About 30 percent of the cerebral cortex is dedicated to processing visual information, compared with 8 percent dedicated to hearing and 3 percent to touch. Basically, if you tell a person the full story of your business, how great it is, and how you create value for your customers, what will stick in their mind is probably just a little bit of envy.
If, on the other hand, you tell her about your business by showing her visual diagrams, with pie charts, bright colors, clear links and numbers in the foreground, then something yes will stick with her.
This is a true dominance of the visual system over the auditory system, as the former is able to process as much as 10 million pieces of information per second, compared with only 100,000 for the hearing.
After all, would you ever go shopping for your monthly groceries without a written list betting 1,000 that you wouldn’t forget anything?
This is where the importance of the Business Model Canvas comes in, a graphic diagram that through 9 blocks allows you to outline a business, new or existing, giving it a concrete form. As you fill it out, the connections between different aspects of the business become obvious, gaps and inconsistencies come to light, and confusion gives way to clarity.
Want to create a clear and concise graphical representation of your business model so you can take information with more confidence? Then here’s everything you need to know about making a human-brain-proof Business Model Canvas!
Business Model Canvas: what is it?
The Business Model Canvas is a strategic and entrepreneurial management tool used to develop new business models and document existing ones for improvement.
It allows a simple and intuitive representation of a company’s business model, which can then be clearly and concisely communicated to internal and external stakeholders, such as employees, investors, and partners.
In fact, it is a visual diagram that becomes a valuable tool for entrepreneurs, managers, consultants and anyone involved in the creation, development or analysis of a business model.
The Canvas Business Model was conceived by Swiss scholar Alexander Osterwalder in 2004 and is considered a pioneer in the field of innovation and strategic management. Since then, it has become a globally popular tool used by entrepreneurs, managers, consultants and professionals in a variety of fields because of its simplicity, flexibility and ability to facilitate the understanding and communication of complex ideas. And it serves so many purposes.
Business Model Canvas: what is it for?
The Business Model Canvas in pdf or any other format that can be filled out by hand or digitally is a versatile tool with multiple applications in the business world. It serves basically two purposes:
- to develop new business models, thus identifying the key components of a new business idea, to see if there is a market and in general if there are opportunities for positioning and profit;
- to analyze an existing business, highlighting its strengths and weaknesses and identifying potential areas for improvement or new business opportunities in which to invest.
In fact, through the Business Model Canvas you put in black and white the business model you aspire to or intend to improve by facilitating its external sharing and understanding. Not only that: even internally, the Business Model Canvas enables strategic alignment to create a shared vision in the team and to ensure that all efforts are geared toward achieving business goals. Truly an important and strategic tool.
Business Model Canvas: why is it important?
Filling out the Business Model Canvas is essential, not just important, for anyone who wants to manage business with clarity and make informed decisions that are the result of timely and certain analysis. For that matter, it offers a number of concrete benefits to companies that use it. Let’s look at the main ones.
- It provides a clear and concise visual representation of a company’s business model, making it easy for people with non-strictly business backgrounds to understand. Everyone can understand it and there is no other tool as clear as this one.
- It gives a complete overview of all key components of the business model, such as customers, value propositions, distribution channels, and cost structures in one diagram.
- Fosters effective communication within the team and with external stakeholders, such as investors, partners, and customers.
- Stimulates creative thinking and the generation of new ideas for business model improvement.
- It can be adapted to different types of companies and industries and allows the business model to be modified according to changing market needs.
- It solves problems that may arise during compilation, such as low profitability or poor customer retention.
- It can be used to evaluate new business opportunities and decide whether or not to pursue them.
- It helps to create a shared vision within the team and ensure that all efforts are geared toward achieving business goals.
- Generates clear and comprehensive documentation of the business model, useful for internal consultation and external communication.
In addition to these tangible benefits, the Business Model Canvas also offers an intangible but no less important value: it fosters a corporate culture geared toward innovation and continuous improvement, as we have seen before.
Regular use of the BMC encourages companies to constantly question their business model, be open to new ideas and look for ways to adapt to market changes. Without filling out the 9 elements of the Business Model Canvas, the company remains anchored to a model that does not follow the evolution of the business.
The elements of the Business Model Canvas
The 9 dimensions of the Business Model Canvas are not just simple boxes to be filled in, but represent the fundamental pillars on which a company’s success is based. Within a Business Model Canvas template are in fact 9 blocks that the entrepreneur must fill in each part. In the end, he will have an overview of what the business is that he wants to build or has built.
Customer Segments
At the center of every business model reside customers, the pillars on which the entire structure rests. The first block of the BMC, devoted to customer segments, has the fundamental task of identifying, understanding and categorizing them. This is not a trivial task, but an in-depth analysis that goes beyond simple demographics.
The goal is to discover the needs, wants, behaviors and motivations of each segment, creating realistic “profiles” that guide all subsequent strategic decisions. This is used to personalize offerings, marketing and communications, creating a unique and memorable experience that builds their loyalty and turns them into brand advocates.
Here is a detailed description of the different types of customer segments:
Mass Market
Description: this segment refers to a large group of customers with similar needs and problems. Companies that serve mass markets offer products and services that have broad and general appeal.
Examples:
- Consumer products such as food, clothing, and consumer electronics.
- Entertainment services such as movie theaters and streaming platforms.
- Technology products such as smartphones and computers.
Niche Market
Description: companies serving niche markets focus on very specific customer segments with particular, well-defined needs. This approach allows them to offer highly customized solutions.
Examples:
- Luxury products such as high-end watches and sports cars.
- Specialized services such as legal advice for specific industries.
- Products for hobbies and special interests, such as climbing equipment.
Diversified Segments
Description: companies serving diverse segments offer products and services to multiple customer groups with different needs and characteristics. This requires a wider range of offerings and different marketing strategies.
Examples:
- Amazon, which serves both the retail consumer market and the enterprise market with Amazon Web Services.
- General Electric, which operates in sectors such as energy, health care and transportation.
- A bank that offers both personal and commercial banking services.
Segmented Markets
Description: companies using this approach recognize and serve different customer segments that, while having similar needs, have specific differences. This allows the value proposition to be tailored to each sub-segment.
Examples:
- Automakers offering different models for families, young professionals, and luxury customers.
- Telecommunications company with customized rate plans for individuals, small businesses and large corporations.
- Clothing companies with product lines for different age groups and lifestyles.
Multi-Sided Markets
Description: this type of market involves two or more interdependent customer groups. Platforms serving multi-lateral markets must attract and retain both groups to be successful.
Examples:
- Social media platforms such as Facebook, which serve both users and advertisers.
- Online marketplaces such as eBay, which connect sellers and buyers.
- Ride-sharing apps such as Uber, which need to attract both drivers and passengers.
B2B (Business to Business) Marketplace
Description: this segment covers companies that provide products or services to other companies. B2B relationships often require a high degree of customization and support.
Examples:
- Enterprise software providers such as Salesforce.
- Consulting firms such as McKinsey & Company.
- Suppliers of industrial materials and components.
B2C (Business to Consumer) Market
Description: this segment refers to companies that sell directly to end consumers. Marketing strategies are often geared toward reaching a wide audience.
Examples:
- Retail stores such as Walmart.
- E-commerce services such as Amazon.
- Fashion brands such as Zara.
International market
Description: companies that operate internationally serve customers in different countries, tailoring their offerings and marketing strategies to the characteristics and needs of each local market.
Examples:
- Global brands such as Coca-Cola and Nike.
- Technology companies such as Apple and Google.
- International hotel chains such as Marriott and Hilton.
Local market
Description: companies that focus on local markets serve customers in a specific geographic area. This approach often requires a strong local market presence and knowledge.
Examples:
- Independent restaurants and cafes.
- Local grocery stores.
- Local maintenance and repair services.
Correctly identifying customer segments is essential to developing a value proposition that effectively addresses the specific needs of each group. Companies must continuously analyze and understand their customer segments to adapt their strategies and maintain a competitive advantage.
Value proposition
What makes your company special? In a world saturated with products and services, the value proposition is the answer to this crucial question. It is the promise you make to your customers, the reason why they should choose you over your competitors.
It must be clear, concise, and distinctive, capable of capturing attention and sparking interest. An effective value proposition not only solves a problem or satisfies a need, it does so in a unique and differentiating way. It is the spark that ignites customers’ interest and prompts them to take action.
Here is a detailed description of the different components that can make up a value proposition:
Newness
Description: this component focuses on offering something completely new that has never existed in the market before. Breakthrough innovations and technologies often create this kind of value.
Examples:
- Smartphones when they were first introduced.
- Electric vehicles such as the Tesla Model S.
- Wearable technologies such as smartwatches.
Performance
Description: improving the performance of a product or service over existing alternatives can be a significant value proposition. This can include speed, efficiency, capacity, and other improved features.
Examples:
- Computers with faster processors.
- Cars with higher fuel efficiency.
- Broadband Internet services with faster speeds.
Customization
Description: the ability to offer products or services tailored to the specific needs of each customer can be a strong value driver. This is especially relevant in industries where customer preferences vary widely.
Examples:
- Tailored clothing.
- Cars configured according to customer specifications.
- Customized software for business needs.
Getting the Job Done
Description: some value propositions focus on helping customers perform a task or solve a specific problem more efficiently or effectively.
Examples:
- Project management tools such as Asana or Trello.
- Food delivery services that save consumers time.
- Freelance platforms that connect professionals with job opportunities.
Design
Description: superior design can contribute greatly to the value proposition of a product or service. Design can influence aesthetics, usability, and the overall customer experience.
Examples:
- Apple products known for their elegant design.
- High-end furniture with distinctive design.
- Luxury cars with well-designed interiors.
Brand/Status
Description: some customers attach value to owning and using a product or service of a prestigious brand, which may reflect social or personal status.
Examples:
- Clothing and accessories from luxury brands such as Gucci or Louis Vuitton.
- Prestige cars such as BMW or Mercedes-Benz.
- High-end watches such as Rolex.
Price
Description: competitive pricing can be an important value proposition, especially in markets where customers are particularly price-sensitive.
Examples:
- Low-cost airlines such as Ryanair.
- Low-cost products such as those offered by Walmart.
- Streaming services with inexpensive subscriptions such as Netflix.
Cost Reduction
Description: helping customers reduce their costs is a significant value driver. This can include optimizing operations or using more efficient technologies.
Examples:
- Business expense management software.
- Solar energy systems that reduce the cost of electricity bills.
- E-procurement platforms that optimize corporate purchasing.
Risk Reduction
Description: products and services that reduce customers’ perceived risk can offer great value. This is especially relevant in areas such as insurance, finance, and health care.
Examples:
- Insurance covering specific risks.
- Cybersecurity software that protects against cyber attacks.
- Extended warranty services for technology products.
Accessibility
Description: making products or services accessible to a customer segment that previously could not access them can be an important value proposition.
Examples:
- Microfinance offering banking services to the unbanked.
- Low-cost health care products for emerging markets.
- Mobility solutions for people with disabilities.
Convenience/Usability
Description: making things easier to use or more convenient for customers is a powerful value driver. This includes improvements in usability and ease of access.
Examples:
- E-commerce platforms with simple purchasing processes.
- Mobile apps offering on-demand services.
- Digital payment systems such as PayPal or Apple Pay.
A well-defined value proposition helps differentiate the company from competitors and attract and retain customers. It must be built on a deep understanding of the needs and preferences of target customer segments, offering solutions that solve their problems in a unique and effective way.
Channels
How do you get your value proposition to your customers? Channels are the “bridges” that connect the company to the market, the pathways through which the offering is distributed and made accessible.
Choosing the right channels is key to reaching the target audience as effectively as possible. Online, offline, direct or indirect channels-the options are numerous, and the strategic combination depends on multiple factors, such as product characteristics, customer behavior and company resources.
The goal is to create a smooth and synergistic distribution system that provides customers with a pleasant and frictionless shopping experience.
Know that the channels, through which you can reach out with your value proposition to customer segments are of 5 types.
Awareness
Goal: to make your products and services known to your target market.
Description: this phase covers all the activities a company undertakes to make its brand and products known to potential customers. It includes advertising, PR, social media marketing, SEO, content marketing, trade shows and events. The purpose is to create awareness and attract customer interest.
Examples:
- Advertising campaigns on social platforms and search engines.
- Blog articles and educational video content.
- Participation in trade shows and conferences.
Evaluation
Goal: to help customers assess the value of your offering.
Description: at this stage, potential customers are comparing and evaluating different solutions available in the market. The company needs to provide detailed information that will help customers make an informed decision. This can include product comparisons, demos, customer testimonials, free trials, and educational content.
Examples:
- Detailed data sheets and product descriptions.
- Customer reviews and testimonials.
- Live demos and webinars.
- Free trials or trial versions of the product.
Purchase
Goal: to facilitate the buying process for the customer.
Description: this stage concerns the channels through which customers can actually purchase the company’s products or services. It is important that the purchasing process be as simple and intuitive as possible. This may include online stores, mobile apps, direct sales through sales teams, or in-store purchases.
Examples:
- E-commerce platforms.
- Mobile app for shopping.
- Direct sales through sales representatives.
- Physical stores.
Delivery
Goal: to ensure that customers receive the product or service.
Description: after purchase, it is critical that the customer receives the product or service as efficiently as possible. This involves managing logistics, warehousing, shipping, and installation or configuration services, if needed.
Examples:
- Shipping via domestic and international couriers.
- On-site installation and configuration services.
- Digital downloading of software.
- Direct delivery to point of sale for pickup.
After Sales
Goal: to support the customer after purchase to ensure customer satisfaction and loyalty.
Description: this phase covers all support and service activities that a company offers customers after purchase. The goal is to solve any problems, improve customer satisfaction, and foster loyalty. It may include customer support, maintenance services, loyalty programs, and ongoing feedback.
Examples:
- Customer service via phone, email or chat.
- Maintenance programs and technical support.
- Loyalty programs and special offers for repeat customers.
- Satisfaction surveys and requests for feedback.
Each stage is an important step in the customer journey and must be carefully managed to ensure a positive and consistent customer experience.
Customer Relationship
Customers are not just numbers or transactions, but people with whom it is important to establish a relationship of trust and mutual satisfaction. The block devoted to customer relationships in the Business Model Canvas serves to indicate how that relationship manifests itself and how you are maintaining it (or intend to maintain it).
This is an ongoing process involving various aspects, such as communication, service, loyalty and feedback management. The goal is to create lasting relationships based on mutual understanding, turning customers into true brand ambassadors.
Here is a description of the main types of customer relationships:
Personal assistance
Description: this relationship is based on direct interaction between a company representative and the customer. It includes support during and after the purchase process. It is a highly personalized form of support where the customer can contact a representative directly to solve problems or answer questions.
Examples:
- Telephone support.
- Live chat.
- Personalized e-mail.
- Face-to-face appointments.
Dedicated Personal Assistance
Description: in this type of relationship, each customer has a dedicated representative who provides personalized service. This relationship is common in industries with high-value customers who require constant, personalized attention.
Examples:
- Dedicated account managers.
- Personal consultants.
Self-Service
Description: in this case, the company does not interact directly with customers. Instead, it provides all the tools necessary for customers to serve themselves. This type of relationship is effective for companies that want to offer low-cost service.
Examples:
- Online FAQ.
- User manuals.
- Customer support portals.
Automated services
Description: this report combines forms of self-service with automated processes. Automated services may include sophisticated algorithms that provide recommendations to customers based on their previous interactions or purchases.
Examples:
- Recommender systems.
- Chatbot.
- Automated notifications.
Communities
Description: the company creates or facilitates online communities where customers can exchange knowledge, solve problems, and advise each other. These communities can also provide valuable feedback to the company on products and services.
Examples:
- Discussion forum.
- User groups on social media.
- Feedback and review platforms.
Co-Creation
Description: the company involves customers in the value creation process. Customers actively contribute to the development of the product or service, such as by providing ideas or co-creating content.
Examples:
- New product development with customer feedback.
- Idea Contest.
- Product reviews and ratings.
Partnership
Description: in some cases, the company establishes partnership relationships with customers, where both work together to achieve common goals. These partnerships are often long-term and based on mutual trust and mutual benefits.
Examples:
- Joint ventures
- Collaborative contracts.
Each type of relationship requires different strategies and may vary depending on the customer segment to which it is targeted. The choice of relationship type depends on the company’s goals, the type of product or service offered, and customer expectations.
Revenue Streams
Every business model needs to generate revenue streams in order to survive and thrive. This block of the Business Model Canvas focuses on the different ways in which the business creates economic value.
A thorough understanding of different revenue streams, assessing their profitability, stability, and growth potential is critical. Diversifying revenue sources can reduce dependence on a single stream and increase business resilience in the face of unforeseen events.
Here is a description of the main types of revenue streams.
Asset Sale
Description: this is the traditional sales model in which a company sells a physical product to a customer. Once sold, the customer owns the product.
Examples:
- Automobile sales.
- Sale of electronics.
- Sale of clothing.
Usage Fee
Description: in this model, the customer pays for the use of a particular service or product. The price is generally proportionate to the actual use of the service.
Examples:
- Telephone rates.
- Payments for the use of infrastructure (e.g., toll roads).
- Cloud computing platforms with consumption-based pricing.
Subscription Fee
Description: this model involves the customer paying a fixed, regular price for continued access to a product or service.
Examples:
- Magazine subscriptions.
- Streaming services such as Netflix.
- Software subscriptions (SaaS).
Lending/Renting/Leasing
Description: in this case, a customer pays for temporary access to a good. This model is common for expensive goods that customers cannot or do not want to purchase directly.
Examples:
- Car rental.
- Leasing of industrial equipment.
- Rental of apartments or offices.
Licensing
Description: this revenue stream comes from granting other companies the right to use intellectual property, such as patents or trademarks, in exchange for a fee.
Examples:
- Software licensing.
- Technology patents.
- Registered trademarks.
Brokerage Fees
Description: these revenues are generated when a company acts as an intermediary between two or more parties and takes a commission for each transaction facilitated.
Examples:
- Commissions from real estate agencies.
- Commissions of online trading platforms.
- Travel agency rates.
Advertising
Description: in this model, a company charges other companies to advertise their products or services within its own platform or through its own channels.
Examples:
- Advertising on websites or blogs.
- Social media ads.
- Advertisements in magazines or newspapers.
Affiliation
Description: companies earn commissions by promoting third-party products or services. They receive a percentage of sales generated through their channel.
Examples:
- Amazon affiliate programs.
- Affiliate links in blogs.
- Promotional discount codes.
Donations
Description: this revenue stream is based on receiving voluntary funds from customers or supporters, without offering them a specific product or service in return.
Examples:
- Donations to NGOs.
- Contributions to crowdfunding projects.
- Individual sponsorships.
Crowdfunding
Description: companies raise money directly from the public to fund a project or initiative, often offering products, prizes or participation in return.
Examples:
- Campaigns on Kickstarter.
- Platforms such as GoFundMe.
- Equity crowdfunding for startups.
Each revenue stream has its own specific characteristics and applications, and a company can use a combination of these models to maximize its earnings and diversify its revenue sources.
Key Resources
To bring its value proposition to life and make the business model work, every company needs key resources. These resources can be tangible, such as real estate, machinery or raw materials, or intangible, such as knowledge, staff skills or patents.
Identifying, acquiring, and managing key resources efficiently is critical to the success of any business. They can represent a competitive advantage that is difficult for competitors to imitate, if put to good use to create value for customers.
Here is a detailed description of the different types of key resources.
Physical resources
Description: these resources include all the tangible assets that a company uses to create and deliver value. They are especially essential for companies that produce physical goods.
Examples:
- Production facilities and factories.
- Machinery and equipment.
- Transportation vehicles and fleets.
- Outlets and offices.
Intellectual resources
Description: intellectual resources include intangible assets that provide competitive advantage. These resources are crucial for knowledge-based or innovation-based companies.
Examples:
- Patents and trademarks.
- Copyrights and trade secrets.
- Databases and proprietary information.
- Brand and corporate reputation.
- Proprietary software and algorithms.
Human Resources
Description: human resources represent the personnel and skills needed to carry out the company’s activities. They are critical in companies that depend heavily on the creativity and experience of staff.
Examples:
- Engineers and developers.
- Sales and marketing team.
- Administrative and support staff.
- Managers and strategic leaders.
Financial Resources
Description: financial resources include the capital and funds needed to support the company’s operations and investments. They are vital to ensure that the company can operate, grow, and invest in new opportunities.
Examples:
- Liquidity and cash reserves.
- Lines of credit and bank financing.
- Venture capital or private equity investments.
- Resources generated from operating cash flows.
Technology Resources
Description: these resources include the technologies and IT infrastructure needed for business operation and innovation. They are crucial for companies operating in technology sectors.
Examples:
- IT infrastructure and servers.
- Software platforms.
- Data management systems.
- Emerging technologies such as artificial intelligence and IoT.
Relational resources
Description: relational resources include the partnerships and networks that a company develops to support its activities. These resources are essential for creating beneficial synergies and collaborations.
Examples:
- Networks of suppliers and distributors.
- Strategic alliances with other companies.
- Relationships with key customers.
- Collaborations with universities and research centers.
Each key resource contributes differently to the success of the business model, and the combination of resources depends on the company’s strategy and goals. Properly identifying and managing these resources is crucial to maintaining a competitive advantage and ensuring the long-term sustainability of the company.
Key Activities
Key activities represent the concrete actions that the company must take to realize its value proposition and make the business model work. They are the “building blocks” that build success, the essential activities that must be carried out efficiently and productively.
Identifying key activities means understanding which processes, functions and actions are critical to the business. It is an in-depth analysis that must consider the different stages of the product or service life cycle, from design to distribution to after-sales service.
Here is a detailed description of the main types of key activities.
Production
Description: this activity concerns the creation and delivery of a product. It is critical for companies that produce physical goods and requires careful management of resources, production processes, and quality.
Examples:
- Product design and development.
- Mass production.
- Supply chain management.
- Quality control.
Problem solving
Description: problem solving activities include developing new and innovative solutions to customer problems. This activity is essential for companies that provide consulting services or complex technology solutions.
Examples:
- Management consulting.
- Customized software development.
- Research and development.
- Technical support services.
Platform/Network
Description: companies that operate platforms or networks must manage and maintain this infrastructure. This activity is crucial for digital and online companies that provide services through technology platforms.
Examples:
- Management of online platforms.
- IT infrastructure maintenance.
- Software development and updating.
- Cybersecurity.
Marketing and sales
Description: this activity concerns the promotion and sale of the company’s products or services. It is essential for attracting and acquiring customers, as well as for maintaining and increasing sales.
Examples:
- Advertising campaigns.
- Direct sales activities.
- Customer relationship management (CRM).
- Market analysis and customer research.
Logistics
Description: logistics activities include managing the transportation, storage, and distribution of products. These activities are vital to ensure that products reach customers efficiently and timely.
Examples:
- Inventory management.
- Organization of shipments.
- Distribution and delivery.
- Management of returns and repairs.
Customer relationship management
Description: maintaining and improving customer relationships is essential for customer loyalty and satisfaction. This activity may include after-sales support, loyalty programs, and customer feedback management.
Examples:
- Customer service.
- Loyalty programs.
- Complaint handling.
- Customer satisfaction research.
Research and Development
Description: continuous innovation is critical for many companies, especially in high-tech industries. R&D activities are essential for developing new products, improving existing ones, and maintaining competitiveness.
Examples:
- Development of new technologies.
- Product innovation.
- Experimentation and testing.
- Collaborations with universities and research centers.
Administration and management
Description: this activity covers the management of the daily operations of the company, including human resources, finance, and strategic management.
Examples:
- Financial management and accounting.
- Human resource management.
- Strategic planning.
- Legal management and compliance.
Partnerships and collaborations
Description: developing and managing strategic partnerships is crucial to expanding the market, obtaining additional resources and expertise, and creating synergies.
Examples:
- Strategic alliances.
- Joint ventures.
- Partnerships with suppliers.
- Research collaborations.
Key activities vary according to the type of business and the industry in which the company operates. Identifying these activities correctly and managing them effectively is crucial to the success and sustainability of the business model.
Key Partners
In an increasingly interconnected world, companies rarely operate alone. The block devoted to key partners in the Business Model Canvas emphasizes the importance of establishing strategic partnerships with external parties to optimize the business model and create value for customers.
Key partners can be suppliers, distributors, joint ventures or other companies with whom you share goals and resources. Choosing the right partners can bring many benefits, such as access to new technologies, market expansion, cost reduction or the acquisition of specialized skills.
Here is a description of the main types of key partners.
Strategic alliances between non-competitors
Description: partnerships formed between companies operating in different sectors that do not compete directly with each other. These alliances allow the exploitation of complementary skills, resources, and markets.
Examples:
- Collaborations between a hardware manufacturer and a software vendor.
- Partnership between a hotel chain and an airline to offer travel packages.
- Alliances between universities and companies for research and development projects.
Strategic cooperation between competitors
Description: partnerships between companies that compete in the same market but collaborate to achieve common goals, such as developing industry standards or creating new technologies.
Examples:
- Joint development of new technologies.
- Sharing of infrastructure or resources.
- Collaborations for standardization of products or services.
Joint Ventures
Description: partnership agreements in which two or more companies create a new legal entity to jointly pursue a specific business opportunity.
Examples:
- Two car companies creating a joint venture to develop electric vehicles.
- Collaboration between a media company and a streaming platform to create exclusive content.
- Joint venture between construction companies to develop a large real estate project.
Supplier-Buyer Relations
Description: partnership between a company and its suppliers to ensure a continuous and reliable supply of materials, components, or services needed for the operation of the company.
Examples:
- Long-term contracts with raw material suppliers.
- Partnerships with logistics service providers to ensure efficient distribution.
- Collaborations with technology component suppliers for new product development.
Licensees and franchises
Description: partnerships based on licensing or franchise agreements, where one company grants another the right to use its brand, products or services.
Examples:
- Licensing of production to third parties.
- Franchising of chain restaurants or stores.
- License agreements for the use of patents and trademarks.
Outsourcing
Description: delegate some activities or business processes to external partners to focus on core competencies and increase efficiency.
Examples:
- Outsourcing of production to factories in other countries.
- Delegate customer service management to external call centers.
- Outsourcing of IT operations and data management to specialized vendors.
Collaborations with Institutions and Public Bodies
Description: partnerships with government agencies, academic institutions or nonprofit organizations for research projects, policy development or social responsibility initiatives.
Examples:
- Collaborations with universities for research and development of new technologies.
- Partnerships with government agencies for sustainable development projects.
- Collaborations with NGOs on social or environmental initiatives.
Incubators and Accelerators
Description: partnerships with incubators and accelerators (such as our partner B-PlanNow) to support the development of new startups and innovative ideas by offering resources, expertise, and networking.
Examples:
- Participation in accelerator programs for technology startups.
- Collaborations with incubators to develop new products or services.
- Support for social entrepreneurship initiatives through specialized accelerators.
Effectively identifying and managing key partners is critical to building a robust ecosystem that supports the company’s business model. These partnerships can bring additional resources and expertise, reduce risk, and create new growth opportunities.
Cost structure
Every business model has a cost structure that represents the expenses incurred by the business in its operation. This BMC block aims to identify, analyze, and optimize these costs by classifying them into categories such as fixed costs, variable costs, direct costs, and indirect costs.
Understanding the cost structure makes it possible to identify areas of inefficiency and waste, assess the impact of different activities on the bottom line, and make informed strategic decisions to optimize the use of resources.
Here is a detailed description of the different components of the cost structure.
Fixed Costs
Description: these costs remain constant regardless of the volume of goods or services produced. They do not change as production increases or decreases.
Examples:
- Rental of office and production facilities.
- Salaries of permanent staff.
- Infrastructure maintenance costs.
- Depreciation of machinery and equipment.
Variable Costs
Description: these costs vary directly in proportion to the volume of goods or services produced. They increase or decrease with the level of production.
Examples:
- Raw materials.
- Production costs per unit of product.
- Shipping and distribution costs.
- Sales commissions.
Economies of Scale
Description: cost savings achieved by increasing the scale of production. The greater the quantity produced, the lower the cost per unit due to the distribution of fixed costs over a larger number of units.
Examples:
- Discounts on materials purchased in large quantities.
- Reduced production costs per unit through efficient use of resources.
- Savings in distribution costs for large shipment volumes.
Economies of Scope
Description: cost savings achieved by offering a diverse range of products or services. By using the same resources or processes to produce various products, a company can reduce overall costs.
Examples:
- Sharing marketing resources for different products.
- Use of the same production infrastructure for different goods.
- Sharing of personnel and expertise among various projects or product lines.
Research and Development Costs
Description: these costs are associated with developing new products or services and improving existing ones. They are critical for companies that focus on innovation.
Examples:
- Investment in research laboratories.
- Salaries of researchers and developers.
- Costs for prototyping and testing.
- Collaborations with universities and research centers.
Marketing and sales costs
Description: these costs are necessary to promote products or services and reach customers. They include all marketing and sales activities.
Examples:
- Advertising and promotional campaigns.
- Salaries of sales and marketing teams.
- CRM (customer relationship management) costs.
- Expenses for trade fairs and promotional events.
Operating costs
Description: these costs are associated with the day-to-day management of the company and the maintenance of its operations.
Examples:
- Administration and management expenses.
- Utility costs (power, water, internet).
- Expenses for software and licenses.
- Supply chain management costs.
Logistics and distribution costs
Description: these costs are for transportation, storage and delivery of products to customers.
Examples:
- Transportation and shipping costs.
- Warehouse management costs.
- Expenses for handling returns and repairs.
- Packaging and packing costs.
Partnership costs
Description: these costs are associated with managing relationships with key partners, including collaboration and integration costs.
Examples:
- Commissions to distribution partners.
- Expenses for licensing agreements and royalties.
- Operating costs of joint ventures.
- Expenditure on maintenance of strategic alliances.
Compliance and regulatory costs
Description: these costs are related to compliance with laws, regulations, and industry standards.
Examples:
- Legal and accounting consulting fees.
- Costs for compliance with environmental regulations.
- Audit and certification expenses.
- Costs for staff training on regulations and standards.
Understanding and effectively managing the cost structure is crucial to maintaining profitability and sustainability of the business model. Companies must balance costs with revenues to ensure positive and sustainable cash flow.
Business Model Canvas download: here is the template
To create a Business Model Canvas the template is important, because it gives you the precise outline on which to work to fill in the 9 fields provided correctly. Do you want to do this without making mistakes?
Download Strategyzer’s original Business Model Canvas template now.
Business Model Canvas and Business Plan: what is the difference?
The Business Model Canvas if you will is akin to a clear and concise road map, offering a visual representation of a company’s key components. Its 9 interconnected blocks, like the pieces of a mosaic, reveal the secrets of success: from customers to value proposition, from channels to relationships, from key resources to strategic activities.
This versatile tool not only describes the “what” and “why” of a company, but also becomes a catalyst for innovative ideas, facilitating analysis and improvement of the existing business model.
On the other hand, the Business Plan takes the form of a detailed travel plan, precisely outlining the company’s strategy, financial projections, and operations. Its financial projections, supported by market and competitive analysis, provide a solid and realistic overview of the company’s potential, while the operations plan outlines the concrete steps to be taken to turn vision into reality.
Although the Business Model Canvas and the Business Plan may seem like two separate entities, their complementary nature makes them valuable tools to be used in synergy: the former provides the strategic foundation, clarifying the “what” and the “why,” while the latter delves into the “how” and the “when,” offering a detailed roadmap to business success.
Business Model Canvas: the most common mistakes
Compiling the Business Model Canvas requires time, concentration, detail and objectivity. If any of these aspects are lacking, it is inevitable to incur errors that can undermine its effectiveness and hinder the achievement of business objectives.
One of the most common mistakes to avoid when compiling a Business Model Canvas is not clearly defining customer segments, grouping the statistical sample being examined in a cursory manner and without precision, or even articulating a vague or generic value proposition that does not differentiate the company from its competitors. These are mistakes that totally undermine the end result.
What about revenue stream analysis instead? Basing the business model on unrealistic or hard-to-reach revenue streams is wrong and misleading, because then you cannot optimize product or service prices and consequently maximize profits and profitability.
Remember: you must not approach the Business Model Canvas as a simple box-filling exercise, but you must adopt an open and strategic mindset, follow a rigorous and analytical procedure, and value the active involvement of all stakeholders. Only then can you truly say you know your business!
