What is a Business Model Canvas?

What is a Business Model Canvas

Based on the work of Alexander Osterwalder, a Business Model Canvas, or BMC for short, is a diagram used to visualize a business model; it allows structured organization and a quick method of evaluation and reflection on the effectiveness of a Business Models.

The Role of the Business Model Canvas

Whether it be in small business entrepreneurship or large corporate product launches, the business model sits at the center. The one thing that stands at the very heart of daily operations of an organization, a model dictates where the opportunity lies and how the company effectively acts on it at each step in the process.

The very best professionals will have all of this knowledge and action driving their decisions. However, the original business model one may follow may not always be applicable to the obstacles that an organization faces, thus it’s incredibly useful to fully display organizational structure and operations.

The Basics of the Business Model Canvas

Whether one is creating an all-new business model, comparing a pre-existing model, or adjusting a model to improve value, the BMC excels in keeping anyone invested in the business on track without wasting time and focus. By displaying only, the most critical pieces in business operations or a product launch, this tool is both a time saver and a method to sharpen your awareness of expectations vs. reality.

There are nine sections in a BMC, each containing a specified topic of information that composes the core of any business model.

1. Customer Segments

This section contains the information related to the core target audience that you are marketing towards. Simple and traditional segmentation analysis must be done to identify the top segments of the model. Start simple with questions like Which are the demographics of the major customer groups being targeted? Why are they going to be interested in the product or service? In essence, how well does the model comprehend who is being sold to? It is crucial that you identify clearly the segments as when facing reality, you will need to focus only in a few (1 or 2) to really test your model without a full operation in place.

2. Value Propositions

Create a list of the unique business positions you will offer. Why is the idea or company valuable? What makes it stand above competitors? If there aren’t any direct competitors, what gaps are being filled in given markets?

This section could be extremely lengthy, depending on the business model, but should only contain the most central concepts at the heart of the model that attract customers or generate revenues. If you’re struggling to identify what is most important, consider using a Value Proposition Canvas, another easy-to-visualize tool that helps establish your target audience with your strengths. Focus on solving a real pain for the segments identified.

3. Customer Relationships

The information of this section of the model should refer on how to connect segments and the value proposition. During the analysis, you should be asking questions like How are customers convinced that your product or organization has the advertised special qualities? What methods are used to interact with them? How does an audience engage with each strategy at in the product lifestyle? Additionally, how is customer engagement tracked?

4. Channels

Once the customer is convinced of the goods or services, how would you deliver it? This should include every step of the process it takes to make the financial transaction possible. Is there a separate supplier? Who distributes the product? How is it displayed? Think about what the model requires from start to finish in order to make a sale.

5. Revenue Streams

If the customer connects with the product or service, and they want to proceed with doing business, then how does the actual exchange of money happen? How is the cash flow tracked? Are there any middlemen between the sale and the income to the business?

Business Model Canvas Diagram for PowerPoint

Source: Editable Business Model Canvas PowerPoint Template

6. Key Activities

This section should include specific activities that the organization will do that will make it stand out from the rest. Unlike the Value Propositions, it’s not just about a new product or business practice, but rather the day-to-day operations that each team will take in order to stay a step ahead of the competition.

7. Key Resources

Similar to Key Activities but focusing on assets that can be used to gain an edge instead. Is there a special supplier? Is there access to any materials or a local storefront that puts you in an advantageous position? Do you have a special intellectual property or patent that introduces a new knowledge into the niche?

8. Key Partnerships

For areas that may be lacking, or areas that are too costly for the business to manage by itself, what can be outsourced to partners to focus on? Which areas would it be more cost efficient to hire from supporting businesses? Specifically, identify model strengths maximize time and money on them, and move identified weaknesses to connected partners that can address them better or solve them altogether.

9. Cost Structure

Finally, what are the major expenses in the model? Are they a flat fee, or are they a variable cost? This may factor into previous sections, like key activities, resources, and partnerships.

Additionally, how does this relate to the Revenue Streams? How will the predicted costs vs. the actual be monitored? Most importantly, what will be done if costs outweigh the incoming funds?

Creating a Business Model Canvas involves analyzing each of this sections individually and as a whole, and connect the dots between them.

The Power of a BMC in Entrepreneurship: Visualize the Business Model

Introducing a new business or product to the world is no small undertaking, especially when you consider how much competition and other new ideas are thrown into the world on an annual basis. The difference between being one of the many ideas that fall flat and the cream that floats to the proverbial top is understanding the business model, in and out.

This also means keeping the model current and responsive. A business model, after all, is only a well-educated guess on how to generate success from a demand. If reality does not match up to the prediction, then even the very best business models are useless. A BMC is your abstract representation and the reminder of what truly matters each day.

Steven Blank’s article to entrepreneurs and business leaders, “Four Steps to the Epiphany”, demonstrates the difference of those who watch and listen to their model in action, and those who convince themselves that their business model is flawless, and the world will adjust to follow it instead. The fact is, you may have the most amazing ideas in the world, but it won’t matter if you aren’t paying attention to unforeseen challenges that arise in between conception and actualization of a successful model.

The BMC is an excellent tool to get away from the guesswork, and out into the metaphorical streets. It allows an individual or team to compare expectations with reality, to double check targets and see if those targets are still manageable, and it gives an opportunity to make adjustments to a business model before it’s too late.

This practice is called, “Get out of the building”. It means to develop a BMC and test it against reality. For this to work, you need to create an MVP (Minimum Viable Product) that materializes your Value proposition and test it against real-life customers. Testing means that they should really purchase the MVP and that they complete the different sections of the BMC for true validation. This process is really iterative, and it helps entrepreneurs and business executives to make the adjustments necessary to really market a value proposition, reducing the risk of mounting a full-scale operation.

Get Out Of The Building PowerPoint Template

Applying BMC’s to Real-World Examples

By using BMCs, we can evaluate business models and identify just what changes need to be made to the model in order to ensure growth and success.

Let’s look at the company MoviePass, for example, which launched with the idea to sell a monthly service to the general public for daily movie tickets at major theater chains for a flat monthly membership fee. The company reasoned that they could benefit two groups, the average moviegoer would be able to see more movies and movie theaters themselves would see better attendance.

In theory, it sounds like a reasonable concept, but in reality, MoviePass had not developed a functional business model which derived in a poor performance against new technologies. There was no constant evaluation to keep track of their cash flow, and how by failing to keep the company growing fast enough, it couldn’t support the necessary costs. Perhaps if leadership had followed a BMC these issues may have been recognized earlier.

Business Model Canvas MoviePass

By using the BMC, MoviePass could have visualized earlier that the business model was in need of a pivot, a change to a section of the model in order to address an issue. In MoviePass case, areas like cash flow and customer acquisition had some gaps that required a solution. Had the company been more aware of their business model, they might have seen a need for a Minimum Viable Product (MVP) where they could test the results of their ideas with a few early adopters.

An MVP is the bare bones of a product or service that can provide invaluable information about how a small group of customers reacts. By having a testing period of limited engagement, a business can limit cost while drastically improving knowledge on how to proceed. Had MoviePass used this, they might’ve been able to observe early on that some customers used their service to the max, purchasing a movie ticket per day, far outweighing the profit of their service from the cost of providing it.

The pivot would adjust to their business model, and a new MVP could be created to test the new approach. This new iteration of the business may have changed the original direction of the company. Through each pivot and each new iteration of the model, MoviePass’ BMC would adjust accordingly, allowing an easy method in which to keep track of the major changes without getting overwhelmed in all the details that lay underneath each educated decision.

There are, however, examples of well-crafted business models that can be observed on a BMC. Let’s take a company that has spread its business model all over the world and has undoubtedly enacted countless pivots and iterations of the business model in order to evolve, adapt, and thrive over the years: McDonald’s.

PowerPoint Template Business Model Canvas McDonalds

When thinking about the massive scope of McDonald’s, it’s both interesting and telling of how the BMC can still capture the essence of their business model. McDonald’s is a global corporate cash cow requiring a rock solid model, but that doesn’t mean it’s the same one since the conception of the company.

With the many decades in operation, you can be sure that a McDonald’s BMC would not look the same at the beginning as it does today. What originally started as a single burger joint on a street corner, now faces the challenges of global food service. Each time a new challenge or opportunity presented itself, the McDonald’s business model was forced to pivot by observing the environment, developing an appropriate plan of action, and monitoring the progress accordingly.

Over the years the world has grown to experience many iterations of the McDonald’s brand, whether it be an icon of American cuisine or an example of adaptation to dietary health. Flexible and ambitious, McDonald’s always made sure the business model matched desired outcomes.

How to Utilize a Business Model Canvas for your Success

Whether it be a brand-new business endeavor or a product launch at a long-standing company, it’s critical that the business model is kept at the core of every decision. A Business Model Canvas is a tool to easily keep the model insight and offers an easy method to open the dialogue when that model may need to pivot.

The whole purpose of the BMC is to allow for a simple presentation of information, reducing complications in understanding just what is required in each new iteration of a business model. At a glance, anyone invested in the outcome of the model should be able to understand the who, what, when, where, and why’s of the model, or bring it to everyone’s attention if they don’t.

Most importantly, the BMC is a tool to help drive success. If there are issues in your business model that need to be addressed, a BMC makes it easier to visualize where the gaps are, and how they may be filled. Keep in mind that pivoting is crucial to the success and survival of a business model and that change, growth, and adaptation are not an abandonment of what matters, but a natural progression to find the best outcomes to the ultimate goal. As Eric Ries, author of Startup Lessons Learned, puts it: “pivoting may lead [successful startups] far afield from their original vision, but if you look carefully, you’ll be able to detect common threads that link each iteration.”

Business Model Canvas PowerPoint Templates

If you want to create professional looking Business Model Presentations, take a look at the following templates, ready to edit and easy to use.

1. Animated 3D Business Model Canvas Template for PowerPoint

Created with a 3D Model, this professional PowerPoint Template is ideal for creating videos or animated versions of your Business Model Canvas. Very popular among educators and speakers of the entrepreneurship niche.

2. Business Model Canvas PowerPoint Templates

Business Canvas 3D in PowerPoint

This Business Model Canvas PowerPoint Template is created 100% with editable PowerPoint Shapes, allowing the user to customize the content and visual appearance of the presentation. Suitable for educational presentations where you need to navigate each section of the BMC, or for investors presentations where you need to deep dive on each section of your Business Model.

3. Business Model Canvas Template for PowerPoint

Our most popular Business Model Canvas Template. Ideal for working in groups and iterating with different BMC’s. Its suitable for cooperation editing, and allows very simple compositions. Well suited for developing your MVP and crossing the assumptions that were negated by reality.

4. 3D Perspective Business Model Canvas PowerPoint Template

3D Perspective Editable Business Model Canvas for PowerPoint

This Business Model Canvas Design is inspired in the idea of empty boxes, that entrepreneurs need to fill with their ideas. The design is simple to edit and decorated with a colorful theme. Designed to impress every audience.

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