THE CANVAS BUSINESS MODEL: EXPLAIN EVERYTHING YOU WANT TO KNOW
Do you want to create a new business model? Or map an existing business model? Then the business model canvas is a super handy tool to do this. In the process of digital transformation, the business model canvas can be used in step 2: concept validation & refinement.
The authors of the book “Business Model Generation” use the following definition for the business model canvas: “the rationale of how an organization creates, delivers and retains value” (Osterwalder & Pigneur, 2010). We at Duodeka often use the business model canvas to refine our own business ideas, or business ideas of customers. That is why we are happy to explain everything you want to know about the business model canvas.
WHEN DO I USE A BUSINESS MODEL CANVAS?
The canvas is very useful if you want to bring a new product or service to the market and refine your ideas and thoughts. However, existing companies can also make valuable use of the business canvas, for example during changes in the market. Your company needs to adapt to this. We also advise companies to map the market on a regular basis using the canvas.
GET STARTED WITH THE BUSINESS CANVAS
The business model canvas can be divided into four blocks, which in turn are divided into nine subcategories. The ‘big’ four blocks that are distinguished are: the internal organization, the external organization, the outgoing cash flows and the incoming cash flows. The four overarching categories are divided into: strategic partners, core activities and people & resources (internal); value proposition; customer relationships, channels and customer segments (external); cost structure and income streams.
When you start filling in the canvas, we recommend printing it out and hanging it up. Fill in the canvas together with your partners (use the well-known post-it stickers!), this way of brainstorming often yields incredibly valuable insights.
Did you fill the canvas with post-its? Then it’s time to start answering the core questions, which are all asked in a what-if form.
“What if our competitor sets a lower price?”
“What if the biggest customer drops out?”
Now let’s briefly review the nine building blocks of the canvas one by one.
1. CUSTOMER SEGMENTS
The customer segments are a very important building block of your business model. If you are going to launch a product or service, it is essential to identify who your target group is and what the needs of your target group are, in other words: segment the market and get to know your potential customer.
2. VALUE PROPOSITION
The value proposition is perhaps the most important building block of your business model canvas: what value do you deliver to your customers? How do you distinguish yourself from the competition? Why should the customer buy your product or service?
3. CUSTOMER RELATIONSHIPS
When your customers have purchased your product or service, it is important to retain these customers as customers. How will you maintain the relationship with your customers? A good relationship with customers ensures more repeat purchases, positive word-of-mouth advertising and more turnover per customer. In short, a good relationship with customers leads to a higher turnover.
Map out which channels you use to reach your potential customers during their customer journey. How are you going to bring your target group into contact with your product? Where can your target audience make a purchase? Through which channels do you ensure retention? Channels can be both online and offline.
5. CORE ACTIVITIES
Your business must continue to run. In the category ‘core activities’ you list activities that must be carried out to keep your business running. What activities sustain our value proposition? What activities should we perform to increase our marketing reach?
6. PEOPLE AND RESOURCES
What people and resources are needed to keep your business running? For which matters, which are not outsourced, do you need people and resources yourself? With ‘resources’ you can think of, for example, a laptop (physical resource) for all employees, but also a patent (intellectual resource). The “people” category includes your employees, for example a sales and administrative employee.
7. STRATEGIC PARTNERS
Sometimes you can’t do everything alone, especially when you’re a starting entrepreneur. Your strategic partners are people and/or parties you need to keep your business running. Bundling knowledge and specialisms can be very important in staying ahead of your competition.
8. COST STRUCTURE
The ultimate goal of your business is to make a profit. To be able to measure whether you are making a profit, it is important to properly map out your operating costs. What costs do you need to run your business?
9. CASH INFLOWS
If you know what your costs are, you must of course also know what comes in. Your incoming cash flows, or your revenue model, is the answer to the question: how are we going to generate turnover? Do people pay once for your product or service? Or do they take out a subscription? Also determine how much turnover you need to make to achieve the intended profit. Determining the turnover at which you break even is also important.
The Business Model Canvas is often used in combination with the Lean Startup Method, you can also read all about this on our website. Need help setting up your own business? Please feel free to contact us.