The Business Model Canvas has long been the framework most widely used by entrepreneurs to define the business model of a startup and, more generally, a company; nowadays, however, this tool might be considered out of date and not perfectly capable of responding effectively to the constant changes that characterize today’s world.
Within this guide you will find a detailed explanation of what the Business Model Canvas is and how it works, but that’s not all: you will also get a chance to learn about modern alternatives you can decide to adopt for your startup.
What is the Business Model Canvas?
The Business Model Canvas is a tool designed by Alexander Osterwalder and described in the book “Creating Business Models.” It aims to provide entrepreneurs with a valid method for representing the Business Model, that is, the strategy through which you plan to generate a profit with your business.
On a practical level, this particular tool can be regarded as a kind of useful guide to ensure that no key element in defining the Business Model is then overlooked.
The 9 components of the Business Model Canvas: how does it work?
There are 9 sections that make up the Business Model Canvas. Knowing which ones they are, however, should not be enough for you: you must keep in mind, in fact, that there is a precise order of compilation that you must necessarily follow in order to best define your business model.
Let us now see, one by one, in order of compilation, the 9 components of the Business Model Canvas.
Value proposition
A value proposition is that statement that can communicate as briefly and effectively as possible why your customers should choose your products or services and not those offered by your competitors.
The value proposition is the first block to be filled in since it represents the beating heart of the Business Model Canvas: here you must write, in brief, what your startup is about and what it can offer consumers that is new. An important clarification should be made here: within the category “new” does not only include totally new products or services, but also, for example, new ways of delivering services that are already on the market.
Customer segments
Defining customer segments means identifying your startup’s target customers. A particularly useful tool in this regard is Buyer Personas.
The Buyer Personas are fictional, generalized representations of a company’s typical customers, i.e., those customers who have a specific interest in the company and/or its products or services or who have a problem that the company believes it can solve.
Distribution channels
Once you have defined who your core customers are, you need to find ways to reach them effectively. To do this, you need to figure out which channels they use most (social networks? TV?) and also identify the easiest way to get in touch with them.
Having this set of valuable information on distribution channels with you allows you to better refine your customer acquisition strategy.
Customer Relations
With regard to customer relations (the fourth component of the Business Model Canvas), it should be pointed out that there is no universally valid rule for reaching out to customers and connecting with them in a consistently effective way.
Take advantage of this: ask yourself the right questions (do you need to offer a personalized service tailored to each customer’s needs or can you automate and standardize some steps?) and choose your own way of relating to them, always keeping in mind the business model you have decided to adopt.
Revenue Streams
The analysis of revenue streams introduces the concept of “revenue” within the Business Model Canvas: since your goal (as, for that matter, any other entrepreneur’s) is to generate profit you need to be clear about how to do this.
You should know and always keep in mind that there are many avenues available to you, ranging from “simple” transactions to affiliate models. Not only that, you must also consider that you are not obliged to generate profit on your own. This, however, introduces the next component, which is the sixth component of the Business Model Canvas.
Key Partners
Partnerships, as we have just mentioned, can play a key role in the process by which you generate profit: within the Business Model Canvas, therefore, you must also indicate the other business entities, suppliers and consultants with whom you wish to form a business partnership (or with whom you should).
Key Activities
In order to develop a business model that is really effective, you also need to draw up in good time the list of the most important activities for your startup, whether they are manufacturing or other (e.g., management) activities.
Key Resources
Once you have identified the core activities for your business, you must also identify the resources needed to actually carry them out successfully. Pay close attention: we are not only referring to purely economic resources, but also to human and material resources.
Cost structure
Only one last field is missing to complete the Business Model Canvas: it is the one dedicated to the cost structure.
The resources you have identified as necessary to complete the key activities for your startup will, of course, generate costs. Within the last section of the Business Model Canvas you must therefore focus on the economic aspect and reason about the costs you will have to deal with (not only the initial ones, but also those that will crop up as your startup grows larger).
Model and examples of application of the Business Model Canvas
Now that you know all nine components of the Business Model Canvas, it is important to remember that in order to build it the best you can, you must follow a specific order. Yves Pigneur, about compiling the Business Model Canvas, once said:
“Adapting the Business Model Canvas is like painting a business picture: each section is a color that contributes to the final image.”
This particular tool can find application in any business environment (and at different points in a company’s life): reasoning about the 9 blocks described in the previous paragraph, in fact, allows you not only to strategically define your company’s business model but also to strategically reconsider and renew it.
The role of the Business Model Canvas in startups
To be successful with a startup you need to be in the right place at the right time, but that, unfortunately, is not enough: you also need to know, in fact, what to do in that precise place at that precise time. Well, the Business Model Canvas is what puts the entrepreneur (who is, or rather should be, for all intents and purposes also a manager), in a position to be able to make the right decision in a timely manner to successfully implement an innovative and successful business model.
Criticisms and limitations of the Business Model Canvas
In the previous lines we have repeatedly stressed the importance of the Business Model Canvas, but we cannot fail to refer also to the limitations that this tool, nowadays, shows.
A rigid model for a changing world
According to one of the most frequent criticisms of the Business Model Canvas, this tool is in danger of being obsolete and outdated nowadays. The reason is related to its rigidity, which makes it unable to adequately interpret the constant changes in today’s world and, consequently, not even to respond to them effectively.
Lack of focus on sustainability and innovation
There is, then, another criticism that is often levelled at the Business Model Canvas: its components (of which, let us recall, there are 9) are considered few and not enough to imagine, describe, share and innovate a startup’s business model. Among the various key elements that a Business Model Canvas is likely to overlook are the aspects related to sustainability and innovation.
The new business models in digital transformation
Precisely in response to criticism of the Business Model Canvas and its limitations, you should know that B-PLANNOW®, after years and years of testing and validation, has come up with THE B-PLANNOW BOARD®.
It is a shared visual language consisting of 23 elements (of which as many as 19 are fundamental), which, better than a traditional Business Model Canvas, really allows nowadays to best describe, visualize and redefine a startup’s business model.
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