The Value Of The Business Model Canvas
Written by CMG News Contributor, Doug Carleton
What would you see if you could step back and see your whole business as if you were looking at the top of a puzzle box? The business model canvas allows you to do that. Designed by Alexander Osterwalder, the business model canvas consists of nine basic building blocks that show the logic of how a company intends to make money. The nine building blocks cover the four main areas of a business: customers, offer, infrastructure, and financial viability.
1. Customer Segments
Customers are the heart of your business model. A business model may define one or several customer segments. It would be best if you decided which customers to serve and which to ignore. Once the decision has been made, a business model can be carefully designed to understand a specific customer need or want.
Are there different customer segments?
Who are the most important customers?
Are they reached through a variety of distribution channels?
Do these customers require different types of relationships?
Do they have substantially different profitabilities?
2. The Value Proposition – Your Product
What customer need or desire, or pain does your product solve?
What will your customer pay to solve their problem?
Are your customers willing to pay for different aspects of your offer?
What channels do you use to communicate your offer to your customers? The web, such as Facebook, Twitter, other? Newspaper? Email blasts? Person-to-personal contact? What is your overall marketing strategy?
What channels do you use to allow your customer to buy your product? Your physical stores? The web? Direct sales? Other, such as other stores selling your product?
How do you physically get your product to your customer?
What channels are the most cost-effective?
4. Customer Relationships
Customer relationships can range from personal to automated. These relationships may be driven by customer acquisition, customer retention, or boosting sales (upselling).
What type of relationship does each of your customer segments expect you to establish and maintain with them?
Which ones have you established?
How costly are they?
How are they integrated are they with the rest of your business model?
What are your customers willing to pay? If you understand your customers, you should understand what customers are paying for products like yours.
What are they currently paying? What are they getting for what they pay?
How much does each revenue stream contribute to overall revenues?
6. Key Resources – What are the key activities necessary to carry out your daily business model?
Production facilities, vehicles, machine systems, point-of-sale systems?
Intellectual property such as brands or patents or customer databases?
Human—how many people does it take to execute your business model on a day-to-day basis?
7. Key Activities – What are the most important things a company must do to
make its business model work?
Problem-solving – continually modifying or improving your product to solve customer needs or pains.
Regular website maintenance?
8. Key Partnerships – Where and how do you get the key resources to run your business?
Who are your key partners?
Which key activities do your key partners perform?
Which key resources are you acquiring from partners?
Who are your key suppliers?
9. Cost Structure
What are the most important costs inherent in your business model?
Which key resources are the most expensive?
Which key activities are the most costly?
Startups can use the business model canvas as well as existing businesses. It is a handy tool and can be used either by one person or a team working together. Several people working on the canvas together can lead to some remarkable results. The ability to see all of the interconnected operations of your company could lead to some very positive results.’
his blog entry is a slightly edited excerpt from Doug Carleton's 'The Daily Life Of A Small Business Owner' series. Doug was a mentor with SCORE, Startup Virginia, and Lighthouse Labs, and has 25+ years of experience in small business finance including 12 years in SBA lending. To contact Doug directly, please email him at email@example.com.