to take a massive sheet of paper or a whiteboard and fill in the nine areas. But digital solutions can also help you visualize and share the template between teams. Below are several examples of prominent business model canvas software.

Strategyzer. This solution comes from the company co-founded by Alex Osterwalder. It is versatile and convenient. The tool allows you to create a business model canvas and value proposition canvas, providing real-time teamwork. An estimator tool analyzes revenue flow and calculates the business idea's viability. The tool also estimates the potential of startups with their price. The solution has convenient color marking and improved encryption. The subscription costs $300 annually, with unlimited canvases and unlimited users.

Canvanizer. The tool has been there for a while, providing an excellent experience in building business model canvases. The website also offers templates for other types of canvases, such as lean canvases and service design canvases. The team can view and share the canvas and convert it into sharable formats, such as .pdf, .png, and more.

Software for building business model canvases

Visual Paradigm. It is a versatile set of tools for development teams' collaboration and creating diagrams. Among other visualization diagrams, the app features various templates of business model canvases. You can choose cards with different colors to mark each of the nine areas.

Miro. Miro is a whiteboard for teamwork, creating content, brainstorming, strategic planning, and more. In addition, it provides various types of templates for collaboration and business model canvas. The software allows you to select and share a template with a team. After that, anyone can contribute to developing the template by bringing their ideas. The tool also offers the option of creating canvases from scratch. The video below presents how you can create and manipulate templates in Miro.

CNVS. This software keeps the features simple and presents them with a minimalistic design. The basic set of features is free. You must pay for advanced features, such as unlimited workspaces, private canvases, and sharing with others. The software offers lean canvas, business canvas, and feature canvas templates. The basic set of templates and team collaboration tools are given for free. Yet, if you need unlimited workspaces or support, you must pay an additional monthly fee of €7.99.

A software tool for building business model canvases

Wrapping up

As Alexander Osterwalder put it, business models have a short lifespan in an ever-changing environment. The business model canvas serves best regarding that possibility. With the evolution of your business, you can adjust the nine areas so your business performs better. This approach is ideal for modern, ever-changing market conditions where you must react quickly.

Remember also that those areas are intertwined and work as a whole. This means that changes in one sector will result in transformations in others.

However you choose to build your business model canvas, it will serve the best of your company. Let your teams share their insights and improve the business model template to keep it updated.

If you need help discovering the key points of your business project’s potential, feel free to contact us . Also, check our portfolio to see more projects that started from defining the key business points. Our experts will eagerly help you with estimating your project’s business opportunities and development.

Article contents cta | Codica

Frequently Asked Questions

The purpose of business model canvas (BMC) is to outline the basic aspects of the company’s business. They include customer segments, revenue streams, and cost structure. A company can use this map to see where it succeeds and where it could perform better and update BMC accordingly.

Key resources are assets that help a company work. They are the tools to deliver your value proposition and connect with customer segments. Resources can be physical, intellectual, financial, and human.

It is a unique reason why customers choose your service or product. The value proposition is a tool to solve your customers’ pain points. Such a solution can be one of a kind or add improvements to existing products or services.

Customer segments cover customers that buy your product or service. A company’s business model can have one or several customer segments. It depends on the value proposition you offer and channels you use to reach them.

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Business Model Canvas Examples

Kyrylo Iusov, Advisor & Co-founder

CPO in Jelvix with 8+ years in software development. He has been working as a project manager for more than 6 years. Kirill has managed a wide range of projects from various business segments and understands the processes that will drive the product to success. He started from managing small teams, and now he assembles an expert team of more than 40 software developers. His expertise and knowledge of the latest technical innovations have brought Jelvix to the ranks of the most distinguished custom software development companies.

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Over the last decade, the approach to planning and organizing a business changed a lot. In the past, business owners created extensive business plans that described the detailed specifics of value proposition and operations. Business plans aimed to foresee the situation in the scale of decades. 

However, the ever-changing startup climate that emerged over the last decade made this approach irrelevant. Spending time preparing business plans that end up being detached from reality led to increased expenses. After all, no matter how good your business plan is, it might not account for a global pandemic. 

What’s a Business Canvas?

Business canvas, also known as a lean business plan , is a time-saving approach to business planning, opposed to traditional planning methods. Rather than describing the detailed vision , mission , operations, it answers key questions – and the team derives the conclusion from this answer.

Business model canvas is more attainable than a business plan. Instead of describing the abstract vision, the document focuses on answering the following questions: 

  • What is the product/service?
  • What is the main value offered to a customer by a company’s product or service?
  • How much does it cost to start a business? What’s a brief estimate of major expenses?
  • What are your business key partners?
  • Who are the main customers? Business canvas can consider both primary and secondary target audiences . 
  • What are the main distribution channels and approaches to managing them?
  • The Format of Business Model Canvas Explained

The main advantage of switching from plain-text plans to visual canvas is its readability. Here’s a rundown of differences compared to the traditional approach. 

  • The document volume: just one page versus old-fashioned 20-30-page documents;
  • Clear structure: each section of a business model canvas is located within its “square”;
  • Fewer words, more meaning: the more concise canvas is, the better it’ll convey its key points;
  • The style: no sales talk on technical jargon, canvas describes the business model in everyday language;
  • Focus on practical matters: business model canvas features useful answers to urgent questions. No information is entered “just in case.”

The Structure of Business Model Canvas

The structure of Canvas

Business model canvas is easy to read because it always follows the same format. Investors, stakeholders, partners get used to seeing particular information where it belongs – so that everyone is literally on the same page.

  • Sections always follow a precise order. For example, the cost structure is always in the left bottom part together with revenue streams.
  • All sections are distributed based on their meaning. Key partners, activities, and resources are located together – because these aspects are closely related. Similarly, cost structure and revenue streams belong in the same row. 
  • More opportunities for branding. Since canvas encourages visual representations, businesses can show their tone of voice and approach clearer. Sure, there’s a format to follow, but deviations are possible in the tone of voice, fonts , narration style. 

Categories that are located on the left side of the canvas are the ones that require investments and nurturing. The aspects described on the right side refer to means of generating revenue. This is called a left/right split of the business canvas. 

This article will give a practical guide on how to describe business concept examples and analyze real-life business models. With a business model canvas, the entire team will have one-page guidance on developing a business model . 

  • Customer Segments

To define customer segments, you need to analyze your clients by demographic and behavioral characteristics. There are many ways of defining user performance and performing customer analysis, but here are few ideas. 

  • Basic demographic characteristics . Split your customers into segments by gender, age, location, occupation. These qualities will influence their behavior later on and allow you to perform basic targeting. 
  • B2B vs B2C segmentation . Often, businesses tend to gravitate to one or the other, but business models combine both. For instance, if you are building a booking or tourism-related platform, you interact with businesses and individuals. These users will have different needs and challenges.
  • Usage habits . Software development companies focus on types of devices, operating systems, browsers that users normally use. 
  • Purchasing trends . You can segment users by their favorite product categories, time of making a purchase, frequency, etc. 

Business canvas is supposed to be brief – so the best strategy is to choose 4-5 leading segments and focus on them. These should be the user types that have the potential of generating the most revenue for your business. 

  • Key Partnerships

Business canvas focuses on tangible aspects of business operations, and partnerships are among its key pillars. For this section, listing all partners is unnecessary. If you don’t have specific names in mind yet, you can list the types of partnerships and briefly describe strategies for attracting them. 

As a software development company, our clients and we typically consider the following key resources in the business model canvas . 

  • Suppliers : e-commerce stores, marketplaces, delivery applications rely on businesses that can steadily supply high-quality products. In your business canvas, list requirements for a supplier. 
  • Technical collaboration : to build the best product, development companies often need to cooperate with others. This section can feature commercial APIs , payment gateway partnerships, cooperation with development teams and agencies, and outsourcing providers. These businesses are also key partners of your business.
  • Cooperation with competitors : if there’s a strong player on the market, smaller businesses often team up to gain visibility. If you are entering an established field, consider looking for smaller competitors and making them a partnership offer. 

The focus on partnerships is one of the main advantages of business canvas over other methods. Too often, businesses don’t think about cooperation out-of-the-box and miss out on opportunities. When you build a business canvas, its structure motivates your team to consider these options. 

  • Key Activities

The operating model canvas describes your company and product’s processes to solve its target problems. For instance, for Uber, the key activity would be connecting drivers to clients and overseeing the safety of cooperation. Key activities tend to vary as the company scales, so most businesses frequently update this business model canvas section.  

The key activities of most IT businesses

  • Product ideation and development. The main value of a tech company lies in its product. Design , development , and testing are key activities that directly influence business success. 
  • Marketing. To reach new users and keep the existing ones satisfied, you need to plan marketing activities. This includes digital marketing and its components – Search Engine Optimization, content management, social media management. 
  • Sales. Sales activities allow companies to continually generate revenue, communicate with clients, and stay in touch with direct customer needs. Pre-sale and sale processes should be listed as one of the key activities in the canvas. 
  • Customer support. If the product is not working properly, or a user can’t understand the interface or functionality, customer support should promptly intervene. For an IT business, focusing on customer support quality is crucial for maintaining a good reputation. For instance, Google Cloud’s lack of customer support is what drives many away from embracing an otherwise great solution. 
  • Distribution and logistics. For businesses that deal with e-commerce and sell physical goods, distribution and logistics are key business model activities. Business model canvas should have information on responsible team members, costs, and requirements for the distribution cycles. 
  • Public relations. If a business is built around a community, communication and community management are key business activities. For NGOs and educational services, public relations are particularly important. 

The list of key activities is a defining feature of the business model. When you understand what operations are the most crucial for your business, you have a better idea of the end value. The key activities define your unique value proposition, operation costs, risks, and partnerships. This is why it’s the most important section in the entire strategy canvas template . 

Learn more about the main stages of product development lifecycle to build a sustainable product.

  • Revenue Streams

Revenue streams

Revenue streams also referred to as monetization, sum up your business strategies to leverage profit. A lot of businesses choose a single monetization strategy, while some combine multiple approaches. As a software development company, we can sum up the most common revenue streams for software businesses and tech-based models. 

Advertising . Users use the application for free; however, some of their personal data might be used for advertising targeting. The application offers the time and attention of their users to businesses – and gets paid a commission. It’s a great business model for attracting more users, as the service remains free.

However, to generate a lot of profit, it’s essential to have many users on the service. Advertising strategy, among others, is used by Facebook, Twitter, Youtube, Google, and others. It’s a common one for mobile applications and games. 

Subscriptions . To use a service, a user needs to pay every month, week, or year. It’s a common model for software-as-a-service, media platforms, learning services, online publishing, and entertainment. On-demand content providers like Spotify or Netflix use this business model with premium-level publishers like Quartz or The New Yorker. 

Affiliate Marketing . The platform gets revenue for referring users to other products. By tracking visits and purchases with on-page pixels and promo codes, affiliate systems calculate your revenue.

Affiliate marketing is frequently used among influencers (like when a sponsoring brand gives a Youtuber a promo code) and blogs (when a niche blog publishes a list of best tools to use or collects the best Amazon listings). Affiliate marketing can be beneficial both to users, referring platforms, and your partners – if recommendations correspond to your users’ needs. 

Donations from users . If you’d like to keep offering your service to the public for free without selling away user data, donations are another option. PayPal provides a donation getaway that can be embedded on the blog, application, or web service.

This strategy is common for businesses with a strong social mission and requires high user loyalty. Such business canvas examples include Wikipedia , The Guardian , and Khan Academy (the education platform that recently received a 5 million dollar donation from Elon Musk). 

Freemium . This business model offers basic features for free and provides updates on a paid subscription. It’s common among SaaS and publishing businesses. Use examples include Medium (users have a certain number of free stories every month) and Grammarly , where a free version recommends basic corrections. 

Commissions . Fee-based monetization is common for marketplaces, APIs, payment gateways. The use of service is typically free, but the intermediary withdraws a fee once a transaction is made. The commission can be fixed regardless of the purchase amount or depending on the percentage. This business model is used by Uber , Amazon , BlaBlaCar , and other services. 

  • Value Proposition

The Value Proposition is a concise sentence or, at best, paragraph that summarizes your company’s offer. It depicts users’ problems and ways to solve them. Let’s take a look at real value proposition canvas templates to make things more transparent. 

  • Slack’s value proposition is summarized in their slogan – be less busy. The full version is more specific: Slack is where teams can collaborate, send important information to the right people, and find tools when and where users need them. Still, the three-word slogan reflects the gist of it pretty well – after all, the purpose of Slack merely is making users less busy.
  • Paypal has two sets of value propositions – one for buyers and one for sellers. The sellers-focused version promises convenience, low cost, and security. Online stores can be sure that the payment will go through on any browser, with a low commission, and user data won’t be compromised. For buyers, the value proposition is focused on convenience, flexibility, and security. It takes little time to make a payment, it can be done from any device and browser, and all data is safe. 
  • Amazon is a super-aggregator of vendors and buyers, where buyers can find whatever they need at a given moment, and sellers can reach large audiences. The company’s value proposition is based on the platform’s functionality and popular community.
  • Distribution Channels

At this point, you can answer two major questions: what is your value, and who needs it. However, the picture is incomplete without knowing how the value will be delivered to customers. Answering this question is the responsibility of the “Distribution channels” sections. 

To plan channels in the business model canvas , we recommend getting acquainted with the buyer’s journey. In a nutshell, it consists of three stages: 

  • Awareness : the customer is aware of the problem but doesn’t yet know how to solve it. He’s not considering any particular help so far. It’s an exploratory stage. 
  • Consideration : the customer is aware of the importance of the problem and is ready to consider looking for help. At this point, the user is exploring multiple options, comparing pricing, advantages, reviews. 
  • Decision : the client spent a lot of time exploring the market and is ready to commit to the final option. At this point, all a customer needs is the last push that will fully persuade towards making a purchase. 

Distribution channels

A company should have distribution channels for all three stages of the buyer’s journey. It’s achieved with focused content marketing, Search Engine Optimization, email marketing, social media management. Here are some of our distribution channels – just to give you an idea.

Distribution channels in a business canvas example 

  • Company’s blog : Jelvix has a blog with in-depth guides like this for users in the awareness and consideration stage. Users get to know their problem better and move to the consideration stage. 
  • Newsletter : once a user considers our blog useful, the next option is to subscribe to our newsletter. This is where we inform about new content, special offers, additional materials (like free e-books or whitepapers).
  • Case studies . When users are deciding on partnering with the Jelvix team, they usually take a look at our case studies. Often, they reach out to us directly – and this is where the sales team comes in. 
  • Youtube channel . Often, clients in the awareness stage come to us from Youtube. They want to see an explanatory video that answers their questions – and this is how they come across our content. 

Distribution methods require a lot of investment at the early stages, but ultimately, they keep your business running in the long run. 

  • Key Resources

To execute plans outlined in the canvas, you need resources. For tech companies, this involves development, design, testing teams, HR specialists, security experts. Other things to consider are server costs, maintenance fees, API costs, office space, hardware, software (development environment, automation scripts, management tools). 

The business canvas should distinguish between already available resources and those that still require investments. To avoid leaving anything out, we recommend grouping resources into human, financial, intellectual, technical, and physical ones. 

  • Physical resources : office space, furniture, computers all fall in the realm of physical resources. 
  • Intellectual resources : if you need to acquire educational resources, patents, copyrights, creative licenses, these will be expenses on intellectual needs. 
  • Technical resources : we could consider those as an extension to intellectual resources, for tech companies, this category is one of the most relevant one – and it deserves own spot. Such resources include hardware for testing, development environments, emulators, additional tools, APIs, server cost, maintenance fees, etc. 
  • Human resources : development, design, testing teams, marketing specialists, sales and customer support department, legal and HR teams – everyone involved in your direct business operations falls into this category. These resources don’t have to be limited to the in-house team – you can include freelancers and contractors. 
  • Financial resources describe funds that the company already has and strategies for obtaining those in the future. You can plan out investments, loans, crowd-funding campaigns, strategic customers, and others in this category.
  • Customer Relation Strategy

To plan a business model canvas for customer relationships , you already need to understand the specifics of your target audience, value proposition, main activities, and available resources in sales, support, and marketing departments (all this was described in other sections). So, in this section, we suggest focusing on building and maintaining a customer relation strategy. 

  • First contact: what are the ways for your users to contact the company. The most common ones are on-site forms, email communication, phone calls, and Skype meetings. Which contact data is public to users, and what has to be obtained after direct contact? Specify these requirements. 
  • Pre-sale process . Canvas should describe the value that your customer receives on the pre-sale stage. In software development, it’s often done during the discovery session. A development team offers a free analysis of a business model and provides estimates. 
  • Sales meetings . Describe who’s responsible for converting qualified leads into sales. What are the channels of communication (Skype, Zoom, phone calls, in-person meetings, negotiation)? Establish the duration of such a cycle. 
  • Finalization . When is the sale process considered finalized? What are the documents that parties need to sign for sale to go through? What data does a customer relations team need to finish the process?
  • Communication . Keeping in touch with existing clients is as important as attracting new ones. What are the ways to stimulate the next purchases? This is where you can describe special offers, bonuses, loyalty programs. 

The customer relationship section usually describes programs for maintaining and attracting clients, communication strategies, and technical resources (software, browser extensions, social media).

Name of video

  • Cost Structure

The allocation of resources depends on your field and business model. As a tech company, we can give you an idea of an approximate cost structure for tech startups.

Statistics show that 10-20% are spent on development, whereas the most are invested in testing. Marketing tends to take up around 15-25% of the budget for new businesses and around 5-10% for established companies. 

Costs can be fixed and variable. In the cost structure business model canvas , define which expenses will be constant and require constant revision.

 types of cost

Main types of cost to consider

  • Operational costs : how much do you need to keep your product running? This includes testing, development, server costs. 
  • Marketing costs : how much do you pay for one client? What is your average promotion budget?
  • Support costs : how much do you pay support teams?
  • Overhead costs : these are costs that don’t impact the product quality directly but can’t be ignored – electricity bills, installation time, delays from human resources. 
  • Staff costs : investments into recruiting, hiring, training employees, and financing additional programs and bonuses. 

For tech companies, R&D departments are the main focus. Sales and marketing are the second priority – however, the business’s success still mainly depends on product quality.

Business Model Canvas Samples

canvas model

Let’s take a look at lean canvas examples for successful companies. There aren’t official versions – such documents are usually not published. The purpose of these examples is to give you an idea of how such businesses could formulate their lean canvas examples . 

Business model canvas - slack

To understand the key aspects of your business model in a few days, you can create a business canvas. It’s an efficient one-page representation of your unique proposition value, key activities, customers, distribution channels, cost structure, revenue sources, and other aspects. Unlike traditional business plans, it doesn’t give irrelevant details – the focus is on the pillars of the business. 

The business model canvas for tech companies has its structure and rules. From audience to cost allocation, the business climate of tech startups is different from traditional businesses. If you’d like to create a canvas for your concept, don’t hesitate to contact our team . We are happy to help you ideate the solution and bring our development team on board – to make the concept into a ready product. 

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19.4: Business Model Canvas

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  • How can the business model canvas help us to describe and assess a business model?

A business model describes the rationale of how an organization creates, delivers, and captures value. Entrepreneurs need to develop and refine a business model for themselves as they seek clarity about what they are doing, and also for discussing with colleagues, partners, and other stakeholders. Moreover, this business model will help them to identify opportunities in their internal and external environment. Originally developed by Alex Osterwalder and colleagues, the business model canvas covers the four main areas of any venture: customers, offering, infrastructure, and financial viability. There are nine building blocks that describe and assess a business model: customer segments, value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partnerships, and cost structure. Table \(\PageIndex{1}\). depicts the business model canvas.

Nine Building Blocks of the Business Model Canvas

Customer segments: Without customers, businesses cannot survive. Businesses must identify and understand their customers, and they can group these customers into segments with common characteristics.

Value propositions: A company creates value, or benefits, for customers by solving a problem or satisfying a need. The value proposition is the reason that customers choose one option over another when deciding what to buy. Although certainly not an exhaustive list, customers may value: newness, performance, customization, design, brand, price, cost reduction, risk reduction, accessibility, and convenience.

Channels: Channels bring the value proposition to the customers through communication, distribution, and sales. Companies can reach their customer segments through a mix of channels, both direct (e.g., through sales force and web sales) and indirect (e.g., through own stores, partner stores, and wholesalers), to raise awareness, allow for purchase and delivery, provide customer support, and support other important functions of the business.

Customer relationships: Companies need to maintain relationships with their customers to acquire and retain customers and boost sales. Strong customer relationships can significantly impact overall customer experience. There are many categories of customer relationships including personal assistance, self-service, automated service, user communities, and co-creation.

Revenue streams: There are two types of revenue stream: revenues from one-time customers and revenues from ongoing payments. Revenue pricing mechanisms vary from fixed (e.g., predefined prices based on static variables) to dynamic (e.g., price changes based on market conditions). Revenue streams can be generated through asset sales (e.g., selling a physical product), usage fees, subscription fees, licensing, brokerage fees, advertising, and temporarily selling the use of a particular asset (e.g., lending, renting, or leasing).

Key resources: Any business needs resources—physical, financial, intellectual, and/or human—to function. These resources enable the company to provide their products or services to their customers.

Key activities: Key activities are the critical tasks that a company does to succeed and operate successfully. Different companies focus on different activities in categories such as production, problem-solving, and platform/network.

Key partnerships: Companies build partnerships to optimize their business, reduce risk, or gain resources. There are four main types of partnerships: strategic alliances between noncompetitors, coopetition—strategic alliances between competitors, joint ventures, and buyer-supplier relationships.

Cost structure: All businesses incur costs through operation, whether fixed or variable. They may also face economies of scale and scope. Companies consider their cost structures in two strategies—cost-driven, where all costs are reduced wherever possible, and value-driven, where the focus is on greater value creation. Cost structures will often consider fixed costs, variable costs, economies of scale, and economies of scope.

Business Model Canvas Application: Apple

To best illustrate the business model canvas, we can take a look at Apple illustrated in Table \(\PageIndex{2}\).

Customer segments : Apple’s main consumer segment is the mass market, and Apple sells globally to customers all over the world. These customers tend to have similar needs and problems that can be addressed through globally standardized offerings such as the iPhone and iPad (hardware) as well as iTunes (software).

Value proposition : In a competitive marketplace, Apple must offer a bundle of products and services that cater to the customer segment. As one illustration, Apple iTunes offers a seamless music experience where customers can easily find, purchase, and download music all in one place.

Channels : Customers are able to interact with Apple in person through retail stores and Apple stores as well as online through the iTunes store and Apple’s company website.

Customer relationships : Apple’s customers are dedicated to the brand and often have many Apple products, such as iPhones, iPads, and MacBooks. The Apple lovemark has become a status symbol.

Revenue streams : Apple earns most of its revenues from selling products such as iPods, and the iTunes store protects them from competition with similar features.

Key resources : Apple’s key resources include its name brand, hardware and software, and content.

Key activities : Apple products have outstanding marketing and hardware design.

Key partnerships : Through negotiations and contracts, Apple’s iTunes store is one of the world’s largest online music libraries.

Cost structure : Most of Apple’s costs come through manufacturing and marketing, including employee salaries.

The business model canvas can be used to determine how to compete, as either an initial entrant or a fast follower. An entrepreneurial organization is often a first mover by introducing a new product or service category that can potentially define an innovation’s characteristics in the minds of buyers, gaining valuable name recognition and brand loyalty. First movers can also lock in key resources (such as certain distribution channels) and set a technology standard. Second movers have the potential advantage of learning from and improving on the first mover’s efforts. For example, second movers can take advantage of existing customers and optimize the first mover’s product to add new features, especially when customers are willing to switch. Research on the battle between first and second movers indicates that they are equally likely to win the market. One illustration of first and second movers is in China’s competitive mobile payment industry.

Expanding around the globe

The War of Two “Horses”: First and Second Movers in China’s Mobile Payment Industry

Over the last decade, Chinese people have been rapidly and systematically utilizing mobile payment—that is, payment services performed through a mobile device. This trend kicked off with China’s first e-commerce wholesale platform Alibaba, founded by Jack Ma from his humble apartment in Hangzhou, China, in 1999. Responding to eBay’s growing presence in China a few years later, Jack Ma launched taobao.com, a consumer-to-consumer (C2C) and business-to-consumer (B2C) online marketplace. To support taobao.com’s transactions, Jack Ma released Alipay later that year as a “third-party online payment platform.” Mobile payment became a reality in China when Alipay released its mobile app in 2008, which can be used to pay water, electricity, and gas bills as well as mobile phone fees. After 2011, when the first third-party payment license was issued to Alipay, more Chinese consumers replaced their credit cards and debit cards with Alipay. By 2013, Alipay overtook PayPal as the world's largest mobile payment platform. Alipay dominated 69.6 percent of China’s mobile payment market. Jack Ma was the “only horse” (the surname Ma means “horse” in Chinese) in the field and a clear first mover, but faced a solid rival in second mover IT giant Tencent.

Ma Huateng founded Tencent Inc. in 1998, and its early years focused on the iconic product of QQ, China’s first instant messaging software product. Tencent expanded into other Internet fields such as games, music, microblogging, and online shopping. By 2011, Tencent’s QQ was China’s most successful instant messaging software with over 700 million active users, and the company released WeChat, another instant messaging software product. Tencent’s two software products competed in the same space, with QQ primarily PC-based with “online” and “offline” status, and WeChat smartphone-based without “offline” status. WeChat soon acquired over 300 million users. Tencent is often described as a successful “second mover,” imitating a promising business model introduced by innovative first-mover firms and then surpassing these firms.

The two IT giants faced off in 2013 when each invested in a taxi booking app: Didi (by Tencent) and Kuaidi (by Alibaba). In an August 2013 5.0 version update of WeChat, users were surprised to find a “wallet” function added to the app, but most did not know how to use it. However, for Jack Ma and Ma Huateng, all had become clear: the two “horses” were going to war.

Tencent offered and then linked three seemingly unrelated apps: smartphone-based WeChat, taxi-booking app Didi, and a new wallet function. In January 2014, WeChat wallet was linked to Didi as the payment method. Passengers using WeChat to pay the taxi fare received a generous subsidy from Tencent, making taxi fare lower than bus fare. Alipay and the Kuaidi app responded in a similar way. While widely welcomed by white-collar workers, the money-burning campaign cost each side approximately 1.5 billion RMB (US$244 million). For Ma Huateng, the campaign is not just about occupying the newly born taxi-booking app market in China, but also about penetrating Jack Ma’s precious share of the mobile payment market by “teaching” WeChat users how to use make mobile payments. Weeks later, Ma Huateng continued his “teaching” in the virtual red envelope campaign during Chinese Spring Festival. The virtual red envelope is modeled after the Chinese tradition of exchanging packets of money among friends and family members during holidays. WeChat introduced the “red envelope shake” to the Chinese Spring Festival Gala, during which users were invited to shake their smartphones for a chance to win red envelopes, and eight million WeChat users participated in this promotion campaign. WeChat users can save the money won to their WeChat “wallet” and then send it to others with their own red envelope. WeChat sent 1.2 billion red envelopes worth over half a billion RMB (US$82 million) during the promotion. However, to use the money from the red envelope, WeChat users needed to add their bank card to their WeChat account and thus fully activate the WeChat payment function. Retrospectively, Jack Ma regarded the WeChat red envelope promotion as a “Pearl Harbor attack” on his territory.

After the Chinese Spring Festival, the money-burning war game between first mover Alipay and second mover WeChat continued. Both sides heavily subsidized taxi passengers on their taxi-booking apps through 2014. In the third quarter of 2014, Alipay’s market share reached a peak of 82.6 percent, but WeChat’s increasing presence the in mobile payment market was unstoppable. Both sides engaged in a new red envelope campaign during the next Spring Festival holiday. While Alipay fought hard to defend its market share, WeChat’s social nature smoothly transformed users into payers.

By the end of 2016, both sides saw continuous growth in user population; however, Alipay’s market share dropped to 54.10 percent, and Tencent and WeChat’s market share rose to 37.02 percent. In that year, consumers spent 157.55 trillion RMB (US$23.72 trillion) on mobile devices in China, and QR codes and POS machines supporting both Alipay and WeChat could be found at street food vendors, supermarkets, department stores, and online markets.

Discussion Questions:

  • What tactics did Tencent use to encroach on Alibaba’s share of the mobile payment market?
  • What key resources did WeChat use to compete with Alipay?
  • Does WeChat’s presence in the mobile payment market always negatively affect Alipay?
  • Would you rather be a first mover or a second mover in a new technology market?

Sophia Yan, “6 things you never knew about Alibaba”, CNN, May 12, 2015, http://money.cnn.com/2015/05/12/tech...cts/index.html ;

Paul Mozur, “In Urban China, Cash Is Rapidly Becoming Obsolete”, New York Times, July 16, 2017, https://www.nytimes.com/2017/07/16/b...-payments.html ;

Eva Xiao, “How WeChat Pay became Alipay’s largest rival”, Tech in Asia, April 20, 2017, https://www.techinasia.com/wechat-pay-vs-alipay ;

Anonymous Author, “WeChat”, Wikipedia, October 2 2017, https://en.Wikipedia.org/wiki/WeChat...yment_services ;

Anonymous Author, “WeChat red envelope”, Wikipedia, September 19, 2017, https://en.Wikipedia.org/wiki/WeChat_red_envelope ;

Anonymous Author, “Alipay”, Wikipedia; September 8, 2017, https://en.Wikipedia.org/wiki/Alipay ;

Nie Chenjing, “Mobile Payment Report: Alipay Shares Occupy Half of the Country”, Xinhuanet, March 31, 2017; http://news.xinhuanet.com/fortune/20...1120732899.htm ;

Li Yanxia, “Central Bank Report: China Mobile’s payment amount increased by nearly 50% year-on-year in 2016, March 16, 2017, http://it.people.com.cn/n1/2017/0316...-29150183.html .

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  • What are the key components of the business model canvas?
  • What are the advantages and disadvantages of being a first mover?
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Project management

What is a Business Model Canvas?

Paul Hersztowski

Paul Hersztowski

Head of Studio

26 March 2020

If you’ve ever planned a company, you likely know that there are a lot of moving parts to consider. Finding a centralized, essential view to take it all in can be tricky. Fortunately, this is where the business model canvas comes in! 

Business Model Canvas Definition

A business model canvas is a visual representation of a business model, highlighting all key strategic factors. In other words, it is a general, holistic and complete overview of the company’s workings, customers, revenue streams and more.

The actual business model canvas definition was first proposed by Alexander Osterwalder, a Swiss entrepreneur, and consultant, but has gone to be used around the world. 

What’s the Purpose of a Business Model Canvas?

Other than providing a general overview of the business model, these canvases enable companies to visualize and analyze their strategy. This includes updating the model as the company evolves, such as changes in the market, new streams or expansions.

The business model canvas provides the central, common source of knowledge through which each department can add their unique input from their respective domains.

It is a template that defines the business - specifically, how each section interacts with the others. For example, understanding the value proposition, the target customer and the channels through which they are engaged all need to be analyzed together, not just in individual vacuums.

Alternatively, the business model canvas can be used by organizations to plan, assess or execute new models altogether. In this way, the canvas highlights the key essentials and ensures that no vital factors are forgotten. If the canvas is incomplete, then the respective strategy is also incomplete.

Elements of a Business Model Canvas

So, what does a business model canvas include?

Customer Segments

Whether its B2B or B2C, all businesses have customers. These are the people or organizations that buy your products, use your service or are otherwise essential for creating a profit. 

Customers can be defined through various means but it’s important to focus on the core customers first, then assess less critical or potential future clients. The canvas should assess, among other factors:

Current and future needs : what are customers looking for, and what might they be looking for in the immediate future?

General demographic : age range, location, interests, etc

Likes, dislikes and pain points : what do your customers enjoy and what puts them off? Knowing this will help understand how best to approach them.

Relations with other segments : this is important if your business relies on multiple groups interacting. Airbnb, for example, has both property owners and guests - the business strategy only works if both are satisfied.

Additionally, you can list additional segments that may utilize the product or service in the future. This will highlight future directions the strategy can go in, once success has been gained with the core, primary audience(s).

Value Proposition

A company’s value proposition is the sum of its various products and services, specifically in regards to how it uniquely stands out amongst the competition. In layman's terms: what is the unique factor that makes this business better than another?

The creator of the business model canvas, Osterwalder has also stated that organizations need to offer something unique and, what’s more, this needs to be immediately discernible from the competition.

The value proposition can be as simple as being cheaper, faster, more efficient or more readily available than the competition. However, we can roughly place all values in two broad categories:

Quantitative. This refers to benefits that can be easily counted; from a customer’s point of view, this means they can be easily compared to the competition. Examples of this can include pricing or speed. Users may very well choose your service because it's cheaper or quicker.

Qualitative. This refers to abstract concepts such as value or experience - those that can’t be readily measured by hard numbers, but nonetheless, give a strong emotional response to your audience. Examples of this can include various characteristics, such as using local products, being eco-friendly or having a personal, customer-centric approach that competitors lack.

Another way of expressing the core value is by asking what you want customers to remember. When it comes to recommending your business to others, what’s the essential benefit that people should mention? This is the value that your organization needs to drive - so it needs to be on the canvas.

Of course, your value also needs to be maintained. For instance, if your value lies in being the only service in a respective region, what will happen when a larger competitor eventually decides to move in? The business model canvas should highlight these weaknesses, in order to better plan ahead.

How will you and your customer interact? Once you define your customer, as well as flesh out your unique value, this will impact what channels you use. 

For example, if your audience is busy and on the go, a mobile-facing service will be essential. Likewise, if you’re targeting specific locations, perhaps a physical presence is also needed? What’s important here is that you consider the many touchpoints that your customers may want and highlight the beneficial ones.  

However, it should be noted that channels can adapt over time and this is one area where the business model canvas is likely to be updated. 

For example, when Domino’s first started, there were only a handful of options, namely dialing the store or visiting in-person. The invention of the internet and mobile apps quickly changed this and now there are over 10 different ways, including smart TVs, slack integration and voice commands. 

Yet the decision to expand with new digital products didn’t just happen on a whim; the business model canvas considered the customer needs (efficiency and a desire for less effort) with their value proposition (making food ordering and delivery as easy as possible) to define new channels. 

Customer Relationships

This section covers your relationship with each customer. This includes how customers first came to use your business, how you kept these initial customers and, ultimately, how the business will grow its audience.

There are a number of factors to consider here, especially in regards to the type of relationship you want:

Personal Assistance. In these forms, customer service is essential. Clients want a personal approach from your company and, in turn, you offer a direct approach tailored to their specific needs. This often involves having employees attached to specific customers (such as a sales or business development position) both before and after the sale process itself. This is something a bank might have for its business clients, for example. How dedicated this exact relationship depends on the nature of your service, as well as your customers.

Automation and Self-Service . On the other hand, you might not want to have a direct, personal relationship at all. This can often be found in e-commerce stores, for example; customers just want to browse and shop at will, without speaking to anyone. Automation can enhance this through personalization, without the customer being aware, such as Netflix’s recommended viewing.

Communities. Alternatively, if your target audience is a particular niche, segment or region, you might want to establish a community. In this approach, your business model brings people of shared interests together, to facilitate more actions.

Revenue Streams

Ultimately, a company has to turn a profit. On the business model canvas, this is represented by revenue streams: the various channels with which income can be generated.

Here are the most common revenue streams to consider:

Asset or goods sales: this is one of the oldest streams. By selling goods, the business generates revenue at each transaction.

Subscription: If your providing an ongoing service or rented out products, then these fall under subscription models; your customers pay on a regular schedule (such as per month or year) as long as they are using your business.

Leasing or lending: This is similar to the subscription, but differs in that it’s for a predefined period. Car rentals, for instance, often do this, as customers define the rental period before purchasing. Newer models, however, try to challenge this status quo by offering a more subscription-based service.

Licensing: This is where the business sells licenses to other companies or individuals to use the property. It’s similar to sale, but differs in that you still own the intellectual property; the user can’t resell it.

White labeling: Similar to licensing, white labeling is where you provide a product or service that businesses can relabel as their own. This is typically done as a subscription or one-off license purchase, so it can be considered an additional variant of the above.

Advertising: Perhaps your model is designed to attract users, but currently drive revenue from advertising opportunities? Social media networks are the most famous example of this; they don’t make money through purchases or subscriptions, but through charging advertisers to benefit from this network.

It’s important to note that these revenue streams are not set in stone - they will adapt and evolve as the market changes. As a business, you should regularly return to the canvas to make sure each stream is as effective as it can be. This includes different pricing plans and options (especially if you have multiple streams) or adding new streams, such as with Domino’s, for example.

Key Resources

Every organization runs on resources: the essential assets in running the business and providing the value (defined earlier) to customers. Like the other elements, this can come in many forms.

Human resources: if you’re providing personalized value or have a model that requires a lot of staff, the cost and training of employees need to be considered.

Financial: how much investment is required to run and maintain a business before it makes a profit? The more money is needed upfront, the bigger the burden to generate ROI.

Physical: expanding your presence, opening offices or buying physical space is also an asset that needs to be considered. This is mostly true for organizations that need prominent positions, such as high street retailers or hotels. For a lot of businesses, the push into a digital landscape is quickly reducing the strain of this particular resource.

Intellectual property: this can include everything needed to develop your IP (such as an app), as well as develop and maintain it. For example, subscriptions and licenses survive by ensuring customers can not use the service without your business, as you still hold the intellectual property rights.

Through these factors, you should identify what is currently available and what is needed to succeed. Much of this will be defined in your previous channels; this is where you focus on what those channels need to succeed - with an end goal of creating a sustainable business model.

Key Activities

Similar to the last section, what do you need to do to produce your value proposition and ensure it succeeds? This section includes the key activities needed to make your model effective and successfully connect with customers.

This can include initial investment, such as finding a development company, or even marketing and advertising to generate that initial awareness. This section should take everything into account, including the impact each has on the overall business, to understand the absolute essentials and recommended extras.

Key Partnerships

Very few companies survive on their own. Identifying and preparing key partnerships is essential for long term survivability. Here are the primary partnerships that you’ll typically need to consider.

Distributors: how will your business sell to customers? Whether its using online stores, sales agents or other companies, you need some form of distribution.

“Coopetition”: sometimes two businesses, that would otherwise be competitors, can join forces to take on larger markets. This works where this is enough potential gains that a joint venture makes more fiscal sense: there isn’t a clear risk of one siding gaining at the expense of the others. For example, smaller organizations can often team up to provide a larger, holistic offer to users, or to even attend events that are outside of either side’s budget.

Suppliers: Similar to distribution, you also need suppliers for everything from raw materials to software development. If there’s something you need and can’t produce in-house, then you need to identify trusted suppliers.

Existing customers: Perhaps if you have existing clients, you can offer some recommendation rewards, or a commission-based system, to spread awareness? 

Like everything else, much of this will be subject to change. As the business grows, you might find you no longer need certain partnerships, and likewise need to move to others. All of this should be noted in the business model canvas.

Cost Structure

Finally, as far as business model canvas elements go, you need to define all potential costs. After all, you need to know how much you’ve spent to know when you’re generating profit. The cost structure takes both existing and future costs into account:

Fixed costs are the easiest to determine as they have a singular price or a repetitive price that doesn’t change. Rent is a good example.

Variable costs, on the other hand, can vary and their high peaks need to be accounted for. Factors such as temperature can often impact businesses that need to maintain a certain heat or humidity - they may spend more (or less) in the warmer months.

Economies of scale and scope , similarly, refer to decreasing costs as the business expands. This is because larger production can introduce better efficiencies (scale) while creating new partnerships and improving internal processes, as a result, can improve the wider organization (scope). For example, you might rely on third-party providers for immediate support, such as packaging, but move this in-house when it becomes cost-efficient to do so.

It’s important to understand these variables so that the business model canvas provides a realistic view of costs right now, as well as where the company aims to be short.

Benefits of a Business Model Canvas

Visuals at a glance.

Thanks for having everything in one place, people in the company can gain an immediate understanding of the business model as a whole. It’s easily interpretable and offers a single source of truth for the wider strategy.

Quick Improvements & Iterations

By having everything connected, organizations can see how every part of the business works with the wider structure. This is where people can highlight flaws or identify solutions. By comparing all the factors, such as customers, revenue streams and costs, the company can begin to make strategic improvements it might not have otherwise identified before.

Nobody wants to go through a 2-hour presentation everything they want to go through the business strategy. The business model canvas definition is a better way to show this plan. It can be easily shown to new people to help bring them up to speed, while simple changes don’t require extensive explanations; people can see how they fit onto the updated canvas.

TL;DR - What Is a Business Model Canvas?

A business model canvas is an effective way to bring all the elements of your strategy together, from initial costs to customer & revenue streams. Doing so helps bring in all departments in your company and allows for a broad, but deep, an overview of the intended business model. Whether its propose updates to an existing strategy or developing an entirely new company, the canvas is one of the best ways to get an initial overview and assess directions as early as possible.

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11.2 Designing the Business Model

Portions of the material in this section are based on original work by Geoffrey Graybeal and produced with support from the Rebus Community. The original is freely available under the terms of the CC BY 4.0 license at https://press.rebus.community/media-innovation-and-entrepreneurship/.

Learning Objectives

By the end of this section, you will be able to:

  • Define a business model and its purpose
  • Describe a business model canvas
  • Describe a lean model canvas
  • Describe a social business model canvas

According to Alexander Osterwalder and Yves Pigneur , the authors of Business Model Generation , a business model “describes the rationale of how an organization creates, delivers and captures value.” Nevertheless, there is no single definition of this term, and usage varies widely. 29

In standard business usage, a business model is a plan for how venture will be funded; how the venture creates value for its stakeholders, including customers; how the venture’s offerings are made and distributed to the end users; and the how income will be generated through this process. The business model refers more to the design of the business, whereas a business plan is a planning document used for operations.

Each business model is unique to the company it describes. A typical business model addresses the desirability, feasibility, and viability of a company, product, or service. At a bare minimum, a business model needs to address revenue streams (e.g., a revenue model), a value proposition, and customer segments. In non-jargon English, this means you want to address what your idea is, who will use it, why they will use it, and how you will make money off it.

A canvas is a display that would-be entrepreneurs commonly use to map out and plan different components of their business models. There are several different types of canvases, with the business model canvas and the lean canvas being the most commonly used. There are hard-copy canvases modeled after an art canvas as well as digital versions. The original physical canvases are meant to serve as visual tools, used with sticky notes and sketches.

As developed by Osterwalder and Pigneur, the business model canvas has nine components, as shown in Figure 11.6 .

Link to Learning

Visit this site to see examples of completed Business Model Canvases for a variety of industries for a deeper understanding of how the different categories are filled in.

Osterwalder and Pigneur wrote Value Proposition Design as a sequel to Business Model Generation . Their value proposition canvas is a plug-in that complements the business model canvas, going in depth on activities such as encouraging entrepreneurs to address and tackle customer pains, gains, and jobs-to-be-done trigger questions, and designing pain relievers and gains. The complementary and accompanying activities and resources can be useful for a deeper dive into and understanding of customer value creation in the form of value proposition, although there are other approaches to conceptualizing your value proposition. For Christensen, the originator of the disruptive innovation and jobs-to-be-done theories, a value proposition is a product that helps customers do a job they’ve been trying to do more effectively, conveniently, and affordably.

Finding the intersection of your customers’ problems and your solutions is how you create a unique value proposition, according to the entrepreneur Ash Maurya , the author of Scaling Lean and Running Lean . In Running Lean , Maurya offers the following formula for creating an initial value proposition in the canvas, as shown in Figure 11.7 .

Maurya deviated from the standard business model canvas to create the lean canvas. It overlaps the business model canvas in five of the nine components: customer segments, value proposition, revenue streams, channels, and cost structure ( Figure 11.8 ]. Rather than addressing key partners, key activities, and key resources, the lean canvas helps you tackle problems, solutions, and key metrics instead.

Visit this site to see examples of completed Lean Model Canvases from some major companies for a deeper understanding of how the canvas can be applied.

While the business model canvas and the lean canvas are similar in format, there are differences in how they are used. It is generally accepted that the lean canvas model is a better fit for startups, whereas the business model canvas works well for already established businesses. The lean canvas is simpler; the business model canvas provides a more complete picture of a mature business.

Watch this Railsware video that demonstrates how the lean canvas model might be applied to startups to learn more. In the case example in the video, the lean canvas model is applied to the successful P2P ride-sharing app Uber, as if it were a startup.

Both the business model canvas and the lean canvas are designed for constant iterations, allowing for multiple versions and changes throughout the entrepreneurial process. Part of that process involves customer discovery; thus, the canvases invoke customer-focused design. The target customer is integrated into the canvas from the start through the use of a customer empathy map and a number of design-thinking ideation activities. 30 The customer empathy map is a portrayal of a target customer —the most promising candidate from a business’s customer segments—that explores the understanding of that person’s problems and needs ( Figure 11.9 ). Osterwalder and Pigneur used a customer empathy map as part of the design ideation phase of developing a business model canvas. There are differing versions of customer empathy maps, but most seek to answer common questions pertaining to the customer, such as:

  • With whom are we empathizing?
  • What do they need to do?
  • What do they see?
  • What do they say?
  • What do they do?
  • What do they hear?
  • What do they think?

Phillips, Proctor & Gamble, Microsoft, and Yeti are examples of well-known companies that make use of customer empathy mapping because, according to the journal Entrepreneur , every transaction can be turned into a meaningful and valuable customer interaction. 31 Once a company analyzes the results of customer mapping exercises, it may very well lead to new products that serve customer needs and/or wants.

For example, Philips used empathy mapping to detect a high level of fear in young patients immediately before an MRI medical procedure, so it invented a miniature version of the CAT scan equipment used in the procedure called the “kitten scanner” along with toy animal characters that were used to dispel the fear of MRIs among children. Proctor & Gamble created a new advertisement that was released for the 2012 Olympics visualizing the trials and tribulations of mothers raising young athletes, demonstrating Proctor and Gamble’s awareness that some of its customers wanted or needed empathy for the sacrifices they had made to help their children succeed. Likewise, Microsoft has attempted to demonstrate empathy with customers’ privacy concerns by developing an interactive website that explains not only how data is stolen but also how we can better protect our own data. 32

On their company website, the now-famous Yeti cooler company publicly extols the value of empathy mapping, explaining that it leads to better products. Yeti doesn’t just create one on its own, it actually asks its clients to work with the company to create an empathy map. 33 Thus, empathy mapping for Yeti is part of its product development process.

Customer empathy maps also strive to address customer pains (in this case, fears, frustrations, and anxieties) and gains (wants, needs, hopes, and dreams). 34

Strategyzer offers six videos outlining the business model canvas that total about 12 minutes; specifically they cover the prototyping journey from ideation to visualization of conceptualization.

Business Model Canvas 35

As Osterwalder and Pigneur describe it, according to Media Innovation and Entrepreneurship , their business model canvas blocks include revenue streams, customer segments, value propositions, cost structures, channels, key activities, key partners, key resources, and customer relationships.

Early on, your greatest focus should be on the right side of the canvas because:

  • These are, in many ways, the most critical aspects of starting a new venture (customer segments, value propositions, channels, and revenue streams).
  • The most fluid (revenue streams, channels, and value propositions will likely differ for the differing customer segments and, as you iterate and adapt throughout the customer discovery process, could likely change).
  • These follow a logical temporal order (there’s no need to focus on the costs of building a company if you won’t have customers).

In a follow-up to business model generation, the Strategyzer team created a second canvas, the value proposition canvas: https://www.strategyzer.com/canvas/value-proposition-canvas. The value proposition canvas is a new tool that pulls out the customer segment and value proposition blocks of the business model canvas, and encourages more in-depth exploration of those blocks to achieve a good fit between the two. The value proposition canvas tool looks at customer pains, gains and jobs to be done on the customer side and painkillers, gain creators, and products and services on the value proposition side. 36

Read this blog that provides a walk-through of how to fill in a value proposition canvas to learn more.

When you peel away the language used to describe business models, the early startup planning stages come down to a series of questions. When it comes to formulating a business model for a startup concept, another popular framework used in entrepreneurial circles is that of desirability-feasibility-viability Figure 11.10 ). This framework forces the entrepreneur to address broad questions about the startup concept:

  • Desirability: How desirable is the product? Who will use it and why?
  • Feasibility: How feasible is this idea? What are the costs of making it? How practical is the concept?
  • Viability: Will this idea remain viable? How will it make money? How will it be sustained over time?

These questions then begin to connect to form a narrative about where the startup concept came from, whom it serves, why it’s needed, how it will make money, and how it will be sustained in the future.

The value propositions, customer relationships, customer segments, and channels address the assumptions that will create customer value (desirability). The cost structure and revenue stream blocks are aimed at viability, or overcoming flawed business models. The key partners, key activities, and key resources are about execution and address feasibility. The risk of poor execution can undermine your assumptions that you chose the right infrastructure to execute your business model (feasibility). The risk of solving an irrelevant customer job (sometimes derisively labeled “a solution in search of a problem”) undercuts desirability in your business. The risk of a flawed business model would hamper the financial assumption that your business will earn more money than you spend (viability). Adaptability is about the assumption that you chose the right business model within the context of external factors such as technology change, competition, and regulation.

The business model canvas is not an exhaustive planning tool by any means. 37 , 38 The risk of such external threats is not specifically addressed on the canvas blocks. The external threats not specifically covered by the canvas blocks can be designed for adaptability, that is, the business model canvas is a necessary but insufficient component of determining the viability of the business idea/concept. There are many elements not included in the canvas that entrepreneurs must address. Industry analysis, including a competitive analysis, for example, falls “off canvas” but is important nonetheless.

The Lean Model Canvas

The lean model canvas is Ash Maurya ’s adaptation of the original business model canvas. As we noted earlier, gone are the customer relationships, key activities, key partners, and key resources blocks. Instead, a problem block is added, because as Maurya explains, “Most startups fail, not because they fail to build what they set out to build, but because they waste time, money and effort building the wrong product. I attribute a significant contributor to this failure to a lack of proper ‘problem understanding’ from the start.” Maurya next added a solution block to the lean model canvas, which corresponds well with features on a minimum viable product (MVP), which you will recall was covered in depth in Launch for Growth to Success . The lean model canvas also adds an “Unfair Advantage” block, similar to the block for competitive advantages or barriers to entry found in a business plan. 39

Social Business Model Canvas

As you’ve noticed by now, the core canvas components are common throughout the various versions. Many of the blocks of the social business model canvas are similar to those used in the business model canvas and the lean model canvas. 40 A few differences, as developed by Tandemic , focus on areas unique to social entrepreneurship ventures. For example, the new areas added include measures of what kind of social impact you are creating or developing, measures of surplus to address what happens with profits and where you intend to reinvest them, and measures of beneficiary segments, and social and customer value propositions. 41 These could be measures such as the number of trees planted, number of refugees housed and fed, jobs created, or investments made—depending on the venture. Social impact looks at an organization’s social mission beyond the bottom line. Measurement can differ among social entrepreneurs, but in terms of the canvas, impact measures are an effort to establish quantifiable metrics.

Social impact can be hard to measure, but nonetheless, many social entrepreneurs aim for long-lasting impact. 42 A 2014 report by the think tank, consultancy, and member network SustainAbility lists cooperative ownership, inclusive sourcing, and the “buy one, give one” model as three forms of social impact. 43 In addition to the Tandemic social business model canvas, there are other versions of similar canvases used for social entrepreneurship. For instance, Osterwalder adapted the business model canvas for mission-driven organizations into a mission model canvas. 44 There’s also a social lean canvas that adds purpose (explaining your reason for creating the venture in terms of social or environmental problems) and impact sections (describing the intended social or environmental impact). 45

This completed social business model canvas for the popular peer-to-peer lending platform Kiva illustrates how the business model canvas can and perhaps should be adapted for social entrepreneurship ventures.

What Can You Do?

Toms Shoes is perhaps one of the best-known companies for adopting a social entrepreneurship purpose into its business model. Part of its early success hinged on the fact that for every pair of shoes a customer bought, the company donated a pair of shoes to someone in need. The company won a prize in 2006 for its innovative solution to poverty. This “ 1-for-1 business model ,” sometimes commonly called the “Toms model” after the shoe company that popularized it, gained traction among other companies that followed suit in similar fashion, seeing both the social and the financial successes in the Toms model. Warby Parker is another example of a company that does essentially the same: A customer purchases a pair of eyeglasses, and the company donates a pair (although Warby Parker pays a third party to procure the glasses, as eyeglasses require an individual prescription, whereas shoes do not).

  • Can you think of an innovative social entrepreneurship business model?

The Birthday Party Project

Paige Chenault wanted homeless children in Dallas to feel special on their birthdays. Many have never experienced a birthday party. So this professional event planner sprang into action in January 2012. She launched the Birthday Party Project (https://www.thebirthdaypartyproject.org/), a nonprofit group whose mission is to celebrate the lives of homeless children (ages one to twenty-two). The group organizes monthly birthday parties with partner shelters. Since its inception, the concept has spread beyond Texas to cities across the United States, including Atlanta, Chicago, Los Angeles, New York, and San Francisco. In six years, the Birthday Party Project has celebrated 4,800 birthdays with 30,000 kids in attendance, eaten 40,000 cupcakes, cracked 30,000 glow sticks, and performed 1,100 renditions of “Happy Birthday.”

  • Identify a need in your community that could become a social entrepreneurship business, as Paige discovered with an initial passion project.
  • 29 Alexander Osterwalder and Yves Pigneur. Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. Hoboken, NJ: Wiley, 2010.
  • 30 Charlene Perrin. “Create A Customer Empathy Map in 6 Easy Steps!” Conceptboard . March 28, 2019. https://conceptboard.com/blog/create-a-customer-empathy-map-in-6-easy-steps/
  • 31 Vineet Arya. “How to Infuse Empathy in Your Marketing?” Entrepreneur . June 28, 2019. https://www.entrepreneur.com/article/335987
  • 32 Vineet Arya. “How to Infuse Empathy in Your Marketing?” Entrepreneur . June 28, 2019. https://www.entrepreneur.com/article/335987
  • 33 Mike Godlewski. “The Secret to Knowing What a Client Is Thinking? Empathy Maps.” Yeti. February 8, 2016. https://yeti.co/blog/the-secret-to-knowing-what-your-client-is-thinking-empathy-maps/
  • 34 Germán Coppola. “What Is an Empathy Map, and Why Is It Valuable for Your Business?” Medium . November 28, 2017. https://medium.com/swlh/what-is-an-empathy-map-and-why-is-it-valuable-for-your-business-14236be4fdf4
  • 35 This material is based on original work by Geoffrey Graybeal and produced with support from the Rebus Community. The original is freely available under the terms of the CC BY 4.0 license at https://press.rebus.community/media-innovation-and-entrepreneurship/.
  • 36 Michelle Ferrier and Elizabeth Mays. Media Innovation and Entrepreneurship . The Rebus Foundation, 2017. https://press.rebus.community/media-innovation-and-entrepreneurship/.
  • 37 Jennifer van der Meer. "Do You Suffer from Value Proposition Confusion?" Linkedin . October 19, 2016. https://www.linkedin.com/pulse/do-you-suffer-from-value-proposition-confusion-jennifer-van-der-meer/
  • 38 “The Value Proposition Canvas.” Strategyzer . n.d. https://strategyzer.com/canvas/value-proposition-canvas
  • 39 Ash Maurya. “Why Lean Canvas vs Business Model Canvas?” Medium . February 27, 2012. https://blog.leanstack.com/why-lean-canvas-vs-business-model-canvas-af62c0f250f0
  • 40 "Social Business Model Canvas.” Business Model Toolbox . 2013. https://bmtoolbox.net/tools/social-business-model-canvas/
  • 41 “The Business Model Canvas Reinvented for Social Business.” Tandemic . n.d. http://www.socialbusinessmodelcanvas.com
  • 42 Ayse Guclu, J. Gregory Dees, and Beth Battle Anderson. “The Process of Social Entrepreneurship: Creating Opportunities Worthy of Serious Pursuit.” Duke/Fuqua case . 2002. https://centers.fuqua.duke.edu/case/knowledge_items/the-process-of-social-entrepreneurship-creating-opportunities-worthy-of-serious-pursuit/
  • 43 Lindsay Clinton and Ryan Whisnant. “Model Behavior: 20 Business Model Innovations for Sustainability.” SustainAbility . February 2014. https://sustainability.com/wp-content/uploads/2016/07/model_behavior_20_business_model_innovations_for_sustainability.pdf
  • 44 Alexander Osterwalder. “The Mission Model Canvas: An Adapted Business Model Canvas for Mission-Driven Organizations.” Strategyzer . February 25, 2016. https://blog.strategyzer.com/posts/2016/2/24/the-mission-model-canvas-an-adapted-business-model-canvas-for-mission-driven-organizations
  • 45 Social Lean Canvas. n.d. https://socialleancanvas.com/

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  • Authors: Michael Laverty, Chris Littel
  • Publisher/website: OpenStax
  • Book title: Entrepreneurship
  • Publication date: Jan 16, 2020
  • Location: Houston, Texas
  • Book URL: https://openstax.org/books/entrepreneurship/pages/1-introduction
  • Section URL: https://openstax.org/books/entrepreneurship/pages/11-2-designing-the-business-model

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What Is a Business Model?

  • Andrea Ovans

describe the concept of business model canvas

A history, from Drucker to Christensen.

A look through HBR’s archives shows that business thinkers use the concept of a “business model” in many different ways, potentially skewing the definition. Many people believe Peter Drucker defined the term in a 1994 article as “assumptions about what a company gets paid for,” but that article never mentions the term business model. Instead, Drucker’s theory of the business was a set of assumptions about what a business will and won’t do, closer to Michael Porter’s definition of strategy. Businesses make assumptions about who their customers and competitors are, as well as about technology and their own strengths and weaknesses. Joan Magretta carries the idea of assumptions into her focus on business modeling, which encompasses the activities associated with both making and selling something. Alex Osterwalder also builds on Drucker’s concept of assumptions in his “business model canvas,” a way of organizing assumptions so that you can compare business models. Introducing a better business model into an existing market is the definition of a disruptive innovation, as written about by Clay Christensen. Rita McGrath offers that your business model is failing when innovations yield smaller and smaller improvements. You can innovate a new model by altering the mix of products and services, postponing decisions, changing the people who make the decisions, or changing incentives in the value chain. Finally, Mark Johnson provides a list of 19 types of business models and the organizations that use them.

In The New, New Thing , Michael Lewis refers to the phrase business model as “a term of art.” And like art itself, it’s one of those things many people feel they can recognize when they see it (especially a particularly clever or terrible one) but can’t quite define.

describe the concept of business model canvas

  • AO Andrea Ovans is a former senior editor at Harvard Business Review.

Partner Center

Business Model Canvas Explained

Business Model Canvas Explained

Getting a business idea is easy. But converting that idea into a full-fledged business that makes money is the hard part.

Most businesses fail because they cannot make their business model profitable or sustainable in the long run.

This is where the business model canvas comes in.

It is powerful business ideation, modelling, and strategic planning tool that helps you identify how your business will operate and make money. It can be used to manage your existing business. Startup founders can also use it to validate their business idea and minimise the risk of failure before they start their business.

What Is Business Model Canvas?

A business model canvas (BMC) is a strategic management template used to organise and visualise the key elements that go into making a business model work.

In simple terms, it’s a template you fill to visualise –

  • Who is your customer?
  • What value do you provide to your customer?
  • How does your business provide value?
  • How does your business operate?
  • How does your business make money?

Technically –

The business model canvas is a conceptual structure that supports the viability of the business and explains who the business serves to, what it offers, how it offers it, and how it achieves its goals.

It is an important business development and strategy tool that helps you validate your business idea before spending too much time and effort on it.

Osterwalder’s Business Model Canvas Template

business model canvas template

Conceptualised by Professor Alex Osterwalder, the business model canvas is a template used to represent different components of running a business.

Originally published in a business model design book, entrepreneurs and startups have used the business model canvas to help them visualise a broad overview of their businesses.

The business model canvas template has nine major components (or sections), and each section helps answer questions on what, how, and who of your business operations:

Customer Segments

Value proposition, customer relationships, revenue streams, key resources, key activities, key partners, cost structure.

To download this business model canvas template right click on the above image and select ‘save image as’ or you can  click here  to get a printable PDF version of the same.

The Components Of Business Model Canvas

The right side of the business model canvas focuses on the customer, while the left side on the business. Both sides come together with a value proposition in the centre to signify the exchange of value between your business and the customers.

Consider the components of a business model canvas as a shared language that helps you describe your business in a structured way. This shared language makes it easier for anyone to understand how your business works, what are its assumptions and dependencies, etc.

Here are the nine components of a business model canvas:

  • For whom do you create value?
  • Who are your most important customer or consumer groups?

Customer segments are groups of target prospects with similar needs and characteristics. They are identified based on factors such as demographics, psychographic, behavioural patterns, etc.

For example –

  • All the people who live in a particular area.
  • All the people with a common characteristic like having a certain age, income, interest in a certain subject, etc.

Your entire business model revolves around your customer. It is therefore very important to understand your customer’s needs and how you are going to provide value for them. This will also help you identify your key segments –

  • What groups of customers are most critical to the success of your business?
  • What are their needs, wants, and the value they place on the benefits you are offering.

People living in a particular geographical location (customer segment) will have different needs and wants than people living in another part of the country.

If your target market is women with a high income, your value proposition, marketing and positioning strategy, etc. will be very different from that of a middle-class customer.

  • What solution are you providing to the customer problems you have identified in your customer segments?
  • How does your offering make your customer’s life easier?
  • What is the value that your customers receive from your offering?

The value proposition is the essence of the customer benefits you offer through your product or service.

It is the main reason customers will buy your product over the competitors’.

Consider it to be the promise of tangible benefits that your customers will receive from consuming or experiencing the offering.

Starbucks offers an experience in the form of a coffee-shop ambience that allows customers to enjoy premium coffee. Customers buy Starbucks because it helps them relax, socialise, and have quality time in their hectic life.

The value proposition is significant in mapping out your business model canvas because it helps you understand your company’s competitive advantage – what makes your company stand out from the competitors in the eyes of the customers.

  • What marketing, distribution, and sales channels do you use to reach your customer segments?
  • Do you serve customers directly, sell through distributors or retailers, etc.?

Channels refer to the path a business takes to communicate with and provide its offering to the end consumer.

They include marketing, distribution, and sales channels.

Channels are the touchpoints your customers encounter as they interact with your business.

If you run a small coffee shop near a college campus, the best way to reach out to students and prospective customers would be through word of mouth and social media. Your distribution and sales channels may include dine-in, takeaway, UberEats, etc.

However, if you open a coffee cart at a busy place in the city, your distribution channels would be different. You will have to focus on outlets that are frequented by office goers or working professionals – perhaps even vending machines or company canteens.

  • What relationships do your customer segments expect you to have with them?
  • How do you establish such relationships?
  • What’s your strategy to get, keep, and grow your customer base?

Customer relationships define the degree of intimacy or intensity of engagement between the brand and the customer, including purchase frequency, loyalty, etc.

Starbucks forms strong customer relationships by directly communicating with its customers through e-mails. They also offer rewards for frequent customers in the form of free coffee, discounts, etc.   

Customer relationships are critical to the success of your business because you will be providing value for your customers through these relationships. When done right, customer relationships can lead to customer referrals and word-of-mouth marketing that is free for you.

  • What are the sources of revenue in your business model?
  • How much do customers pay for your offering?
  • What revenue streams contribute to what percentage of total revenue?

Revenue streams refer to how a company generates revenues from its business model.

In other words, it is the way a company makes money through its offering. It includes both primary and secondary incomes.

Primary income is derived from customers who buy your offering. Secondary income comes from other non-core sources.

For example – Starbucks brings in its primary income through regular customers who specifically choose Starbucks over the competition because of their value proposition and customer experience. Their secondary revenue source includes selling coffee beans or merchandise on their online store, etc.

  • What activities does your business need to perform to operate successfully?
  • What activities does your value proposition require you to perform?

Key activities refer to those activities that help you deliver your value proposition. Planning, organising, staffing, controlling, etc., these activities will keep your business running efficiently.

They are the most important activities that enable your business to run smoothly and provide its value proposition.

For example – Coffee-shop’s key activities would include roasting coffee beans, brewing coffee, managing servers, taking orders, delivering the order to the customer.

For a PC manufacturer, key activities would be designing PCs, sourcing PC components, manufacturing products, offering after-sales services, etc.

  • What do you need to have to produce your offering?
  • How will you create, deliver, and distribute the offering to your customers?

Key resources are the most important inputs required to create and deliver the promised value proposition, leverage different channels, maintain relationships with the customers, and earn revenue.

It includes elements like

  • Human resources
  • Property and equipment
  • Raw material
  • Intellectual property, etc.

For example, to run a coffee shop, you will require human resources in the form of Baristas who can prepare delicious coffee, skilled management to manage the operations , etc. You will need property and equipment such as coffee machines, tables and chairs in the shop for people to sit and enjoy their coffee, etc.

  • Which external organisations and individuals enable your business to offer and deliver the value proposition?
  • If you don’t perform these activities yourself, who does?

Key partners refer to those organisations and people who play an important part in supporting you in creating and delivering the promised value proposition.

These are alliances with third parties who bring their unique resources, skills or assets to complement yours, which in turn, helps you –

  • Optimise your business model
  • Acquire better resources
  • Reduce costs
  • Reduce risks
  • Gain access to new markets

For example – Lenovo doesn’t create its own processors. Instead, it partners with Intel to use its microprocessor.

Similarly, a coffee shop may partner with a bakery that can supply them with baked goods on demand.

  • What are the costs required for your business to operate?
  • How much has each cost contributed to bringing in revenue?

A company’s cost structure highlights its operating expenses and how they evolved over time. It shows what percentage of revenues goes to different expenditure items like paying employees, buying raw materials, etc.

The cost structure basically summarises a company’s expenses in a particular time period. You calculate it after defining all the other business model canvas elements.

For example – In a given year, a coffee shop may have operating costs, including rent, salary for employees , cost of equipment, etc., amounting to $1,000,000. Their revenue in the same year is $3,000,000. This means that their net income after operating expenses is $2,000,000.

The Importance Of Business Model Canvas

The business model canvas (BMC) is considered an effective strategic tool to develop or modify existing businesses. It helps you to clearly see all the elements of your business model and analyse them for big areas of opportunity.

A clear understanding of what, how and for whom your business will create value is invaluable in making key decisions related to operations, revenue generation, distribution channels, etc.

Here’s why you should always develop a business model canvas for your business –

  • Allows you to visualise the different parts of the business model, which is difficult otherwise.
  • Enables detailed analysis of all elements that give rise to value creation – the key resources, key activities, key partnerships, etc.
  • Helps you identify and segregate value-adding and non-value-adding activities, which in turn helps you cut down on unnecessary costs.
  • Provides a clear picture of your business’s revenue model, which helps you identify key revenue drivers and areas that require more focus.
  • Provides an understanding of the channels you can use to distribute your products or services.
  • Helps you identify gaps in operations, areas where there is scope for improvement etc.
  • Helps you identify all possible risks associated with the business model – both external and internal.
  • Gives a clear answer to what matters most when it comes to your business – what your business is, how it operates and makes money, who are the key partners to collaborate with, what are the costs involved, etc.

Business Model Canvas Examples

We shall present some examples of Osterwalder’s Business Model Canvas in the following section.

Google business model canvas

Bottom-Line?

A Business Model Canvas Is More Than Just An Infographic

Many individuals think of a business model canvas as just another marketing tool or infographic to help present their idea in a more attractive way.

But it’s not just that. It actually helps you gain a comprehensive view of your business.

The objective of creating a business model is to have complete clarity on how your business will create, deliver and capture value. The more clearly you are able to identify, describe and visualise all the elements involved, the better it is for your overall business.

It becomes easier for you to understand the different elements of your business and identify areas where you can improve, innovate or add more value.

The Startup Process

We know how important your dream business is to you. Therefore, we’ve come up with an all in one guide:  The Startup Process  to help you turn your vision into reality.

Aashish Pahwa

A startup consultant, digital marketer, traveller, and philomath. Aashish has worked with over 20 startups and successfully helped them ideate, raise money, and succeed. When not working, he can be found hiking, camping, and stargazing.

Related Posts:

startup process

Rocket Innovations

Business model canvas.

Business Model Canvas is a breakdown of several key elements about your business, or intended venture, and how it plans to make money. Each piece of the canvas is a tool that lets you visualize the assets you bring with your business, idea, or concept.

Business Model Canvas Breakdown

The Right Side Focuses on the customer market and the external factors that are typically out of the control of the business owner. The Left Side Focuses on the internal aspects of your business that are mostly within your control. The Center The value propositions that represent the value your venture holds for your customers.

Click here to download the editable version of the Business Model Canvas

business model canvas

VALUE PROPOSITION

Your value proposition is the unique solution that your venture provides to your target market or customer base. Your proposition should be unique and different from your competitors. If your product is new, your statement should be innovative. If your venture already exists in the market, your proposition should highlight unique features from what already exists. Questions to ask yourself: What's compelling about the proposition? Why do customers buy, use?

CUSTOMER SEGMENTS

Customer segments are the groups of people or companies you're trying to reach to promote or sell your venture. By creating customer segments, you're grouping your potential audience into similar categories, such as age, gender, location, interests, etc. Questions to ask yourself: Who are the customers? What do they think? See? Feel? Do?

Types of customer markets:

  • Mass market: Focuses on the general population or a large group of people, and doesn't group its audience into segments. 
  • Niche market: focused on a specific group of people with unique qualifications. Interactions for this market need to be customized to meet particular requirements. 
  • Segmented: One leading group, but each audience is created based on their different needs. 
  • Diversified: this type of market segment includes customers with very different needs. 
  • Multi-sided markets: this includes interdependent customer segments. One segment depends on or utilizes the other segment.

CUSTOMER RELATIONSHIPS

Depending on your venture, you'll establish different relationships with your target markets or customer segments.  Questions to ask yourself: How do you interact with the customer through their 'journey'?

Types of customer relationships:

  • Personal assistance: you directly interact with the target audience member through various personal interactions.
  • Dedicated personal assistance: you assign a dedicated customer representative to interact with a member of the target market.
  • Self-service: There is no direct relationship with the customer, but you provide solutions for the member of the customer segment to help themselves.
  • Automated services: the creation of automated processes that helps members of your target complete the services themselves.
  • Communities: the utilization or creation of digital communities where audience members can help each other find solutions to issues.
  • Co-creation: you invite your audience members to get involved in product design or development of the product.

Key Partners

Key Partners are relationships forged with external companies or suppliers to reduce risks and acquire resources and complete your key activities. Questions to ask yourself: What can the company not do to focus on its Key Activities?

Types of Partnerships

  • Strategic alliance: the partnership between non-competitors
  • Coopetition: the strategic collaboration between business partners
  • Joint ventures: partners developing a new business
  • Buyer-supplier relationships: ensure reliable supplies

Key Activities

Key activities are objectives that must be completed to fulfill your business purpose, reach targeted customer segments, generating income, and maintain customer relationships. Questions to ask yourself: What uniquely strategic things does the business do to deliver its proposition?

Key Activity Categories:

  • Production: delivering, manufacturing, and designing a product in substantial quantities and/or of superior quality.
  • Problem-solving: finding alternative solutions to problems faced by your target market.
  • Platform/network: Creating and maintaining platforms.

KEY RESOURCES

The key resources are the pieces that you need to progress with or complete your venture. Questions to ask yourself: What unique strategic assets must the business have to compete?

Types of key resources:

  • Human resources- (employees)
  • Financial - (cash, lines of credit, etc.)
  • Intellectual - (brand, patents, IP, copyright)
  • Physical - (equipment, inventory, buildings)

Channels play a role in raising awareness of your venture and value proposition to your customer base. They can also be used to show customers the avenue to purchase your products or services and offer post-purchase support. Questions to ask yourself: How are these propositions promoted, sold, and delivered? Why? Is it working?

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

Cost Structure

In the cost structure section, you'll need to identify any and all costs associated with moving forward with your venture or business. Don't forget to evaluate the costs of creating and delivering value propositions, maintaining customer relationships, and generating revenue streams. It's easier to define your essential resources, partners, and activities before examining the expenses associated with your cost structure. Questions to ask yourself: What are the business' major cost drivers? How are they linked to revenue?

Businesses cost structures:

  • Cost-driven: focus on minimizing costs whenever possible
  • Value-driven: focuses on providing maximum value to customers and members of the target audience

Revenue Streams

You can earn income through two revenue models: transaction-based, which occurs when a customer makes a one-time payment or the reoccurring revenue model. The customer makes ongoing payments for continuing or post-sale services. Questions: How does the business earn revenue from the value propositions?

Of the two forms of revenue types, you're able to generate income in the following ways:

  • 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
  • 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

Reference: Author Amanda Athuraliya Amanda Athuraliya is the communication specialist/content writer at Creately, et al. “Business Model Canvas Explained: A Step-by-Step Guide with Templates.”  Creately Blog , 7 Nov. 2019, creately.com/blog/diagrams/business-model-canvas-explained/.

After selling his startup for a life-changing $3.7 billion, Jyoti Bansal launched a VC firm and two high-value startups. Why?

Jyoti Bansal has gone on to launch a venture firm and two new high-value startups.

Sometime in 2017, Jyoti Bansal was on his couch watching Jiro Dreams of Sushi .  

In the first three minutes of the documentary, a masterpiece about excellence and obsession, sushi chef Jiro Ono speaks right into the camera: 

“Once you decide on your occupation… you must immerse yourself in your work. You have to fall in love with your work. Never complain about your job. You must dedicate your life to mastering your skill. That’s the secret of success… and is the key to being regarded honorably.”

Ono was a steely 85 at the time of the movie, and his philosophy struck Bansal, then at his own crossroads. Bansal had recently sold AppDynamics for $3.7 billion in a dramatic pre-IPO deal . The day before the company went public, Cisco had upped the ante enough to get to a yes. It was a triumph, and a kind of loss.

“I remember being at the party after, celebrating, we’d sold the company for a pretty good price, and that was a high point,” said Bansal. “Then I came home, and I was depressed, thinking ‘this is the end.’”

After working through his bucket list (Himalayas hiking and Norwegian fjords, for example), he was back on his couch, and not actually sure what he was supposed to be doing. As in, with his life. 

“I was really doing some soul-searching at the time, after selling AppDynamics,” Bansal told me. “And if you look at the movie, it really isn’t just about the outcome, it’s about the process of getting better and better.”

He tells me the sale of AppDynamics was both a high and low point of his career. On one hand, the sale helped mint 400 millionaires out of AppDynamics employees and delivered killer returns for investors. On the other hand, he felt like he hadn’t finished the job. 

And, for many entrepreneurs, this is about where the story would end. But not for Bansal. He went on to co-found software delivery company Harness in 2017. And, for many entrepreneurs, it would stop there. But in 2018 Bansal went on to cofound Unusual Ventures, and then, in 2019, he cofounded API security startup Traceable AI. 

As if on cue, Harness and Traceable (Bansal is the CEO of both) have each reached new milestones in recent weeks. Fortune has exclusively learned that Harness has raised $150 million in financing from First Citizens-owned Silicon Valley Bank and Hercules Capital. Harness, which has more than $100 million in ARR, is valued at $3.7 billion, and Traceable (last valued at $500 million) this month announced that it had raised a $30 million funding round.

And, lest you forget, this guy does have three jobs—as cofounder and entrepreneur partner of a VC firm, Bansal is also advising founders and the firm has done a few deals this year, including Traceable, Theia Insights, Navro, and Qdrant. 

The ‘Elon Musk of enterprise software’ (sort of)

This sounds atypical, sure. But how anomalous is Bansal? Very, said Menlo Ventures partner Matt Murphy, an investor in both Harness and AppDynamics. 

“You could count the entrepreneurs on two hands that have been able to do something like this, maybe one,” Murphy told Fortune . “ Jack Dorsey is the best example. I know Jobs started multiple companies , but it was Apple that was successful… You have a guy like Andy Bechtolsheim who’s founded multiple successful companies, but he’s done that over a very long period of time, and Jyoti’s done it in a relatively short period of time.”

Bechtolsheim recently settled an insider trading case , without admitting or denying the allegations, so he’s not necessarily an ideal role model. Another famous (and controversial) name comes up, twice. 

“I look at him as the Elon Musk for B2B businesses,” said Sanjay Nagaraj, Traceable cofounder and Harness investor. “A lot more integrity and humility, that’s the biggest difference.”

I tell Bansal this, starting only with “the Elon Musk for B2B businesses,” and he shudders humorously: “I hope Sanjay said something nice after that!” It’s a comparison that came up again.

“I tease Jyoti that he’s the Elon Musk of enterprise software,” said Unusual Ventures cofounder John Vrionis, who’s known Bansal for 17 years and was the first check into AppDynamics back when he was at Lightspeed. “But I’d finish that with the reality that he’s not super weird, or extreme,” Vrionis added. “The part of him that’s Musk is that Traceable will also be a multi-billion company. I have zero doubt. And how many people have done that?”

Rinse and repeat

Because so few founders have minted back-to-back unicorns, it’s not easy to choose something or someone to compare Bansal to. And that leads to a natural question: What exactly is Bansal’s superpower (if we must use such language)? Everyone kind of has a different answer.

“He’s the best entrepreneur I’ve ever worked with in terms of finding product-market fit, and that’s the hardest thing in venture capital,” said Murphy. “There are all kinds of great ideas and good products that, for whatever reason, don’t land.. Jyoti has started these three companies that had traction right out-of-the-gate.”

To Steve Harrick, IVP general partner, Bansal’s ability to systematically break down his own success makes him remarkable—and allows him to repeatedly attract exceptional people.

“What he’s done is he’s accumulated all the components that it takes to build a really good high-growth company,” said Harrick, who’s known Bansal for more than ten years and–fun fact–once roomed with him on a fly fishing trip. “He knows the right lawyers, the right venture capitalists, the right software engineers… People want to work for Jyoti Bansal companies, so he gets this incredible technical talent. He has all these components in place. It’s almost like an artist who’s worked all their life, and has the oil, and the canvas, and everything else. And he just wants to paint another painting.”

IVP has the distinction of being the only investor to have backed all three of Bansal’s companies. And Harrick wants me to understand that backing a founder running multiple companies at once is exceedingly abnormal for IVP—and incredibly specific to Bansal. That’s high conviction, I say. 

“It is high conviction,” said Harrick. “I do have to confess it’s the first time I’ve ever backed anybody to run two companies… I think we’ve only done that once before in the 22 years I’ve been here, and only with entrepreneurs we know. Because at that stage, you’re betting on the people more than anything. And he is that good.”

Harness chief people officer Luan Lam, who previously was at AppDynamics, says that while Bansal is an intense manager, he also offers a lot of freedom.

“He identifies experts in the field and basically gives them the keys to the kingdom, their own books of business, and they go run it,” said Lam.

To Nagaraj, it comes down to Bansal’s “clarity of thinking—that was there from day one: ‘here’s the way I want to do it, this is how you build a product and a company.’”

Since everyone has a theory, I may as well offer up my own: That Bansal is an astonishing goal-setter. At dinner, each of us with a glass of Brunello, I watched him work backwards and meticulously break down precisely how Harness is going to get to $1 billion in revenue, in the casual way that most people describe their commute. 

“His ability to set vision far exceeds anyone I’ve worked with,” said Sid Choudhury, Harness SVP and general manager, who also worked at AppDynamics. “I’ve worked with tens of founders by now and I haven’t seen anybody like him, who not only can do the day-to-day work… but can continue to execute a grand vision every day for ten years—that’s where he’s an outlier in my opinion.”

Software, lab-grown meat, or sushi?

The fact that Bansal was able to develop these skills was not a given. He grew up in a small town in India (he’s careful to distinguish that a small town in the U.S. is very different from a small town in India). 

“I had my first computer access when I was in grade 11 or something,” he said. “My dad ran what you would call a small mom-and-pop shop… Growing up in India, we had a lot of power outages where the electricity just went off, and my dad had this rule that any time there was a power outage, we had to do multiplication tables. ‘Kids, become good, because that’s what you have to do.’”

(A wrinkle I noticed, as I talked to eight of Bansal’s employees, colleagues, and investors: Many of them also come from places people rarely leave.)

Bansal’s career has also been shaped by downturns. After graduating IIT Delhi, he came to Silicon Valley, found a crowded place to live and a job—then the dotcom crash happened just a few months thereafter. Later, looking to launch AppDynamics, he struggled to fundraise and initially was rejected by 30 VCs. Bansal would launch AppDynamics in April 2008, and, by September, the Great Financial Crisis would materialized.

From there, through the AppDynamics exit, coupled with the combined $4.2 billion valuation of Harness and Traceable, it’s a pretty sterling American Dream story—Murphy recalls that, by the time he was fundraising for AppDynamics the second time, Bansal’s hair was “spiked up” and he had a different aura about him.

“AppDynamics was more like the training phase of Jyoti, and Harness is more like Jyoti as the highly-trained model that knows exactly what to do,” said Murphy. “And like any good model, he’s constantly learning and evaluating.”

There’s a work-in-progress air about Bansal—for all his success, his life still has outstanding questions and ambitions. Will he ever step outside enterprise software into, I don’t know, lab-grown meat, he muses aloud in one of our conversations? Bansal also doesn’t necessarily like being a VC in the traditional sense. He enjoys working with founders but is happy to leave fund management to Vrionis. Still, that leaves Bansal as the CEO of two high-value startups and the cofounder of a VC firm that’s deploying a $522 million third fund. 

And that gets to the essential enigma of this 46-year-old entrepreneur. Okay, one startup after selling another, sure. But two, and a VC firm? Where is this all going? And why?

In a roundabout way, I felt like I found my best answer to that question in Chris Bleidorn, executive chef and owner at Birdsong, a two Michelin-starred restaurant in which Bansal is an investor. 

“At the restaurant, we employ 30 people, we cook a ten to 15 course menu using the best ingredients, the best stemware, and we’re not trying to be our best,” said Bleidorn. “I often think Jyoti thinks like this as well, but he’ll never say it: We don’t try to be our best because that sets a limit. That means there’s a ceiling. We try to be the best, and that’s infinite. There’s no end goal. Yes, that’s exhausting and that’s tiring, but also it never stops.”

At another San Francisco restaurant, I confess to Bansal: That as I try to find meaning “in the day-to-day trenches of adult life,” as David Foster Wallace has called it , the pursuit of excellence gives me purpose. He tells me it resonates, and it brings us back to Jiro Dreams of Sushi.    

“I love this whole concept of the pursuit of excellence,” Bansal said. “[Jiro’s] just running a small restaurant in a train station, and all he cares about is getting better, and he enjoys doing it… I’m really inspired by the clarity of that, and the realization that my craft is building products, and the business around the product.”

I press the metaphor: So, to be clear, your sushi is enterprise software?

“Not the most exciting product, I know–lucky me!… But it’s half the tech world, right?”

So it is. But in the end Bansal’s why isn’t about the what, so much as the process, bringing us right back to Jiro, who told his documentarians, eyes boring into the camera:

“I’ll continue to climb, trying to reach the top, but no one knows where the top is.”

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COMMENTS

  1. Business Model Canvas: Explained with Examples

    Here's a step-by-step guide on how to create a business canvas model. Step 1: Gather your team and the required material Bring a team or a group of people from your company together to collaborate. It is better to bring in a diverse group to cover all aspects.

  2. Business Model Canvas: The Definitive Guide and Examples

    Before 2004, entrepreneurs suffered from prolonged and cumbersome business plans. Alexander Osterwalder facilitated the creation of a business model by introducing the Business Model Canvas (BMC).. By definition, it's a visual template that illustrates various objects of a business model.Osterwalder's original canvas includes nine elements, which we will have explained below in the article.

  3. Business Model Canvas Explained: Definition and Components

    See why leading organizations rely on MasterClass for learning & development. The simple, visual template of the Business Model Canvas has made it a favorite among entrepreneurs and business strategists. With its one-page, nine-points design, a Business Model Canvas allows stakeholders to quickly understand the key needs and goals of any business.

  4. Business Model Canvas: Definition, Benefits, and Examples

    As Jim explains, here are a few of the benefits of using a business model canvas to think through product strategies: 1. You can use a business model canvas to roadmap quickly. You can use this canvas approach in just a few hours (and as Jim says, you can even do it with sticky-notes). This way, rather than trying to write out every detail ...

  5. Business Model Canvas Explained: Definition, Pros, Cons, and ...

    The Business Model Canvas is a strategic management tool that helps businesses visualize and analyze their business models. It consists of 9 fundamental building blocks that describe the core aspects of a company's value proposition, infrastructure, customers, and finances (more on that later, we promise). By using it, organizations can gain a ...

  6. What is a Business Model Canvas? Definition, Examples ...

    In the Business Model Canvas, "Key Resources" refers to the essential assets, capabilities, and infrastructure that a business needs to create, deliver, and capture value. These resources are fundamental to the business model and help define the core competencies and advantages of the company.

  7. Business Model Canvas (BMC): The Ultimate Guide

    Business Model Canvas (BMC) is a framework that helps determine how a business creates, delivers, and captures values. It is a visual representation of the important aspects or parts to consider when designing a Business Model. BMC aids in constructing a shared understanding of a business by condensing it into a simple, relevant, and ...

  8. What is the Business Model Canvas?

    A business model canvas provides a high-level, comprehensive view of the various strategic details required to successfully bring a product to market. The typical use case for this tool is to outline the fundamental building blocks of a business, but it can be used effectively for individual products as well. The exact ingredients may vary, but ...

  9. What is a Business Model Canvas?

    The Business Model Canvas - Flexible Chart, Early-Warning System and More In service design, two tools are essential to use early in your design process: the business model canvas and the value proposition canvas.You can use the business model canvas to build an overview of changes to be made to an existing business (e.g., a merger) or of a totally new business opportunity or market gap.

  10. Business Model Canvas

    The Business Model Canvas is a strategic management template used for developing new business models and documenting existing ones. It offers a visual chart with elements describing a firm's or product's value proposition, infrastructure, customers, and finances, assisting businesses to align their activities by illustrating potential trade-offs.. The nine "building blocks" of the business ...

  11. The Business Model Canvas Explained: Easy Guide

    A business model canvas is a template that helps business teams to visualize, analyze, and adapt essential aspects of their business. The concept was coined and spread by Alexander Osterwalder, a Swiss entrepreneur and business theorist, and his graduate supervisor Yves Pigneur, a Belgian computer scientist.

  12. Business Model Canvas Explained: Examples And Structure

    Business canvas, also known as a lean business plan, is a time-saving approach to business planning, opposed to traditional planning methods. Rather than describing the detailed vision, mission, operations, it answers key questions - and the team derives the conclusion from this answer. Business model canvas is more attainable than a business ...

  13. 19.4: Business Model Canvas

    Originally developed by Alex Osterwalder and colleagues, the business model canvas covers the four main areas of any venture: customers, offering, infrastructure, and financial viability. There are nine building blocks that describe and assess a business model: customer segments, value propositions, channels, customer relationships, revenue ...

  14. The Business Model Canvas Explained

    The Business Model Canvas (BMC) is a powerful tool which systematically works through the fundamental building blocks of a business, structuring an idea in a coherent manner. It quickly draws a ...

  15. Business Model Canvas: A Complete Guide

    The Business Model Canvas, developed by Alexander Osterwalder, is a visual representation of current or new business models, generally used by strategic managers. The Canvas provides a holistic view of the business as a whole and is especially useful in running a comparative analysis on the impact of an increase in investment may have on any of ...

  16. What is a Business Model Canvas?

    A business model canvas is a visual representation of a business model, highlighting all key strategic factors. In other words, it is a general, holistic and complete overview of the company's workings, customers, revenue streams and more. The actual business model canvas definition was first proposed by Alexander Osterwalder, a Swiss ...

  17. 11.2 Designing the Business Model

    Describe a business model canvas; Describe a lean model canvas; ... When it comes to formulating a business model for a startup concept, another popular framework used in entrepreneurial circles is that of desirability-feasibility-viability Figure 11.10). This framework forces the entrepreneur to address broad questions about the startup concept:

  18. What Is a Business Model?

    In The New, New Thing, Michael Lewis refers to the phrase business model as "a term of art.". And like art itself, it's one of those things many people feel they can recognize when they see ...

  19. Business Model Canvas Explained

    The business model canvas is a conceptual structure that supports the viability of the business and explains who the business serves to, what it offers, how it offers it, and how it achieves its goals. It is an important business development and strategy tool that helps you validate your business idea before spending too much time and effort on it.

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  21. Business Model Canvas: Importance, Benefits & Examples

    The business model canvas is the ideal tool to analyze and plan your new business venture. Learn what it is & how its elements can benefit your business. Business Model Canvas: Importance, Benefits & Examples | Boldare - Digital Product Development & Design Company

  22. Business Model Canvas

    Business Model Canvas Business Model Canvas is a breakdown of several key elements about your business, or intended venture, and how it plans to make money. Each piece of the canvas is a tool that lets you visualize the assets you bring with your business, idea, or concept. Business Model Canvas Breakdown. The Right Side

  23. What is the business model canvas?

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  24. PDF Business Model Canvas

    A business model canvas is a simple tool that helps you innovate your business right away. It's in Four Parts: (Change Two!)

  25. After selling his startup for a life-changing $3.7 billion, Jyoti

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